Recent research into leading providers of outsourcing services found a significant contrast between companies that do what customers want, versus those that do what customers need. The differences were especially marked in levels of customer satisfaction and supplier profitability, with those who address ‘needs’ taking a very clear lead.
Many times we are asked at IACCM what we think of the contract management software market, what growth we anticipate, who are the leading suppliers. And a common question is “Why hasn’t the size of this market developed in accordance with analyst forecasts?”
The answer, I think, is that almost all the suppliers are catering to wants, not needs. They are being driven by a lack of imagination and understanding from both clients and industry consultants, who have failed to grasp the true business impact that automation could have on the contracting process and its business value.
“Wants” generally reflect the way that a customer’s internal stakeholders see the process. It tends to result in a narrow and non-threatening view of requirements which assumes what those stakeholders are doing today is valuable and necessary. Hence the focus for contract management has been on repositories, transactional review and compliance, auto-reminders and database search. The return on investment for this functionality is hard to define and is certainly not exciting; many implementations grind to a halt part way through because they are not seen as strategic.
“Needs” reflect what a customer really could be achieving as a result of more fundamental change, bringing innovation to their existing process and practices. In the case of contract management software, that would include realization of the fundamental insights that automation might bring to the business through more holistic data analysis – for example, consolidated data on risk probabilities and consequence, systems support that generates automatic alerts of potential problems, tools that enable shared data access and integrated supplier / customer risk registers.
Suppliers who address needs are thought-leaders, taking their customers to places they did not even realize they could go. I simply do not see many instances of this happening in the contract management software market.
In defense of the suppliers, the challenge they face has been especially significant because contracting is generally such a fragmented activity with no clear internal owner or champion. Therefore it has been very difficult to gain attention or establish a senior sponsor for anything that is truly innovative. But now, with the sort of data that IACCM is generating related to the potential return on investment, there is no longer a good excuse. It is time for customers to wake up to this potential and for those suppliers who want to lead this market to re-think their offerings and their marketing and to become purveyors of needs, not wants.
Filed under: Contract / Commercial Management, Legal & Regulatory, Organization, Procurement, Risk, Technology
