Data analytics in contract management – expectations from customers

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Why data analytics in contract management is extremely important for organizations?

I was recently in New York to meet several new customers, and attend workshops with existing customers to discuss and shape our vision for 2019. While this vision was – as you might imagine – different for each customer, the one thing that was consistent was the increasing demand for us focus on delivering analytics and reporting.

Traditionally, we’ve been asked to maintain quality, as well as increase efficiency, productivity, and customer satisfaction. Reporting has been limited to measuring our own performance and productivity. This year, however, most of my customers want us to go above and beyond this kind of reporting, and leverage this data to understand their own performance and strategic business decisions. They want to know how to control and manage the contract portfolio, how to reduce spend, and increase revenue by using the contracting data that goes into the system.

In the contract management space, where thousands and thousands of contracts are executed every year resulting into millions of documents, analytics are key to understanding how to manage and maintain them. Here are some recommendations I often give to my customers:

  • Contract negotiations how many contracts arrived for negotiation vs. how many were actually executed and how many resulted in real business:
    • Review the number of contracts that were executed the previous year to get insights on the cycle time required to close each contract.
    • Check whether you’re using the same framework agreement for new business opportunities or executing new ones each time, which often leads to delays and same negotiations.
    • How many contracts never resulted into any business? Is it worth negotiating such contracts?

Understanding this kind of data will give you some excellent insights and help you reduce time and cost.

  • Low value contracts – in low value contracts (for example, $5,000 depending on the size of the organization), how many contracts were below the threshold and how much time was spent in negotiating them? Is it worth the time? If not, you should either:
    • Advise sales not to entertain such requests.
    • Increase the margin to cover the hidden cost of negotiation.
    • Prepare a policy to prevent redlining on such contracts.

This will help optimize low value contracts, and reduce cost and cycle time.

  • Analytics – what are the most negotiated clauses that have taken up most of your time? Can such boilerplate clauses be redrafted to address the opposite party’s most common issues? This will eventually reduce the negotiation cycle time and tedious approval process. Artificial intelligence (AI) and machine learning (ML) tools are equipped to give this kind of information, enabling you to tweak the language of such clauses.
  • A unified approach – in large organizations where goods and services are procured or sold across geographies, contract analytics can reduce the approval and cycle time, while delivering better visibility, control, and governance. A fragmented approach may qualify an organization as low value or low risk, whereas a consolidated picture increases the chance for an organization to become a strategic partner. This represents a win-win situation for both the parties.

Overall, reporting and analytics that can answer multiple non-standard questions are a key driver in every business sphere. Contract management is no exception. This is only set to grow further and will become a much bigger part of the boardroom discussion as AI and ML tools become more mature.

Capgemini helps Fortune 100 companies drive meaningful intelligence out of their thousands of contract documents. To learn how Capgemini can provide the correct contract management platform for your organization, please contact: mani.agarwal@capgemini.com

Click here  to learn more about how Capgemini’s Contract Compliance & Optimization (CCO) solution provides a broader and deeper solution to your compliance, cost reduction and spend protection goals, from an often-overlooked area – the written contract.

Mani Agarwal advises clients on commercial and contract management transformation initiatives. He helps organizations to transform their contract lifecycle and contracts portfolio by implementing the right machine learning/AI tools. He also uses his expertise in optimizing the performance of contracts to ensure maximum value through all contractual opportunities and avoid any revenue leakage. Mani is a qualified lawyer and an elected member of the prestigious IACCM Council for IT and Outsourcing Networks. Prior to his role he worked in various large legal and technology companies managing their contracts and risk.

 

 

 

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