Daily Archives: January 7, 2010

The Real Reason No One’s Buying Contract Management Software

Over on Commitment Matters, Tim Cummins authored a post on The Guilty Secret of Contract Management Software where he attempted to explain the disappointing uptake in contract management software. It was pretty good, and he was right in that the uptake is not simply down to a reluctance to buy and due to a failure to achieve widespread internal adoption within many organizations that have bought. But he missed the real reason why.

According to Tim, the problem is that contract management continues to be a football, today owned by one function, tomorrow another; today centralized, tomorrow decentralized; at one moment an instrument for compliance, at the next a source of empowerment. Basically, the activities that lead to [contract] creation and management are generally fragmented. Finance, Legal, HR, Product Management, Marketing, Procurement, business unit management, Sales — all of them have an interest, yet none feels responsible.

While Tim’s observations are correct, it’s not a problem of “the buck doesn’t stop here”, it’s a problem of “where is the buck“? Even if a company appointed a head of contracts with ultimate responsibility for all contracts (which should reside in the Procurement or Supply Management department), such as a VP of contracts, you’d still have an uptake problem. Why? Because contract management systems, on their own, don’t offer much in the way of value.

But they centralize all of my contracts. So does a shared directory on the central file server. Heck, so does a filing cabinet and a little bit of diligence.

But they provide me dozens of useful contract templates. So does the CD I picked up for $5 ten years ago.

But they allow for automatic contract generation from standard clause template libraries. So does Microsoft Word.

But they allow me to query my contracts and create custom queries. So does an Access database and a high school programmer.

The simple fact of the matter is that most of what the contract management vendors sell is hot air. The real value of a contract management system materializes when you integrate it with your e-Procurement, EIPP, and/or P2P system and use it to automatically check all invoices against your contracts to make sure that

  • no off-contract purchases are accepted without appropriate management approvals, and only with good reason and
  • all charges are at contracted rates.

Then you stop maverick spending and overcharges dead in their tracks, which collectively account for the 40% to 60% of negotiated savings that are never realized in your average Procurement department. Otherwise, you’re just buying an over-priced content management system with word processing capabilities — and you might as well use Open Office and a centralized shared directory with naming conventions as the uptake will be about the same unless you can demonstrate how the software is going to result in real hard dollar savings.

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2009 Vendor BS of the Year: SRM

Since I’m sure you’ll find many posts and articles on the best supply management technology of 2009 if you take the time to look, I’m going to take a slightly different approach and focus on the best bullsh*t supply management technology of the year in 2009. That was, without a doubt, SRM, or, in it’s full vernacular glory, Supplier Relationship Management. Less than five years after SAP adopted the phrase as their own, it seems every vendor and their mascot has jumped on the SRM feel-good-wagon and tried to make it their own.

It’s simultaneously hilarious and pathetic because there’s no such thing as SRM technology. There’s SCM (Supplier Compliance Management), SDM (Supplier Data Management), SEM (Supplier Environmental Management), SIM (Supplier Information Management), SPM (Supplier Performance Management), and probably a dozen other SXM solutions that are, more-or-less real, honest-to-goodness technology solutions, but not SRM.

The very definition of relationship is “a connection between persons“. Persons, not systems. Even if the technology uses AI and connects to a supplier system that also uses AI, that’s still not “a connection between persons”. So while you can buy systems to track environmental and regulatory compliance (SCM), electronically exchange data with your suppliers (SDM), track carbon emissions (SEM), manage all of your vendor data across multiple systems though a single interface (SIM), and track metrics and scorecards (SPM), you can’t buy a piece of software that will manage your relationship, as that requires real person-to-person interaction.

It’s too bad that you, my dear readers, and I are apparently the only ones who realize this as I’m sick and tired of hearing how great SRM is from all of the publications who have apparently fallen for this bullsh*t –spread by the vendors in the space en-masse because “SAP did it” — hook, line, and sinker. Every time they profile this BS, another great technology goes unnoticed. And, as far as I’m concerned, that helps no one (except, of course, for the publication that gets a nice chunk of advertising revenue from the vendor they profiled in their SRM story, but I’m probably not supposed to write that).

If you disagree with me and think that another bullsh*t technology, process, or claim was even wider spread in 2009, I encourage you to leave a comment below stating what it was, why it was bullsh*t, and why it deserves to knock SRM out of the top spot. And remember, on the leaner and meaner SI, as long as you follow the comment rules, you don’t have to pull your punches.

We’ve got the right to choose and
there ain’t no way we’ll lose it
this is our life, this is our song.
We’ll fight the powers that be
just don’t pick our destiny
’cause you don’t know us, you don’t belong

oh we’re not gonna take it
no, we ain’t gonna take it
oh we’re not gonna take it anymore
  Twisted Sister, 1984

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