Independent Study Reveals Contract Management’s Dramatic Shift from “Nice-to-Have” to “Critical-to-Have”
Research Finds Contract Intelligence Better Prepares C-Suite to Respond to Disruptions Like COVID-19, Manage Other Rapid Change
Icertis, the contract intelligence company that pushes the boundaries of what’s possible with contract lifecycle management (CLM) software, today announced new findings that reinforce how critical contract management is to business decision-making. The conclusions were drawn from a study, conducted by Forrester Consulting and commissioned by Icertis, that analyzed how companies are using CLM software. A key finding of the report is that the status of contract management software inside the business has undergone a dramatic shift from an important business application to a critical-to-have solution.
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“Among the firms surveyed, CLM has universally gone from a nice-to-have to a critical-to-have in a post-COVID world,” according to the Forrester Consulting study. “Firms who involve coalitions of C-suite stakeholders in CLM decision-making and have more fully integrated solutions are better prepared and more confident in managing rapid change.”
Respondents from organizations that tie contract data more deeply into enterprise systems and have more input across departments reported, “CLM helped with increased contract intelligence and insight across business functions (64%) and improved spend visibility (61%).” The study found that, “[C-suite] stakeholders have increased their involvement in everything from CLM strategy to reviewing data and benchmarks from a CLM system since the start of the COVID-19 pandemic.”
The disruption caused by the pandemic highlighted the importance of coupling a comprehensive contracting strategy with a robust CLM solution, which can help firms pivot quickly and confidently in times of uncertainty. The study found companies that have done this were better prepared, saying “Mature firms rely on CLM to surface contract intelligence, including impacted agreements and clauses (80%), as well as for negotiation guidance and clause recommendations (87%), across their worldwide portfolios.”
In addition, the study surfaced how the nature of contracts is evolving as the business landscape becomes more volatile. Nearly two-thirds of forward-thinking companies no longer view contracts simply as shields against risk but as, “dynamic artifacts that continually change to reflect changing business relationships (64%).” This highlights how organizations need to broaden their perspective with regards to the strategic benefits of CLM, which can empower them to quickly adapt to meet the needs of customers, suppliers, and even employees.
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“Today, contracts are seen as the beating heart of commerce, vital to managing business relationships throughout every part of the organization,” said Bernadette Bulacan, Vice President and Lead Evangelist, Icertis. “This year, it has become clear that focusing solely on CLM as an electronic repository isn’t enough. The COVID-19 pandemic proved real-time access to contract intelligence is a critical shock absorber to ensure businesses can manage risk and capitalize on opportunities, now and in the future.”
CFOs Lean Into CLM
The study also confirms C-suite involvement in CLM decision-making is increasing and the office of the CFO, in particular, are getting more involved in every aspect “from selecting a CLM provider (40%) to reviewing contracting data from their CLM systems (35%).” CFOs glean immense value from AI-powered CLM systems which allow them, “to quickly and easily view all new, old, and in-progress contracts to uncover opportunities to save money, reduce risk, and learn from past mistakes.” This data is proving crucial during contract negotiations, as 43 percent of finance leadership teams became more involved in CLM during the COVID-19 pandemic when supply chains are being unexpectedly disrupted.
Artificial Intelligence Drives Better Decisions
One area the survey explored was the increasing importance of Artificial Intelligence (AI) in contracting. Fifty-six percent of firms reported taking advantage of AI-enabled CLM solutions to gain enhanced visibility into contract relationships and performance data, enabling them to make more informed business decisions. In addition, employees are seeing the benefits that AI-powered CLM provides. The study found that, leading firms are also leveraging AI-enabled CLM as a collaboration platform to support remote teams (59%), and more than half (52%) are leveraging CLM to enable self-service contracting capabilities for their employees.
Methodology
Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. The commissioned study began in May 2020 and was completed in June 2020. Forrester conducted a global online survey of 329 contract management leaders and eight in-depth interviews with CLM strategy decision makers to explore this topic. Respondents were separated into three categories; high maturity, medium maturity, and low maturity, based on how integrated their CLM system was with their core business applications, the number of contract types the CLM system supports organization-wide, and the CLM capabilities they were currently utilizing.
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