Ardent Partners’ recent research report, Sourcing and Procurement: The 2016-2017 Technology and Innovation Outlook Report, chronicles the evolution of sourcing and procurement technologies over the last two decades to where they are today and poised to go tomorrow. This report, which is chock full of great insights on many advanced, distinct sourcing and procurement technologies, has spawned a series here on CPO Rising that looks in depth at each of the innovative solutions coming onto the market today and in the near future. Today’s installment: Contract search, discovery, and analytics.
There are several key parallels between contracts and other forms of procurement information, like spend and supplier data: Chief Procurement Officers (CPOs) and their teams are overwhelmed by their contracts, they have too few hands to effectively process and leverage them, and there is risk in failing to digest their contents. Another parallel is that there are robust, cutting-edge technologies in the solution market now that can help CPOs and their teams cut through the red tape and get to the red meat. Chief among them are contract search and discovery and contract analytics. Both kinds of tools rely on contract digitization and centralization, as well as automation and algorithms to drive each process forward. But there are subtle differences in the two.
For starters, contract search and discovery tools leverage keyword and parameter search techniques to crawl (or, perhaps more appropriately, scour) through thousands of lines of contracts to find operative language that is suddenly of interest to the enterprise. Perhaps there is a labor strike in the supplier’s home country; or political unrest in the third-tier of the supply chain; or a tsunami has just hit a major production region. Whose responsible if supply cannot be met? Are there fines? Which party is liable? CPOs and general counsel need to quickly understand what their contract and supply risks are vis-a-vis emerging events, and they often need to reference a supplier contract to do so. But if there are hundreds or thousands of contracts and suppliers, even a sharp and organized staff will become quickly overwhelmed, particularly with paper and ink contracts. Contract search and discovery tools will help them isolate the operative language in the pertinent contract and understand their liability and risk.
Contract analytics tools likewise leverage keyword searches, but they do so autonomously to deliver actionable insight to decision makers, like CPOs and general counsel, who can make informed, proactive business decisions. Contract analytics look for important contract milestones, like execution, delivery, and renewal/expiration dates to keep the enterprise on track and the CPO/GC abreast of the contract’s status. These may seem like mundane details; but if a particular contract (among hundreds or thousands) is unfavorable to the enterprise, there is real risk in letting the contract auto-renew and cost the enterprise significant financial, operational, or reputational capital. If the CPO is updated on contract status and supplier performance, then he or she can make an informed decision to either renew, renegotiate, or “sunset” the contract. This can be hard to do with hundreds and especially thousands of contracts and or a Spartan contract management team. But contract analytics can deliver this insight automatically to allow the CPO to proactively make the right decision.
Final Thoughts
Modern contract management tools have come a long way from the bad-old days of dusty filing cabinets and pen-and-ink contracts. Solution providers, like Seal Software, have been reimagining the sub-discipline to more closely resemble other data-driven processes, like spend analysis and supplier information management. In a Big Data environment, there is simply too much structured and unstructured data to manage by hand. CPOs, their teams, and general counsel teams can overcome the Big Data “challenge” when it comes to contracts and employ search and discovery and analytics tools to cut the process down to size and get ahead of fast-turning events that would swarm lesser-equipped teams.
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