Webinar Notes: We Don’t Need No Education, But We Do Need Contract Management
This week’s webinar notes are from an event run on September 3rd by Spend Matters EU/UK, Selectica, and IASTA. The event is available on demand here.
Once you get this classic Pink Floyd tune stuck in your head, it is likely to stay, and maybe that was the idea with this event title. Far from being a strategic sourcing solution ‘add on’ contract lifecycle management requires its own program considerations, including its impact on global supply chains, corporate strategy, and enterprise wide implementation and leadership. In other words, not allowing your next executed contract to be just another brick in the wall.
Peter Smith from Spend Matters UK/Europe, Constantine Limberakis from IASTA, and Patrick Stakenas from Selectica shared the presentation responsibilities, each taking a different perspective on contract management and the opportunity it represents for each organization.
Smith opened the event with a look at three core assertions that drive home the point about why contract management is being overlooked by many procurement practitioners:
1. Corporate virtualization is here to stay. Smith referred to a Proxima study done earlier this year (you can read our coverage of it here) which found that on average, 70% of a company’s total revenues are going to suppliers, while only 13% is spend on staff. The resulting increases in contract numbers and value will require procurement to take on additional responsibilities and ramp up supporting technology in order to meet expectations.
2. Procurement’s point of disengagement is sliding (or disappearing altogether). In many cases, the value derived from a contract is realized after procurement would typically file it away or hand it off to someone else in the organization. In a particularly interesting point, Smith raised the question about the difference between contract management and supplier relationship management – where one begins and the other ends. Any innovation with suppliers must be done on a solid foundation of effective contract management.
3. Contract management is not just a procurement activity. The cross-functional need for access to and understanding of contracts extends well beyond procurement. Legal, sales, finance, human resources, and a range of individuals buying based on each contract have different access and information needs. Add to the fact that even the best written contract can not administer itself, and you have an expending level of effort associated with contract risk and opportunity.
Stakenas looked at modern enterprise challenges with contract management. As he said, it is one thing to know where a contract is stored, and entirely another to truly understand the value of what was committed on both sides. And although the configurability of today’s contract management solutions makes them infinitely more useable than their predecessors, it is not the entry of a new contract that is associated with the most opportunity. When considering the contract lifecycle, it is the time between execution (signature) and expiration or renewal that requires the most active involvement.
Limberakis then finished the presentation by considering the range of data relevant to contract management. Although the process becomes more harmonized all the time, there are still process and requirement variances by type of contract and stakeholder group. There are both structured and “unstructured” data associated with each contract. Unstructured data, which is harder to capture but holds just as much value, includes the emails, images, spreadsheets, and RFP data associated with a contract. That information has different meaning and importance for each person touched by the contract and should be centralized and made accessible.
Can you draw the line between supplier relationship management and contract management in your organization? What active steps does procurement take between contract execution and expiration? Are you capturing all types of data associated with your contracts?
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