Category Archives: Procurement Innovation

Source-to-Pay+ is Extensive (P27) … Breaking down the ORA of Sourcing, Starting with RFX

In our last post, Part 26, we noted that, after covering e-Procurement, Spend Analysis, Supplier Management, and Contract Management, it was finally time for Strategic Sourcing. When it comes to Sourcing, we have to deal with the ORA et labora. The work, and the prayer (that it gets the results we want). But at least when it comes to the prayer, we have three tools at our disposal:

  • Optimization
  • RFX
  • Auction

Today we’ll start with the most classic sourcing tool, RFX, where RFX stands for Request for X, where X could be Bid, Information, Proposal, Quote, etc. depending on the depth of response required and the terminology used in the industry and geography the RFX is being issued in. So what is RFX? What must it do? We’ll break down the basics in this post.

BASIC

Surveys
This is so fundamental and obvious that you’d think we shouldn’t even need to mention it, but we do. The platform has to support the creation of arbitrary surveys, using all of the standard HTML form elements (check boxes, multi-select, text boxes, etc.), and allow them to be created in sections that can be mandatory or optional, depending upon what the supplier is bidding on, and re-used as needed.

Cost Breakdowns / Should Cost Modelling
In the beginning, back in 1995, man didn’t know that we should use TCO, for savings strive; ERP had the parts; but spreadsheets had the bids; no one new what they was gonna do; but FreeMarkets had the news; they said “let there be web”; there was web; “let there be bids”; there were bids; “let their be portals”‘ there were portals; “oh, let their be SaaS”. And it was great. But unit costs, and even landed costs, weren’t reminiscent of the full costs associated with a buy. And even worse, it didn’t give you any insight into why a product cost what it cost.

When sourcing expensive, or complex products, if you’re trying to understand the cost, it’s not average, or lowest bid, it’s what the product costs to make, plus a fair margin. This is why cost breakdown bidding / should cost modelling capability is key to understand the cost baseline.

Templates
Having to setup an RFX from scratch every time is very time consuming and unnecessary if the RFX you need is (almost) the same as an RFX for the last product you sourced in the category. That’s why it’s critical that the platform support templates that can be used to instantiate RFX events and then modified as needed to publish the event. The organization should be able to create as many templates as they want, and even create templates off of templates (adding detail and complexity as categories warrant).

Workflow
The platform must include basic workflow support, which should be configurable to the needs of the organization and the type of event — single round, double round; sealed envelope, blind; etc. This is especially critical for the public sector which must meet strict requirements in its call for bids in many countries.

Excel Support
The platform must support every buyer’s, and supplier’s, favourite tool, Excel, for RFX completion. Specifically, any supplier, or the buyer on behalf of any supplier, must be able to export the entire RFX to Excel, fill out the Excel spreadsheet, and then upload it into the system. While one may think this is not as critical now that broadband is more ubiquitous, there are many suppliers whose sales people are not very technologically proficient and still not comfortable using modern platforms, being used to bidding in Excel for years (and years).

Reporting
The platform must support basic report(build)ing capability that will allow a buyer to build the appropriate side-by-side comparison reports as well as custom reports by supplier, product, lot, and so on. Unless the platform supports some basic capability, it will be impossible for a buyer to identify an award.

Award Creation
Once a buyer has identified the award they want to make, the buyer must be able to mark the award, store it, associate custom reports that demonstrate the savings (and costs), create notes as to rationale for the award (especially if it is not the lowest cost award), link to associated documentation, and if the organization has SXM and/or CLM modules (or systems), link to the appropriate supplier records and contract(s) in those systems.

Real Time Management
It should be possible to manage the RFX, and process, as necessary at any time. While this doesn’t require the same “real-time” nature as an e-Auction system might require for a 30 minute auction, it must be possible to pause, and if necessary extend, the RFX at anytime if an issue is discovered, add documentation and details when a supplier question indicates a weakness in the documentation, and even modify the lots if it is discovered that items were overlooked or substitutions can be permitted.

ADVANCED

Integrated Optimization
A great RFX solution will integrate with the strategic sourcing decision optimization module, automatically run an unconstrained scenario, highlight the lowest cost award; automatically run a scenario with just the current suppliers, highlight the lowest cost award for an award to the current supply base; and automatically run a min 2/max 3 supplier scenario, with each supplier getting at least 20%, highlight the lowest cost award in a risk mitigation scenario; and then show a side-by-side comparison across those 3 scenarios (or organizational tweaks to these defaults) to help a buyer understand the cost differential between different options so they can optimize price vs. quality vs. risk vs. other factors of interest in an informed fashion.

