Today’s market is defined by global disruption, risk, digital transformation, and heightened customer expectations. To compete and win, companies much achieve unprecedented levels of transparency and agility across their organizations, which can only be achieved by leveraging the critical business information found in their contracts. As stakeholder expectations – from customers, employees, financiers, vendors, and shareholders – are at an all-time high, it has become systemically important for tech giants in the consulting and IT services industry to exhibit agility and resilience in an effort to deliver services beyond borders, while simultaneously managing financial, legal, market, and regulatory, risks.
The Role of Contracts
Contracts are older than the written word: Scholars believe the earliest writing was created by traders in Mesopotamia whose contracts had become too complex to commit to memory. Today, as then, these powerful documents continue to form the foundation of commerce, defining what a company owes, and what it’s owed. Every dollar in and out of the enterprise flows from clauses and provisions in contracts; contracts with suppliers, customers, shareholders, financiers, service providers, employees, and government, among others. In fact, most client/provider relationships are governed by master service agreements (MSAs) and statements of work (SOWs), which contain critical business information that defines a client engagement.
Although contracts play a critical role in the efficiency and performance of the consulting and IT services industry, businesses face massive challenges with contract volume and complexity when it comes to contract management. Structured contracts are the preferred operating process, but it is equally important that the solution offers adequate flexibility for customization to cater to the diverse client requirements without 1) comprising the robustness of the basic structure, and 2) exposing the service provider to increased risks.
Need for Contract Lifecycle Management (CLM)
Efforts to address the most pressing challenges confronting today’s consulting and IT service providers must be largely about reinventing how contracts are managed and valued. Manual, inefficient contract procedures have long been a common roadblock to organisational efficiencies and profitability.
An organization-wide CLM solution can provide a rules-driven contract system that promotes efficiency by turning its contract repository into a single source of truth for business risk, compliance, and performance obligations. With a centralized CLM, all stakeholders have equivalent access to the contracts system, enabling exceptional visibility and faster review processes.
How Contract Intelligence Can Help
Contract Intelligence transforms the critical business information found in contracts into structured, connected, and on-demand data to deliver the intelligent insights, automation, and contract development capabilities organizations need for growth. Consulting and IT services companies can make the most of contract intelligence to coordinate or delegate work across departments, pool resources to meet shared contracting goals, and drastically decrease contract administration expenses. Additionally, an end-to-end contract intelligence solution helps service providers prevent revenue loss in back-to-back contracting scenarios.
Advanced analytics in contract intelligence can identify the performance-based incentives embedded in contracts and cross-reference them with financial data. This ensures that the service provider receives the compensation to which it is entitled, without incurring penalties from missed deadlines. Additionally, an analysis of past contract data enables companies to negotiate better deals in the future.
Today’s services industry is becoming highly competitive. Therefore, consulting and IT services companies that leave contracts to manual procedures risk exposure to inefficiencies that are detrimental to their ability to compete and grow. Now is the time when companies can maximise their performance to maintain a competitive advantage in this increasingly competitive industry.
(The author Vivek Bharti, Vice President of Product Management, Icertis and the views expressed in this article are his own)