Earlier this week I completed a Research brief called Bridging the eProcurement gap through Contract Management. My goal was to understand what organizations are doing with contract management from the perspective of eProcurement. Evident based on this cut of the eProcurement research, functionality of procurement contract management does not operate as a stand alone solution but more often in conjunction with other spend management solutions.
The findings essentially boil down to contract compliance with the unifying factor being contract and catalog data. For instance, 73% of the Best-In-Class organizations are using Contract Lifecycle Management (CLM) as compare to 45% of all others. 86% of Best-In-Class companies had Purchase Orders compliant with Contracts versus 51% for Industry Average and 36% for Laggards. 50% of Best-in-Class had compliance based with their electronic catalogs versus 30% for Industry Average and 21% for Laggards.
If we take a step back contract solutions there are generally two types. The first is what I like to call spend management “portfolio solutions” include key players in wider spend management including Ariba, Emptoris, Ketera, Perfect Commerce, Iasta, iValua as well as the main ERP plays such as Oracle and SAP that all have purchasing capabilities and catalog management tied somewhere in their solution sets. The other group of what I will call “pure plays” represents niche solutions like Upside Software, Selectica, and Mumboe that market their products on a more general aspect of contract management, not just procurement contracts. Every enterprise solution has its own starting point and raison d’être, but a majority represent SaaS solutions as opposed to on-premises.
Regardless of deployment type organizations are more likely to have enabled CLM in conjunction other solutions – 74% using eProcurement, 70% using Strategic Sourcing, 66% using Catalog Management, 67% using Spend Analytics/Visibility and 61% using Supplier Management. Perhaps part of the reason for such a high percentage of combined usage is that most “portfolio” spend management vendors offer contract management solution directly within their solutions, while CLM “pure plays” focus on integration with other solutions.
Yet with the availability of contract management becoming more pervasive, it is clear that small to mid-sized organizations (SMBs) will be picking up the adoption of contract management and may provide additional market expansion opportunities for solution providers from an install/subscription base. Moreover, understanding CLM within the wider context may provide some advantages and justifications for contract usage across the organizations, especially for those looking to increase ROI for their technology spend. For instance consider Ariba’s CLM solution strategy which in addition to procurement covers sales, employee agreements etc.
To maximize usage of a contract management solution, it may make sense to reach across the organization rather than take “siloed” solution approach based on business function area. The question is, does this wider strategy approach distract or dilute the focus on eProcurement based contract initiatives to other areas like Legal or Sales?