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Is technology the death knell for contract management?

Published: 27 May 2016 Average Rating: 4 / 5 Print
 

Author: Tim Cummins

This week, my major focus has been on technology and its likely impact on the world of contracts and contract management. It included a day at the MIT Labs, meeting with academics, legal and technology experts and then proceeded with a West Coast tour that embraced Los Angeles, Silicon Valley and San Francisco, having discussions with technology start-ups and several of the more established providers. In each location, we also convened meetings with local IACCM members.

So what did all those conversations lead me to conclude?

Far from eliminating contracts and contract management, it is technology that is making them more important. It is also making them far more visible and transparent. So those responsible for contracts face both a challenge and an opportunity – to modernize, make fit for purpose and then deliver increased value.

Trading relationships are key to business – indeed, key to global development. Digitization and networked technology are transforming those relationships – their number, their strategic importance, their diversity and the risks they entail. Clarity, simplicity, ease of execution are critical and will be enabled by technology. For example, we must stop thinking about contracts as purely legal documents produced using traditional legal methods and wording. They are in fact communication vehicles that assist in defining and managing relationships, their risks and business outcomes.

“I speak all the time with executives from successful IT and technology companies. They no longer have time or patience to do business with companies like Oracle and IBM. It takes 3 months for them to negotiate a contract. By then, those executives expect a project to have been completed – not about to start.”

That was the comment made by one meeting participant – and he should know, because he and his team recruit many of the C-level executives for those firms.

Another of the companies attending our meetings explained that all its contract management staff are undertaking compulsory training in digitization – and this training includes revolutionizing its approach to contract design, negotiation and management, to deliver exceptional customer experience. “It is transforming delivery,” explained one manager.

At MIT, all the talk was about creating contract standards – but not to eliminate contracting. Instead, it was to facilitate and hasten the process, especially around legal provisions, so that organizations can instead focus on the results they are trying to achieve and the relationship they must form and manage to generate shared benefits.

The issues and opportunities go much deeper. Contract management has to make use of the advanced analytical capabilities now available. These include the ability to manage across languages and jurisdictions (we have to eliminate the risks that these impose); they include the ability to see and manage interconnections between contracts (for example, an extended supply network); they include portfolio performance analytics – what issues regularly arise, what terms contribute to success and failure; they include advanced negotiation techniques, with technology removing emotion and imposing effective planning and prioritization. The list goes on – and such technologies are rapidly emerging and gaining deployment.

In a fast-moving, outsourced, outcome-focused world, contracts and their management take on massive significance for the health and sustainability of business and government. Far from technology spelling the death knell for contracting experts, it promises their elevation to key roles within the business. But this, of course, depends on a readiness to act as business enablers, not controllers. It is about embracing risk and finding creative answers to its management. And it demands steady consolidation of those resources into an integrated group that covers all trading relationship types (buy and sell), to ensure their integrity and inter-operability.

Without doubt, the best news from this week was the evident excitement and enthusiasm of practitioners and technology leaders to partner on this journey and together to become the drivers for rapid change.

 
 
 

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