Analytics: Improve Rather Than Manage Contracts

All business-to-business companies today develop, sign, and store their fair share of contracts. While these contracts hold valuable information about partner relationships, incentive structures, and payment timelines, contract management is rarely seen as a crucial source of value.

Instead of viewing contract management as a vital part of the corporate infrastructure, companies tend to accumulate contracts in large data stores, managing them through paper filing, disparate electronic repositories, or makeshift solutions being labeled contract lifecycle management (CLM) systems. Not only are these rudimentary systems cumbersome and time consuming, they offer little contract visibility, poor access capability, and pose serious threats for organizations — such as lost contracts, missed milestones, compliance risks, and significant revenue leakage.

Comprehensive CLM systems, however, organize contracts in secure, searchable repositories, and pose an obvious advantage over contracts housed under paper or basic electronic filing systems. While many companies choose CLM systems in an effort to administer more contracts, the greatest value you can receive is related to the visibility of your actual contract performance — understanding if your contract is driving organizational revenue.

While the speed at which contracts are closed is important, understanding the success or failure of each contract is equally pivotal. In order for companies to truly create impactful and fruitful contracts, they must implement a contract management system with in-depth analytics capabilities. Here's why:

Benefits of CLM with analytics

  1. Tracking the value of high-impact incentives — Many B2B companies rely on channel partners to grow revenue and improve market share. Often companies develop complex incentives to encourage successful channel partner relationships. While incentives can boost revenue, companies often lack the visibility needed to know which programs succeed and which flop. By employing a CLM system with a robust analytics platform, companies can better track incentive value and develop impactful future programs.
  2. Visibility to alerts and milestones — Organizations often house important contract milestones in basic contract management systems that lack the ability to proactively alert organizations of upcoming renewal dates and milestones. In some cases, this can lead to thousands in revenue losses. For example, one company housed more than 300 contracts in disparate information silos, such as spreadsheets, databases, and local desktops. Due to limited visibility into automatically renewing contracts, the company lost more than $750,000. With the implementation of a CLM solution with analytics, the company identified and eliminated six-figure losses associated with automatic contract renewals.
  3. Increased partner value — Finally, by implementing robust analytics, companies can not only assess contract value but measure the value of each channel partner. Organizations can compare and contrast current partner contracts, and then view the agreements with the most favorable terms. From there, organizations can use those terms to develop more profitable agreements in the future. By identifying partner value, companies can strengthen overall partner relationships.

Best of breed contract analytics systems
While analytics are crucial for effective contract management, not all analytics systems are created equal. Organizations should seek analytics solutions that are built into their contract management system. Stand-alone analytics platforms lack the system expertise and data structure understanding required to easily develop and modify reports and dashboards. Instead, companies should seek a contract management solution with integrated analytics and out-of-the-box functionality. These systems come with built-in reporting and full analytics dashboards to provide the greatest insights in contract management processes organized by customer, partner, vendor, or product.

Analytics are key to an effective contract management system. While companies can extract insights from contracts housed in spreadsheets and automated data repositories, the analyses tend to lack depth and are prone to error. Companies serious about developing impactful contracts in an effort to boost revenue must implement a contract management system that contains a robust analytics platform.

3 comments on “Analytics: Improve Rather Than Manage Contracts

  1. Taimoor Zubar
    March 24, 2014

    “Stand-alone analytics platforms lack the system expertise and data structure understanding required to easily develop and modify reports and dashboards”

    @Joe: I agree with you on this. An integrated analyics platform built into all kinds of systems (including the CLM system) is the key to success in the market. While you may have analytics tools that exist in isolation, I don't think they give the required speed and flexibility that companies need. What's needed is seamless integration and interconnectivity.

  2. Hailey Lynne McKeefry
    March 25, 2014

    I read with interest a report from the Supply Chain Council that said:

    Accounting for an incredible 60 to 90% of overall expenses, supply chain costs can be a significant lever for driving bottom-line performance. In fact, it's estimated that a 5% reduction in supply chain spending can increase net income by over 40%.

    It seems that better use of analytics makes capturing this sort of reduction.

  3. Himanshugupta
    March 25, 2014

    Contract management sounds really an exciting field. What analytical techniques do you use for the software program. I know that it might be a trade secret but i just wanted to know whether these techniques are well known techniques or you have IPs protecting the software tool.

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