Executive Brief

2013 Contract Management

Benchmarking & The Role of
Technology
In 2013, IACCM interviewed executives from 50 of the worlds largest corporations. The
IACCM Annual Contract management survey found that many organizations contract
management function has been relatively immune to decreased spending across business
units within the enterprise. This is attributed to an increased presence of government
regulators across industries so the need for strong and compliant contracts has increased.
Also, commercial transactions have gotten more complex as organizations continue to
push for the globalization of their products and services.
IACCM also found that only 11% of the organizations surveyed felt well equipped to
handle the future business needs and 89% acknowledge that there is significant room for
improvement. One key area of improvement pertains to the automation of the contractual
function. Contract management professionals are very heavy handed in contract lifecycle
management, from creation to execution, to search to obligation management, it all
requires a lot of heavy lifting, or does it?

Improved contract management technology has broken new

grounds in recent years.
With the proper investment in the right technology and change management,
organizations can experience a very highly automated process. So why dont we see
more organizations further along on the contract management maturity model? 40%
of the survey respondents noted that there was no clear individual with the authority
or executive sponsorship needed to drive the necessary process improvements; their
process ownership remains largely undefined and often organizationally fragmented.
This represents a lost opportunity to what could produce greater revenue and increased
governmental, organizational and term compliance.
But there is light at the end of the tunnel. The survey uncovered that nearly 90% of the
respondents said that their executive leadership was receptive to changing the support
structure relating to contracting and over 50% saw this as an urgent priority.

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Executive Brief

The focus is shifting away from avoiding potentially risky

relationships to managing those relationships closely to ensure
the full benefit of the contract is recognized and proactively taking
measures to mitigate exposure.
The findings suggest that the traditional contracting models of forcing complex, inflexible
language is not meeting business needs. Rather, Companies are feeling the need to
implement more adaptive, flexible commercial terms and practices that generate business
and capitalize on rapidly emerging opportunities while improving oversight into and
assessment of potential negative risks. This means that the focus is shifting away from
avoiding potentially risky relationships to managing those relationships closely to ensure
the full benefit of the contract is recognized and proactively taking measures to mitigate
exposure. What do we mean by that?
In 2013, IACCM conducted the Value of Contract Management ROI survey. By taking a look
at the biggest pain points that arise through poor contract and relationship management,
IACCM discovered that 9.15% is the average impact to bottom-line performance that
results from weaknesses in contract management. Furthermore, the losses manifest
themselves as follows:
Project Delays and Cost Overruns: 76.7%
Claim/Dispute Settlements: 52.1%
Lost or Cancelled Business: 26%
Liquidated Damages: 26%
Also in 2013, IACCM and the UKs National Audit Office conducted a survey on attitudes
towards contracting. More than 700 respondents from a range of sectors, regions and
functional areas completed the survey. The survey found the following cause of disputes:
Scope or Goal Change: 77% frequently
Price Changes: 48% frequently
Change Management
Procedures: 37%
frequently
Performance Guarantees:
33% frequently
Service Levels and
Warranties: 30%
frequently
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Executive Brief
When looking at those numbers, it makes sense to spend the majority of the contract
management negotiation period focusing on those categories that:
Improve visibility into revenue drivers
Implement flexible terms that address potential delays and cost overruns
Focus on termination provisions and including provisions accounting for potential
eDiscovery
This again brings up the point that the traditional legal-centric approach is not
preventing risk or increasing revenue, its actually undermining contracts primary value
as instruments of communication and understanding. And if we focus on the legacy
contracts and make effective use of these contracts, we can change the way business is
conducted and give our organizations a competitive advantage. So where do we start?
CLM systems, when properly utilized, are very good at delivering value on their primary
objective, which is managing the contract lifecycle process and tracking the important
terms across all contracts created from internal contract templates. But they lack the
flexibility to elegantly capture and classify the type and nature of unique terms introduced
through third party paper contracts. As such, organizations have no way to confidently
analyze their entire body of contracts, which still leaves them with limited visibility to
and control of the risk buried within their contracts. Because of this, we find that a
combination of software is necessary to capture the missing pieces of the contractual
puzzle. Seal Software has often been described as the puzzle master, putting the missing
pieces together. By leveraging the Seal solution, organizations quickly and easily gain
control of the critical legal and commercial terms within every contract (internal and third
party-based), providing confident insi insight and analysis to meet their unique contract
and risk management needs.

What Should You Do Now?

If your organization needs answers to your contract questions, get in touch with Seal today
to learn more and see Seal Contract Discovery and Analytics in action by requesting a
demonstration.

Contact Seal
Americas Headquarters
201 Mission Street, Suite 2250
San Francisco
CA 94105. USA.
T: + 1 650 938-SEAL (7325)
info@seal-software.com

European Headquarters
1-2 Hatfields, Waterloo
London
SE1 9PG, United Kingdom.
T: + 44 203 735 9898
info@seal-software.com

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Copyright 2016. Seal Software Limited. All rights reserved.