The Why, What & How of Contract Management: Part 2 – Driving Forces

The Why, What & How of Contract Management: Part 1 – Significance of Contract Management
November 8, 2013
The Why, What & How of Contract Management: Part 3 – Spoke in the Wheel
November 12, 2013
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In the previous blog, we briefly spoke about the rising significance of contract management technology. So what are the factors that are leading to a rise in leveraging technology for managing contracts?

Driving Forces

Here are some interesting facts pointed out by the Aberdeen 2011 study.

  • Large enterprises (those with $2.5bn or more in top line revenue) averaged having around 13,000 procurement contracts in use
  • Medium enterprises (those with $250mn to $2.5bn) averaged having 8,200 procurement contracts in use
  • Small enterprises (those with $250mn or less in top line revenue) averaged having 4000 procurement contracts in use

These are enough contracts to get lost in, let alone track and manage contract compliance. As the organization expands, so do the number of transactions, making contract management even more complex.

Manual ways of managing contracts lead to

  • Lack of visibility
  • Organization becoming vulnerable to missed cost savings, poor compliance
  • Organization flouting regulatory norms
  • Error-prone contracts
  • Lack of knowledge of approval hierarchy
  • Majority of the execs are unaware of the contract owner
  • Increase in the contract cycle time, etc.

As per another study conducted by Aberdeen in 2011, that lack of visibility and exposure to supply chain and supplier risk are some of the biggest concerns of procurement.

Automating contract management helps procurement tackle the concerns, as highlighted in the study, and thus generates better savings and attains the maximum value out of suppliers.

Watch out for this space as we talk about the spokes in the contract management wheel in our next blog.

For further reading, click on the download button to access the report- The Why, What and How of Contract Management

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