How much value is your business gaining from your contracts?
If a procurement executive asked you what a given contract was worth, you would likely give an answer based on estimated spend value as a result of projected volume, negotiated costs, and term. While this is accurate, it is also a limiting perspective that places more emphasis on the transactional footprint of the contract than what it means to the company’s operations.
Patrick Stakenas, Chief Strategy Officer of Selectica, recently said it is one thing to know where a contract is stored and an entirely other thing to truly understand the value of what was committed on both sides. Having that mutual commitment is important to both parties and cannot be reduced to a stale format without loss of opportunity.
Contract lifecycle management (CLM) solutions are growing in prevalence over their predecessors, contract management (CM) solutions. This demonstrates an understanding on the part of companies that the time between contract execution (signature) and expiration or renewal offers the most potential for value creation.
Procurement must start thinking of contracts as more than documents used to store negotiated details. Although they exist as documents, each contract should be allowed to serve as a living encapsulation of the relationship between buyer and seller. If procurement is building relationships with their suppliers, the contract in place must support the full range of that relationship’s needs, including other interested parties.
Although procurement is usually the owner of in-place contracts, they serve the requirements of the entire company, hence the need for enterprise access, visibility, and control.
How much value would you say your contracts are “worth”? Are they living up to their full potential for value creation and serving the needs of all interested parties? Share your thoughts by commenting below or tweeting @BuyersMeetPoint.
If you would like to learn more about CLM solutions and how they meet the needs of the entire enterprise, contact us and request a demonstration.