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Contract Visibility & Analytics: The Next ‘Must Have’ Solution for Procurement?

02/11/2019 By

I’ve been thinking quite a bit about the evolution of specialized contract analytics and visibility solutions of late. Seal Software was arguably the first provider to bring contract visibility and spend visibility (see our coverage from 2017 here) elements together. And others have followed on the contract analytics side alone (with varying degrees of capability). The vendor landscape aside, contract visibility is not just the counterpart to spend visibility — it’s something different entirely.

Yes, it’s a complement, an extension, to spend visibility. But I’m beginning to sense it’s a standalone area of value to procurement, especially when contract visibility extends past the structured paper that is contained within a CLM system alone (i.e., to “all” or as many contracts as possible).

So the question I’d like to raise today — and toss out to the Spend Matters audience to debate — is whether contract visibility is the next “must have” solution for procurement. Let me offer a few arguments as to why contract visibility is sufficient to justify itself as the next must-have solution area for procurement, especially when coupled with broader data from existing system environments.

First, consider how contract visibility can unlock hard dollar savings that other types of analytics solutions would otherwise miss (and would require procurement to manually review and structure documents and associated metadata to provide visibility). For example, providing insight into the ability to implement (or capture existing) savings opportunities based on volume discounts, rebates and supplier obligations (e.g., performance thresholds, SLAs, etc.) already established in a contract, mapped against spend and performance data.

Next, think about the typical visibility “black hole” that exists into AP/treasury-related terms across all vendor contracts, which can serve as a foundation to implement working capital programs. This includes offering insight into working capital/DPO opportunities based on contract terms as mapped against AP payment data, showing the precise balance sheet impact that adherence to existing terms (or renegotiation/extensions) can have.

Or conceptualize how contract visibility capabilities can also highlight priority sourcing/negotiation opportunities based on expiring contracts (e.g., 60, 90 and 120 days prior to exploration). Or take this concept a step further and consider expiring contract data mapped against commodity price indexes showing which contracts should be prioritized for negotiations based on declining prices and underlying trends in commodity markets even in cases when “indexing” is not a component of existing contracts.

Also, from a supplier management perspective, contract visibility can provide a means to drive specialized compliance efforts by showing where to focus initiatives. For example, showing whether existing suppliers have specific insurance riders or specialized policies such as cyber insurance — or not — as contained within MSAs.

This list is just the tip of the iceberg for procurement savings, working capital and compliance  when it comes to the independent value that contract visibility solutions can bring.

Finally, don’t think for a minute that even best-in-class CLM solutions and procurement suite vendors capture this level of visibility into contracts. That is, unless they originate in the vendor’s walled contract garden. Beyond even a best case scenario (i.e., using a CLM with a strong metadata structure and potentially even semantic analysis of a repository or targeted document) for the foreseeable future in procurement, there will always be constant supplier paper and maverick contracting in addition to buyer-led, legal-negotiated contracts. It’s never-ending!

So what do you think? Will contract analytics and visibility become a “must have” solution for procurement?

My vote is yes. But I’m not sure precisely what the time horizon is.