The Latest in the Contract Management Market: Catching Up with Upside (Part 1)

Unlike P2P and strategic sourcing, contract management is a market segment that I don't hear too much about on a daily basis. Yet every few weeks, I hear some story about an implementation that's played a central role in better procurement and supplier management programs or another one that hasn't ended up as planned (over the years, the number of contract management implementations that end up not meeting expectations is higher than I would have thought at first). Yet some vendors, like Upside, one of the undisputed leaders in the market, keeps chugging along (with, in general, solid customer support and backing). Earlier this winter, before the deep freeze hit Chicago, I had the chance to catch up with Upside's Ashif Mawji, the firm's founder and CEO. Ashif shared some general updates and observations regarding trends in the contract management market and his firm's recent experience in general.

From a general adoption perspective, Ashif has seen legal groups continuing to play a central role in contract management strategy, requirements/systems specification and selection, in both the buy- and sell-side areas (as well as dual-purpose implementations). Procurement is also a key role in many selections, and certainly a "key stakeholder" in the software and the overall selection and deployment processes. Interest in contract automation solutions is, however, not just limited to buy-side. There has been significant interest in the sell-side as well, with commercial (i.e., sales, account management, legal/contract sales support) organization also playing a role as another key stakeholder in the deployment and roll-out process.

When it comes to selections, the process is getting more involved these days, and customers are doing their homework. "What we're finding is the timeline is getting a bit extended because clients are doing [greater] due-diligence," Ashif suggests. They're also going through a proof of concept period, which was not as common in the past. If the context of best of breed vs. suite/ERP, it appears that Upside's customers are increasingly self-selecting for a best of breed approach, and have resolved to working with multiple vendors in different Spend Management areas (including Upside for CLM). Yet our own research on solid adoption of SAP, Ariba, and other contract management solutions that do not match Upside feature-for-feature suggests that a material section of the market is content with the 80% solution -- or less, depending on your perspective -- rather than a best-of-breed approach.

Yet what are signals that companies are ready for a contract management solution that goes beyond typical and often inexpensive run-of-the-mill systems? I asked Ashif this question and his response maps to what I've been hearing in the market for a couple of years. Specifically, when companies begin to prioritize integration into other systems, that's when the contract management ante rises. This integration might take the form of bringing in spending data from SAP or another ERP system. It might also take the form of integrating KPI data into a contracting system based on underlying catalog and non-catalog PO information.

Another sign that a company is ready for the next level of contract maturity is when they turn to advanced templates to streamline the contracting practice while simultaneously driving compliance and minimizing legal involvement. Consider templates in the area of indemnification. A company that is more advanced and can take advantage of a broader contract management system might present five options for indemnification clauses and will then measure and look at how long it takes for users to arrive at a single clause (which can yield fascinating and invaluable insight). For example, a company might realize that it is landing at the middle-tier indemnification option (Option 3) 80% of the time, but only after multiple round-trips with counsel and weeks of cycle time involved. Analytics and insight such as this from a template-driven perspective might suggest changing Option 3 to the default (Option 1) choice.

On the commercial side, Upside has partnered with two other vendors in the broader sourcing/procurement market, Iasta and BravoSolution, and claims they're seeing traction in these relationships from a go-to-market perspective (I've not confirmed specifics by talking with Iasta or BravoSolution). Interestingly, both of these partners have their own contract management capability and Upside also has a sourcing/RFX module as well, yet it's clear between the partners (and prospective customers) where their individual vendor strengths are. For overall growth, it's clear that Upside's direct and partner sales strategies are paying off, as the company is currently looking at a 30%+ current growth rate, with approximately 80% of revenue company from CD-sales (enterprise software). But trend-wise, Upside is seeing, in their words, a "marginal increase" in SaaS sales relative to enterprise software sales.

Stay tuned as we continue to look at Upside's product enhancements and roadmap in Part 2 of this post.

- Jason Busch

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