Sourcing Strategy Enabled Dynamic Workflows
A basic solution should support standard, somewhat configurable, workflows, but those will be rather rigid once the RFP is launched. A more advanced solution will allow the organization to define different sourcing workflows based upon current market conditions (supply vs. demand, current bids, potential supply base, etc.), differentials between first round bids and the prices the organization is currently paying, potential supply base shifts, and so on and, after the first round is complete, shift to a second round RFX, push to an e-Auction, or divert to strategic negotiations with the incumbent (or a new supplier that is significantly more appropriate for the buyer under the current situation), as appropriate. While such functionality may not be capable of being used in the public sector, it’s perfectly fine in the private sector, especially if you tell your bidders up front it will be a multi-round process and, based upon the first round, there may be a second round, or you may go straight to negotiations with the leading supplier(s).

Bill of Materials (BoM)
While not strictly necessary for an RFX to support a multi-level bill of materials, especially since it could be flattened into a lot, if the organization sources direct on a regular basis, then the RFX should support multi-level bill of materials, as well as allow suppliers to bid at any level they want to.

Enhanced Globalization
The platform should support multi-currency, multi-language, and be fully localizable to any supplier, including support for auto-translation of documents as required. The platform should even support customized workflows and input screens tailored to the suppliers based upon their region, their requirements, and the workflows that work for them.

Market Intelligence
A good RFX platform will integrate with market intelligence sources that give you current commodity pricing, average pricing from public sector contracts, average on-line pricing, and/or average GPO savings to help a buyer understand how good, or bad, the quotes are that they are getting.

Automation
A modern sourcing platform will also support rules-based automation, and will allow a multi-round event to run on auto-pilot all the way from launch to award recommendation, with the exception of the buyer possibly having to answer a few supplier questions. For example, if the RFX was defined as a 2 round RFX with only the top 5 initial responses going into the 2nd round, if the weightings for the responses are predefined, the system will automate the closure of the first round, launching of the second round, and the identification of the recommended award based upon the sourcing strategy defined (dual-source, 80/20, price vs. non-price factor weightings, etc.)

Of course, this is not a complete list of what an RFX platform might have, or necessarily should have, as systems continue to improve, but a baseline of what they must have to be considered a modern RFX solution.

Onward to the “A” in Part 28.

Source-to-Pay+ is Extensive (P26) … Time for Sourcing

When we started in Part 1, we noted that even though all core sourcing and procurement technologies have been available for twenty (20) years (although it is debatable just how good the initial versions of many of these applications were) … the majority of organizations still do not have what any modern analyst would consider reasonable support for the full, core, source-to-pay process.

However, now that inflation is back with a vengeance, anticipated savings is leaking faster than a bald spigot, and most organizations are in a cash crunch as a result of down sales during the pandemic (and now due to a lack of core inventory to sell), they need to update their procurement tech stack fast.

But, and this is the kicker, they can’t do it all at once. We went into a lot of the details as to why, but, basically:

  • the applications don’t work without data … and don’t work well without LOTS of data … clean, organized, enriched data … (that you don’t have now and won’t have for a while)
  • the applications don’t deliver without user training …
  • you need value out of the gate to justify the purchase … and good luck getting enough value to justify the license cost of an entire suite!
  • your users need to see results for them to adopt … and use … a solution long term

So, you need to figure out where to start. And after three posts, we figured it out — e-Procurement. We then spent a few posts discussing the need for e-Procurement, the benefits, the barriers to e-Procurement (which were not what you think), and providing you with a large list of vendors. But then we had to step back and figure out what came next again because, depending on the particular situation at hand, there were good arguments for contract management, spend analysis, strategic sourcing, and supplier management. It took quite a bit of analysis, and the answer was spend analysis because, even if all things seemed equal, or one solution looked more attractive than another, spend analysis could identify the (biggest) opportunities and the solution best suited to the most / biggest opportunities, and so spend analysis always made the most sense to adopt after e-Procurement.

After that, it was difficult. But, if all opportunities are equal, or there is no one to do the thorough spend analysis that can help differentiate the savings opportunities that can be enabled by each S2P module, there still has to be a best choice for what’s next. And that was … Supplier Management. The reason? Just like you needed to get your spend data captured for everything to function (which is what e-Procurement does), no matter what you’re doing, you’re interacting with suppliers, so you need to manage them effectively.

