Round up

Conclusions

Contracts exist because separate legal entities that decide to form a relationship with each other need some formal record of understanding regarding the nature of the relationship and their respective rights and obligations. They are not well served by traditional enterprise software because this is typically inward looking – it is not designed to support or enable external relationships.

Contract management software is therefore distinctive because it seeks to support inter-organizational activities. It does this by providing a basic platform for control, which is enhanced by functionality and features that enable process efficiency and organizational effectiveness.

Many organizations have thought of contracts primarily as documents that record commitments and define the consequences of failure. While some recognize that they reflect relationships that are ‘assets’, many think of them only as legal instruments and few have defined a formal ‘contract management process’.

The traditional role of contracts remains necessary. But organizations and the economic environment in which they operate are changing and this requires new and improved controls. Contracts and contract management have a critical role in delivering these controls – and that is why new software tools are receiving a heightened level of attention.

The networked economy is changing the nature of relationships. It has introduced rapid movements of goods, capital and information that transform business operations. This has caused increased regulation and the development of global governance standards. It has also enabled new and exciting approaches to product and service development, global delivery systems, relocation of work and the management of risk.

Such change causes disruption. Organizations are forced to rethink the way they are structured and also the way they relate to customers, suppliers, partners and distribution channels. Both internal and external interfaces need to be managed faster and with greater flexibility. The speed of change demands strong business discipline through robust governance systems and shared understanding of base roles and responsibilities.

Superior contract management processes offer the tools needed to manage the complexity of global networked relationships, allowing a balance between the twin imperatives of compliance and change.

This is the environment that has given rise to advanced contract management software. It is an environment that demands much more than simple repositories; it demands more than planning systems that maintain standards; it demands more than document management. Contract management software delivers value because it offers not only control, but also increased efficiency and effectiveness. It bridges the gap between organizations and offers a source of integrated management insight to the performance of their relationship portfolio.

It is clear that many systems do not yet offer the sophistication that will be required by maturing supply chain disciplines, but they do offer substantial advances on any currently available alternative. They also cost very little compared with many other enterprise applications and with the right executive focus, they can deliver a strong return on investment.

Automation is not an alternative to process definition and reengineering; it is a critical supplement to realizing and retaining the benefits that come from a streamlined contract and ‘commitment management’ capability. In the 21st century economy, this capability is fundamental to any organization that wishes to compete and maintain its public reputation.