How to use software to manage contracts
First step: Know your own needs
By Susan Avery -- Purchasing, 6/16/2005 6:00:00 AM
Click hereto view Purchasing's web exclusive complete list of contract management software.
More and more purchasing professionals are trying to get their arms around the contracts they negotiate with suppliers. Twenty percent of buyers responding to a recent PURCHASING magazine survey say they use contract-management software and another 37% say they have plans to purchase the software in the coming months. By 2007, researchers at Gartner in Stamford, Conn., expect the market for contract-management software to grow to $20 billion.
Contract-management software provides purchasing operations with the visibility and control needed to create better contracts, to ensure that suppliers meet their contractual obligations and to manage and evaluate performance against contract terms. It also helps maximize the effectiveness of other purchasing applications, accelerate cycle times from sourcing through contract and realize negotiated savings.
While purchasing pros may recognize the benefits of implementing contract-management software, how do they know which application is best for their organizations? There are a number of companies that provide contract-management software, and PURCHASING has put together a list of these suppliers. (Please see accompanying sidebar.)
For some of these companies, contract-management software is their sole offering. They dedicate resources to its development, marketing and service. Others offer contract-management software as part of a suite of applications designed for the purchasing function.
In the past year, a number of these players have changed. For instance, Procuri has purchased CMSI and Selectica has acquired Determine Software. And now some buyers may want to add asset-management software companies to the mix. These companies have honed their applications to address contract management in a slightly different way. While the more traditional contract-management software tools are developed for purchasing operations looking to get a better handle on contract terms and conditions, these asset-management applications are concerned with managing the entire lifecycle of a particular asset, (i.e., computer hardware or software).
"Unfortunately there is no magical formula to determine what contract-management solution is right for the buying organization," says Greg Buchanan, a business analyst in the global supply chain organization at International Paper in Memphis, Tenn. "However, with the appropriate due diligence an organization can document its needs and plan a path forward to maximize efficiency and minimize risks and costs either with an in-house solution or a supply market offering." Buchanan, who has years of experience buying computer hardware and software, has put together a list of recommendations for purchasing operations considering contract-management software.
To get started, he suggests software buyers follow these three simple steps:
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Identify the organization's needs.
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Analyze and understand contract-management suppliers and their products.
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Identify the benefits of implementing contract-management software.
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Three other important elements a sourcing operation must address are: communication, a champion and governance structure, and change management. "These are critically important elements that require ongoing consideration and effort," says Buchanan.
How to
Before deciding if contract-management software is the right answer, a purchasing operation should clearly identify its needs by acquiring a baseline understanding of current processes, systems and control/audit needs by interviewing individuals involved in the process. Buchanan recommends completing a sourcing technology "prioritization matrix" based on perceived needs and benefit, to "learn if and where contract management fits into this larger picture."
Next, it's important to thoroughly detail the organization's requirements. Responses to these questions will help: What process flows can be improved? Do business rules and policies need to be modified and/or changed to reflect these requirements? How can the processes be defined to increase simplification, and minimize risk while allowing room for creativity? What processes can be put in place to ensure ongoing sustainment? Detailing organizational needs, Buchanan says, "is extremely important because it will be what contract-management solutions are measured against."
Some issues purchasing operations may want to address with contract management include ensuring, enforcing and tracking compliance, integrating contract data into transactional procurement systems, creating a contract repository, communicating terms internally, and contract collaboration.
The purchasing operation needs to analyze and understand the market for contract-management software. Who are the suppliers? What are their offerings? Is there differentiation among the suppliers and offerings? Have the suppliers and offerings been independently evaluated? What evaluation criteria is/was used? Where can one go to find this type of information?
Buchanan recommends that an organization be sure to consider using internal resources to the fullest in developing and supporting contract-management software.
The purchasing operation needs to identify benefits or drivers to change. Reflecting on the organization's needs, what is the value that can be documented in terms of addressing the top challenges? What are the costs associated with not changing? Buchanan suggests purchasing operations use these criteria to evaluate product offerings of software providers:
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Functionality. Does the technology meet the organization's requirements? If so, to what degree?
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Ease of use. Does the technology look and feel intuitive?
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Supplier viability. Does the supplier have a good track record in the supply market and with other customers? What were the best and worst implementation cycles? What were complexities of each?
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Technology. Does the supplier's underlying technology complement the buying organization's technology landscape?
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Costs. What are the short- and long-term costs associated with using the technology?
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Benefits. What is the payback? What is the benefit of ensuring contractual terms—payment, discount and pricing—are correct?
A buyer's guide to software for contract management
| Company | Description of Software |
| Ariba www.ariba.com | Ariba Contracts promises to deliver value throughout the contract lifecycle. Configurable contract creation workflows, with deep integrations to MS Word, streamline collaboration, negotiation, and approval. |
| diCarta www.dicarta.com | diCarta Contracts is a comprehensive tool for managing supplier contracts throughout the procure-to-pay cycle. The tool's functionality spans from contract creation and negotiation, through reporting and analysis. |
| Elance www.elance.com | Elance Enterprise helps improve the way companies buy and manage external resources and outsourced services. Elance says that organizations that deploy its application may reduce cost by 8-17%. |
| Emptoris www.emptoris.com | Module helps maximize negotiated savings by optimizing management of contracts from creation and execution through monitoring, analysis and re-negotiation. |
| Frictionless Commerce www.frictionless.com | SRM contract-management module enables users to gain control over the contract generation and management process—providing a repository, automated management, contract and clause templates, and visibility into spend. |
| Global eProcure www.globaleprocure.com | eSourcing/eProcurement provides spend-management applications, including automated spend analysis and reporting, eRFX and eAuctions, vendor management tools, and contract management. |
| I-many www.imany.com | ContractSphere Enterprise Contract Management software offers purchasing operations an end-to-end solution—from precontract processes and contract management to transaction compliance. |
| Ketera www.ketera.com | An on-demand offering, Ketera Contract Management helps cut costs by bringing maverick spend under control through a single repository and system, decreasing cycle time and enforcing contract compliance. |
| Nextance www.nextance.com | Nextance provides contract performance and analytics tools that leverage information about customer, supplier and partner relationships that usually remains hidden inside enterprise systems. |
| Oracle www.oracle.com | Oracle Procurement Contracts is an enterprise application that creates and enforces better purchasing contracts. Customers can standardize contract processes, reduce time to contract, and drive compliance. |
| Procuri www.procuri.com | Procuri TotalContracts helps streamline the deal-to-contract lifecycle—from contract request through creation, negotiation, approval and execution—enabling organizations to negotiate and execute the best deal. |
| PTC www.ptc.com | Windchill has a range of supplier lifecycle management capabilities spanning supplier approval processes, contract management, and supplier/manufacturer relationships. |
| SAP www.sap.com/solutions/business-suite/srm/index.epx | mySAP Supplier Relationship Management is a purchasing platform that helps companies integrate all supply processes to achieve sustainable savings. |
| Selectica www.selectica.com | Leveraging OnDemand delivery and collaborative implementation services, Selectica's Enterprise Contract Management Solutions offer a pragmatic, risk-free approach, according to the company. |
| Upside Software www.upsidesoft.com | UpsideContract is a Web-based, enterprise-class contract-management tool providing full-contract lifecycle-management functionality. |
| UGS www.ugs.com | Teamcenter is an enterprise-wide product-lifecycle management product that helps procurement to track supplier performance to contract. The software provides a gateway to more supplier-collaboration products. |
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Verticalnet www.verticalnet.com |
Verticalnet Contract Manager provides tracking, management and negotiation capabilities to optimize contractual supplier relationships and contract compliance and performance. |
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