The True Value Of Contract Intelligence – Why Are Contracts Hard To Find?

If you missed our webinar with Seal Software in December, we’re pleased to say we cover the same ground and more in a new briefing paper, titled The True Value of Contract Intelligence; it is free for readers to download here . “Contract intelligence” in our definition is the potentially useful and important information and data found in supplier contracts that every organisation hold, but few truly understand, utilise or exploit.

In the paper, we look at why procurement executives should pay attention to contract management (some still do not, unfortunately), and explain why the concepts of risk and opportunity are central to everything in contract management. We then get into the value of contract discovery and what exactly we mean by contract analytics. It is a paper that starts with some relatively straightforward issues, then gets into what for many organisations will be more in the way of leading-edge thinking.

We published a first extract from the paper before Christmas here; and we’ve got another one today. But please do consider reading the whole paper – this is a big issue for procurement in our opinion!

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 Why Are Contracts Hard to Find?

As we have said, most organisations simply do not know how many contracts they are party to, where they physically are held or who is responsible for them. In response to this problem, contract discovery and analytics is a relatively new discipline built around the processes designed to establish exactly which contracts are live within an organisation, and what those contracts contain.

The experience of providers that have implemented solutions is particularly interesting here, and emphasises where many buying organisations are starting from in this field. As one of the first solution providers focusing on this space, Seal Software has developed an end to end approach to contract discovery and analytics which supports management of the opportunities and risks we discussed earlier. Formed in 2010, Seal works with over 100 clients and many partners in the software, legal and consulting areas to help organisations discover, manage and analyse their contracts better and more professionally.

Their experience is that even organisations that believe they have a good grip of their contract population vastly under-estimate the number of live contracts in operation by anything up to and even beyond 100%. So the organisation that believes it has 2,000 contracts in place turns out to have 4,000. (There are even more extreme examples in fact.) Organisations are also usually unaware of the risks contained in that contract population.

Why is this the case? Experience suggests that usually a combination of the following factors comes into play:

  • Procurement itself does not always keep good records. Many procurement functions let contracts but then are less diligent about capturing the contract details properly and professionally.
  • There are often entire spend categories where procurement has not achieved good coverage and contracting in those categories is left to the business owners. Even in the very best firms, with a high level of procurement “coverage,” there are some gaps. Asking procurement what contracts are in place with corporate finance advisers (for instance) will rarely get a convincing answer!
  • A lack of compliance to preferred contracts may lead to budget holders setting up their own arrangements, independent of procurement and outside their visibility....

(Download the paper to understand the rest of the factors!)

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