Then it was easier. Even though you technically need to find the products and services before you contract for them, the reality is that you are already buying products and services, you already have contracts, and chances are you can’t find most of those contracts when you need them, don’t know what the obligations and deliverables are for anything that’s not available through the e-Pro catalog, and don’t even know the pricing, permitted price escalations, etc. Furthermore, most organizations without a modern CLM don’t know how many evergreen contracts they have, when they automatically renew if not terminated or renegotiated by that date, when key contracts they need are expiring, and so on. Nor do they understand just how much excess manual effort and time the organization is taking to re-negotiate existing or negotiate new contracts. They are also completely unable to do a proper analysis of existing payment terms, key risk clauses that are required for a new regulation, and so on.

Contract Management may not identify any big opportunities, but without a good, enforceable, contract that can be easily monitored throughout its lifetime, the reality is that the identified savings will likely never materialize. Thus, Contract Management was key to have in place before you started strategically sourcing, as you want to immediately turn the bids into contract terms before the process disconnect from not having a good CLM solution causes bids to be retracted “because they were only good for 15 days” or some other excuse a supplier will come up with to not honour a bid.

But now that we are at the point we can identify the right opportunity with spend analysis, select and manage the best suppliers, manage the contracting process and the contract, cut the purchase orders (POs) for the right goods and services for the right price from the right suppliers with e-Procurement, we’re ready for strategic sourcing as we have everything we need in place to capture the identified savings and cost avoidance opportunities. (It’s true that we may still have to manually process that invoice if the invoice-to-pay or accounts payable functionality in the e-Procurement system is weak or relatively non-existent, but the fact that we have immediate access to the PO and all associated documents to verify the invoice means that we can accomplish the necessary process to ensure we pay what we are supposed to. And even if it takes $30 to manually process every invoice against that contract, if the contract captured 300,000 in identified savings, do you know how many invoices it would take to even make a dent in that? In this situation, it would take 100 invoices just to reduce the savings by 1%.)

This is key. Historically, 30% to 40% of identified savings opportunities from strategic sourcing never materialized, and the reason was that the organization didn’t have the infrastructure in place to even capture the savings and cost avoidance opportunities in the agreements they had, or the cost reduction capabilities they had through supplier development in their existing supply base. That’s why you need to build out the S2P support infrastructure before starting strategic sourcing — otherwise, you’ll identify savings that will never be realized and sometimes even spend more than if you had just stayed with your current supply base and processes. When you consider how hard Procurement still has to fight for recognition, budget and new systems, you want to make sure that you can take full advantage of every system that is implemented and deliver on every dollar. This is why the order of module implementation, integration, training, and utilization is key, and why strategic sourcing typically has to be the (next-to) last module that is implemented for maximum benefit.

Tomorrow we will start our overview of strategic sourcing, covering the ORA et labora of the technology and the process in Part 27.

Source-to-Pay+ is Extensive (P25) … And Contract Management Very Extensive … So Here Are 80 Contract Management Companies to Check Out!

And now the post you’ve all been waiting for! A partial, starting, list of 80 contract management companies that may (or may not) meet some, or many, of the core baseline capabilities we outlined in the last three parts of this series (Part 22, Part 23, and Part 24) as we discussed the Negotiation, Analysis, and Governance sides of Contract Management today. (For those of you who skipped these posts, please note that we define a Contract Analysis solution as one which supports the syntactic, semantic and numeric [spend] analysis of the contracts and that we do NOT include a vendor that focusses [just] on numeric [spend] analysis of the contracts.)

As with our lists of e-Procurement Companies (in Part 7), Spend Analysis Companies (in Part 12), Sacred Cow Companies that do, or support, customized “spend” analysis on Marketing, Legal, and SaaS (in Part 13), and Supplier Management Companies (in Part 20), we must again give our disclaimer that this list is in no-way complete (as no analyst is aware of every company), is only valid as of the date of posting (as companies sometimes go out of business and acquisitions happen all of the time in our space), and does NOT include any document management companies (that could store contracts) in our expository on how Contract Management can be a NAG.

Furthermore, as we’ve said before, not all vendors are equal, and we’d venture to say NONE of the following are equal. The companies below are of all sizes (very small to very large, relative to vendor sizes in our space), cover the baseline differently (in terms of percentage of features offered, the various degrees of depth in the feature implementations, and differing levels of customization for a vertical), offer different additional features, have different types of service offerings (backed up by different expertise), focus on different company sizes, and focus on different technology ecosystems (such as plugging into other platforms/ecosystems, serving as the core platform for certain functions or data, offering a plug-and-play module for a larger ecosystem, focussing on the dominant technology ecosystem(s) in one or more verticals), etc.

Do your research, and reach out to an expert for help if you need it in compiling a starting short list of relevant, comparable, vendors for your organization and its specific needs. For many of these vendors, good starting points might be found in the Sourcing Innovation archives, Spend Matters Pro, and Gartner Cool Vendor write-ups if any of these sources has a write-up on the vendor.

