Contract Management's Day Has Arrived

In the world of Strategic Sourcing, it’s sometimes difficult to anticipate how early and how broadly a particular solution will be adopted by the broader community. The best example currently is Contract Management. 

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Date

Wednesday, January 23, 2019

In the world of Strategic Sourcing, it’s sometimes difficult to anticipate how early and how broadly a particular solution will be adopted by the broader community. The best example currently is Contract Management. 

Contract Management solutions have been on the market for some time but, frankly, it took them a while to start gaining real traction with customers. This is true despite some very real and proven benefits. A study from the NCMA (National Contract Management Association) found the following buy-side ROI drivers: 

  • 2-7% Direct savings on purchase costs
  • 55% Improved compliance management
  • 25% Increased discount/rebate capture
  • 50% Reduction in contracting cycle times
  • 25-50% Reduction in contract administration costs

These are in addition to the clear, intuitive benefits of transparency, risk management, and compliance. 

One of our first Contract Management customers put it best,

“It has allowed us to focus key resources on what’s important to our business rather than waste time on administration.”

Why Contract Management really matters

Recently, we have seen a significant increase in the number of new customers signing up for online Contract Management. We are attributing this change in attitude to several factors:

  • Inclusion of electronic signature capabilities such as DocuSign make it easier to take paper entirely out of the process
  • The systems have gotten easy enough to use that it is no longer a chore to get the multiple departments on board (e.g. procurement, legal, sales, etc.)
  • Integration between Contract Management and other modules such as eSourcing and Supply Base Management have gotten much better leading to easier exchange of information and the ability to empower stakeholders  
  • On-boarding approaches have been improved making it easier to migrate existing information into the new system without major I/T resources
  • An increasing openness to combining buy-side and sell-side systems into a single program

HOW to build buy-in for Contract Management

That said, the question we are asked most often by prospective customers is not WHY to use Contract Management but HOW to justify the investment to the “powers that be”. Based on what we have seen other customers do to successfully get a Contract Management program approved, our advice is centered less on building the most bullet-proof business case than on having good answers up-front to the following questions:

  • What were the key benefits the organization will get from a Contract management solution? How will these benefits be measured?
  • What specific risks will Contract management help manage?
  • Is the legal department on-board from the beginning? How about sales?
  • What’s the plan for file conversion and on-boarding? How much I/T time will be required?
  • What’s the plan for on-going administration?
  • What’s the plan for geographic, user and business unit rollout?
  • What are the risks in NOT adopting a Contract Management system?


In the words of one of our new customers,

“There really wasn’t much need for convincing. The benefits were too obvious. We just needed to prove we had a plan.”

We are now seeing customers using Contract Management as a de facto Spend Analysis tool especially for spend aggregation across business units. By comparing contracts and expiry dates, teams can identify joint sourcing opportunities to negotiate together.

There are hard savings to be found with Contract Management! Read here about how a customer managed to find savings in unexpected places by combining efforts with other business groups.

Contract Management programs have really taken off in recent years. It is currently the Scanmarket module experiencing the highest growth. If you have a plan, you can make sure your organization is taking advantage of this powerful approach.

For more information on these approaches or to learn more about how Scanmarket can help you achieve your business objectives, please contact us at www.scanmarket.com or contact your Scanmarket Account manager.

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