Managing contracts proving harder for Procurement
Author: Tim Cummins
The level of investment in Procurement technology has far outdistanced the spending on customer contract management - but the coronavirus pandemic is revealing weaknesses.
A survey of 500 companies, ranging in size from $100 million to over $40 billion, reveals that Procurement groups have faced greater difficulty than their sell-side colleagues in several key areas:
- finding the current executed contract (22% versus 16% say this is proving very difficult):
- searching for specific clauses or terms (32% versus 17%);
- assessing and reporting risk (35% versus 23%).
This is leading many to re-evaluate current technology and set wheels in motion to tackle the identified weaknesses. For some, that is simply a renewed determination to ensure enterprise-wide adoption, but for more than 30% it involves acquiring additional functionality within the next six months.
Replace or augment?
The survey shows very few organizations planning to replace existing systems – this really is a story of building on what they have. However, there is also an appreciation that this may be difficult to achieve through their existing vendor. For example, the need for advanced analytics, for collaboration tools and for increased supply chain visibility will often not be met by a traditional P2P provider.
For those without large-scale automation, the pandemic has added to the business case for investment – though it is interesting to note that those with existing systems are more likely to see their systems as 'business critical' than those without (35% versus 21%). It is encouraging to see that there is no immediate rush to implement – those without automation understand it would bring benefits, but also appear aware of the need for careful preparation. Hence the immediate commitment is focused on better defining or driving cross-business consistency of process, developing or updating standards and creating term databases. Without those steps, many appreciate that software implementations will fail.
Has technology proved worthwhile?
The picture is more mixed than expected. In part, the answer depends on whether organizations have the right technology. For example, a repository of signed agreements is helpful, but if it has no robust search facility and no support on risk analytics, it will have offered little help in handling the current crisis. Overall, the percentages of those reporting extreme difficulty or extreme ease in handling contract issues and evaluations show that those with technology have benefited, but only by a net margin of around 12%. It is interesting to note – again contrary to expectations – that company size made little difference to these findings.
It is industry segmentation that reveals the most significant variations. Clearly, different industries are experiencing different levels and forms of impact. The survey report will delve into those in detail.
The IACCM survey was undertaken in the period April 1st – 6th and gathered input representing 507 organizations. The full report will be issued in the week of April 14th.