We've talked to a lot of companies who aren't using contract management software. And we've talked to a lot who are. A question we hear time and time again is, "How do I know we need a solution? We've been using Excel for years."
We interviewed over 100 companies to determine characteristics that defined when companies typically started to consider using contract management software and why a purpose-built solution started to make the most sense.
100 Contracts a Year
If you are managing 100 new contracts a year, you may be fine using Excel, Outlook, and whatever cobbled-together solution you have.
Typically, once companies crossed that threshold, they were increasingly aware of the shortcomings of using Excel, especially as renewing contracts stacked up on each other.
Once companies had more than one office that was creating or signing contracts, the person or people managing contracts became more acutely aware of using spreadsheets for contract management.
Awareness came in the form of:
- Time expense tracking down contracts for internal stakeholders.
- Missing contracts signed by individuals no longer with the company.
- Business productivity bottlenecks as internal stakeholders had to wait for answers regarding certain contracts and could not find or access them themselves.
The more $100/hr senior-level employees (general counsel, CFO, business development, etc.) needing access, review, reports, and alerting, the more likely a company was either using or looking for purpose-built contract management software.
$45,000 Duplicate Vendor Cost
One of the companies we interviewed said in the past year they had paid two vendors for the same service. The person that negotiated and signed one of the contracts had left and the replacement person hired another vendor because there was no central alerting or repository for anyone to see that the service had already been purchased.
If a company found one incident like this, they knew there were likely many others they simply weren't aware of.
$1,000,000 Compliance Risk
Some of the companies we spoke with talked at length about the time expense of ensuring that their suppliers, vendors, or even they themselves were in compliance.
These were low-probablility events with high-cost consequences that they could not afford should they occur.
For instance, if there was some failure that could be traced to a partner whose insurance had expired, that could expose the company and its insurance. The risk of this ocurring might be low, but the consequences so high that this led to an active search for a contract management solution. Putting in place a system with a central repository, alerting, and reporting protects against this type of scenario.
If your company has experienced any (or all) of the above, implementing some sort of contract management system makes sense. Conversely, if you do not fall into any of those buckets, you probably don't need one.
For more information on how to determine if your organizaion is ready for a purpose-built solution, for a framework to align your goals to the approprieate features, and to save time in vetting the 100+ solutions out there, download our whitepaper below.