The Critical And Evolving Role Of Contract Management In Digital Transformations

Annie Vaseekaran

Like everything in our professional lives, business contracts are changing and being transformed by digitalization. And like many other technology advances, this transformation is enriching the role of legal, finance, procurement, and sales operations in designing, preparing, negotiating, and managing contracts.

Recent research from the International Association for Contract and Commercial Management (IACCM) discusses how technology is changing the way people interact with contracts and enabling greater knowledge application, commercial innovation, business judgment, and behavioral economics. The IACCM study also notes that contracts will be less about cost in the future, and more about relationships. Ultimately, contracts will increasingly be recognized and treated as a critical business asset over the next five years.

The new, dynamic role of contract management

The IACCM report discusses how the management of contracts is evolving into a sophisticated and scientific discipline based on fact. No longer is contract management merely an administrative task. It now has a dynamic role that orchestrates change and makes sense of market volatility, driving performance- and outcome-based agreements and payment for results as it integrates processes across the enterprise and beyond.

So what does this look like in the everyday enterprise? Most organizations already have contract management tools, but they are largely used as repositories for storing contracts. The most innovative companies, however, know that contract management solutions are much more powerful and their legal, finance, procurement, and sales operations experts are taking full advantage of them. These companies can now use contract management technology to:

  • Build strategic relationships and achieve greater contract collaboration
  • Improve supplier performance and negotiation efficiency
  • Standardize contract processes and approvals
  • Lower administrative and legal costs
  • Automate all phases of contract management from contract request, contract authoring, to contract execution workflows using electronic signatures.
  • Strengthen operational, contractual, and regulatory compliance and reduce risk

Insights into the power of contract management

With contract management technology, companies can achieve process harmonization, increase transparency and visibility, and gain business performance support. And the results speak for themselves.

For instance, a major international airline recently used technology to improve its overall operating efficiencies, including the management of its contracts. The company introduced efficiencies by standardizing and streamlining the contracting process from initiation to delivery, consolidating disparate processes for over 3,000 suppliers and reducing the management costs and cycle times for over 7,500 contracts. The airline facilitated transparency on $7 billion in annual contracted spend through a new closed-loop process, increasing productivity and visibility while lowering costs.

A large technology company involved in drilling, production, and processing solutions in the oil and gas industry was experiencing similar issues. It had inefficient, inconsistent procurement and sourcing practices that led to a lack of visibility and compliance, as well as a duplication of effort between contracting teams. Moving from completely manual processes, the company implemented technology to automate and standardize its workflows, reduce administrative work, increase its responsiveness, and improve negotiations. Through a common enterprise-wide robust system, the company achieved a 91% improvement in its contract processes, reducing the cycle from six days to half a day, in a way that is convenient, fast, easy, and seamless. The company achieved greater efficiency, higher productivity, and reduced risk exposure.

Take the management of contracts to the next level

Contract management is now considered an integral part of the procurement process to help stop leakage and aid in gaining compliance around spend and visibility into suppliers.

To learn more about how companies are bringing contracts into the process to gain visibility with the supplier and manage compliant spend, download the full IACCM white paper The Future of Contract and Commercial Management.

Or, learn about the SAP Ariba Contracts solution and how it helps SAP customers take advantage of innovative contract management technology. You’ll see how SAP is helping companies achieve enterprise-wide management of contract functions, improve negotiation efficiency, identify revenue opportunities, and realize cost savings while lowering administrative and legal costs.

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About Annie Vaseekaran

As a product marketing manager on the SAP Ariba Portfolio Marketing team, Annie Vaseekaran handles product marketing for the SAP Ariba Spend Analysis, SAP Ariba Sourcing and SAP Ariba Contract Management solutions. She has over 11 years of experience in the IT products and services industry. Prior to SAP Ariba, she was with Oracle in marketing and business development roles. Annie holds an engineering degree in Industrial Engineering and Management from Visvesvaraya Technological University, and an MBA in Marketing and Human Resource from Mount Carmel Institute of Management, India.