Finally, a second reminder that inclusion on this list DOES NOT imply Sourcing Innovation is recommending the vendor.

Company LinkedIn
Employees		 HQ (State)
Country		 Negotiation Analytics Governance
Aavenir 69 Plano, Texas N G
Advanced 2680 United Kingdom G
Agiloft 259 California, USA A G
AnyData Solutions 10 United Kingdom A G
Atamis 40 United Kingdom G
Aufait 114 India G
Bonfire 87 Ontario, Canada G
BrightLeaf 65 Massachusetts, USA A
Brooklyn Solutions 23 United Kingdom G
Cloudia 40 Finland G
Cobblestone Software 131 New Jersey, USA A G
Concord 71 California, USA N G
Conga 1571 Colorado, USA N G
Contract Hound 37 New York, USA G
ContractLogix 32 Massachusetts, USA N G
ContractPodAI 294 United Kingdom N A G
Contract Safe 18 California, USA G
Contracts Wise 2 United Kingdom G
Contracts 365 19 Massachusetts, USA G
Corcentric 588 New Jersey, USA G
Coupa 3674 California, USA N G
datanet 2 Colorado, USA G
Deep Stream 25 United Kingdom G
Delta eSourcing ?? United Kingdom G
DocuSign 7538 San Francisco, USA N A G
ebidToPay ?? Bavaria G
eBrevia (DFIN) 23 New York, USA A
Elcom 18 United Kingdom G
ElectrifAI 132 New Jersey, USA A
Eyvo 24 California, USA G
Evisort 234 California, USA N A G
FullStep 128 Spain G
GateKeeper 103 Illinois, USA G
GEP 4650 New Jersey, USA N G
iCertis 2263 Washington, USA N A G
Ignite Procurement 60 Sweden G
Inconto 9 Netherlands G
Intenda 111 South Africa G
Ion Wave 22 Missouri, USA G
ISPnext 59 Netherlands G
Ivalua 849 Ivalua N G
Jaggaer 1266 North Carolina, USA N A G
Juro 125 United Kingdom N G
Kira Systems 48 Ontario, Canada A
Legal Robot ?? California, United States A
Legal Sifter 31 Pennsylvania, USA A
LGX Corporation ?? North Carolina, USA G
Litera 1104 Illinois, USA A
Malbek 89 New Jersey, United States N G
Market Dojo (Esker) 34 United Kingdom G
MarketPlanet 72 Poland G
Medius 562 Sweden G
Merlin Sourcing 29 Germany G
Oalia 22 France G
Onventis 129 Germany G
OpenGov 603 California, USA N G
ParleyPro 16 California, USA N G
Outlaw 7 New York, USA G
Penny Software 35 Saudi Arabia G
Proactis 557 United Kingdom G
ProcurePort 8 Indianapolis, USA G
ProcureWare (Bentley Systems) 4830 Pennsylvania, USA G
Prokuria 8 Romania G
Raindrop 27 Raindrop G
Ready Contracts 243 Australia G
SafeSourcing 10 Arizona, USA G
SAP (Ariba) 2963 California, USA G
ScanMarket Symfact (Unit4) 60 Denmark G
ScoutRFP 44 California, USA G
SirionLabs 918 California, USA N A G
Sourcing Force 4 Ontario, Canada G
Sourcing Insights 9 Indiana, USA G
SupplyOn 239 Germany N G
Synertrade 180 Germany G
Trade Interchange 27 United Kingdom G
Trakiti 12 United Kingdom N G
Unimarket 77 New Zealand G
Vortal 188 Portugal G
Zycus 1464 New Jersey, USA A G

Come back for Part 26 as we continue our discussion of Source-to-Pay.

Source-to-Pay+ is Extensive (P24) … Time for More Contract “Management”, but it’s a NAG. Let’s end with Governance!

In Part 21 we noted that after Supplier Management came Contract Management because the only way to lock in the opportunity was to get a contract signed on the bottom line. However, like Supplier Management, Contract Management isn’t consistent across vendors because each has a different idea on what Contract Management actually is … and sometimes isn’t. (And most vendors are jumping on the AI bandwagon faster than fleas on the only stray dog in town, but that’s a rant for another day, or week — there’s so much absurdity here.)

However, as noted in our last two posts, Part 22 and Part 23, most of the definitions, and the implemented capabilities, tend to fall into three categories: Negotiation, Analytics, and Governance. Two days ago we started by breaking down negotiation and yesterday we tackled analytics, so that just leaves governance. So today we’ll tackle governance.

Before we continue, we should point out that what we are calling contract governance includes the baseline functionality that many people used to call contract management in the early days, but since

  • the capabilities of contract systems have multiplied and varied significantly since the early days, resulting in the definition of management being too jumbled and nebulous to be useful and
  • management is more than just an electronic filing cabinet, especially when an organization really needs is control of, and by, the contract (which is an archaic definition of governance, by the way)

what we are really talking about here is not nebulous “management” but true contract governance, and a foundation for relational governance as part of an organization’s GRC (Governance, Risk, and Compliance) strategy (but that’s beyond this series).

Finally, please remember that this is not meant to be an exhaustive list of capabilities you may find, or need, but a starting list of capabilities that should be present in any tool you are considering.

BASIC

indexing and classification w/ full doc management capability
At its foundations, a governance solution must support full document management functionality with deep indexing and classification support for contracts. And that indexing must be customizable to the organization for fast location of contracts by customizable hierarchical indexes, key metadata, filters, and easy searches.

obligation, deliverable, and expiration tracking and management
The entire point of contract governance is ensuring the contract is executed because, while you may want a SaaS solution configuration to be “set and forget”, that’s the last thing you want a contract to be! While you want to trust your supplier, you also want to verify that the obligations are being met, on time and to spec, the billings are done for agreed upon rates, to the payment terms, and any issues are appropriately addressed and adequately resolved within the specified timeframes.

This means that obligations, deliverables, and expirations need to be tracked, their current state maintained at all time, and issues need to be easily surfaced and reported on.

alerting & notifications
In addition to constant monitoring, the platform must also support the definition of custom alerts and notifications, with email/instant messaging support and escalations through channels and notification chains if issues (such as deliverables being late, disputes going unresolved, etc.) are not resolved within a timely fashion.

amendment and addendum management
Few contracts, especially in the project / services category, survive their lifespan without needing at least one amendment (or addendum) as a result of a needed change order, so it’s critical that the solution support amendment and addendum management as well.

equal support for buy-side and sell-side
We really shouldn’t have to say it, but a contract governance system should govern ALL contracts, both buy and sell side. You have obligations, deliverables, terms and conditions on both types of contracts and need to manage, monitor, and report on them both on a regular basis.

ADVANCED

dispute resolution
The goal of a good contract negotiation is to end up with a contract that both parties are comfortable with, agree to, and are willing to execute to the dotted i’s and crossed t’s. However, despite the best of intentions, sometimes misunderstandings will arise, and these could lead to disputes. [And sometimes the best of intentions were not in the hearts of all people on one, or both, side(s), and issues are going to arise, and some of these issues are going to turn into disputes.] Disputes need to be resolved, and the process needs to be managed, the communications tracked, and the resolutions and agreements archived in an effort to prevent the disputes from recurring.

asset management
Contracts are for goods or services. Contracts for goods are for goods for use or goods for resale. Goods for use fall into two categories, consumables, which should be managed as inventory, and durables, which are used for execution of the business (like furniture, machinery, electronics, etc.). These durables are typically assets and should be tracked and managed in conjunction with the contracts that governed their acquisition (and their warranty and associated services, etc.). And while there are separate asset management systems, and the organization may prefer to acquire and use one, you still want the link between assets and contracts because, chances are, the asset management system will generally not maintain that link.

project management
Services contracts are generally for the implementation and delivery of projects with multiple phases, deliverables, and obligations, which need to be managed … like a project. While the organization can choose from a multitude of traditional project management solutions to manage the project, the project should not be managed independent of the contract, so a good contract governance solution should contain at least standard project management capabilities.

budget support
The entire point of a contract is to manage spend, and, hopefully, stick to the budget. So while your e-Procurement solution should support, and monitor spend against, the budget, it’s also very, very, useful if the CLM solution can, on a regular basis, import spend and monitor spend against active contracts and show performance against budget for all contracts in a category, for a supplier, etc. so that an organization can see if the contracts are keeping the projects and categories on budget, or not.

event monitoring (re obligations, deliverables & clause triggers)
While you likely have solutions that monitor external events that might impact your suppliers, or your organization in certain geographies (natural disasters, political events, new regulations, modified tax/tariff/custom rates, etc.), how many of these monitor events and identify those that might impact specific contracts? Likely none. That’s why a good governance solution will import this event data from these solutions and associate it with contracts, and then use the alerting and notification capability of the platform to let you know when a contract (obligation and deliverable) might be at risk.

Next up: The Vendor List in Part 25!

Source-to-Pay+ is Extensive (P23) … Time for More Contract “Management”, but it’s a NAG. Let’s continue with Analytics!

In Part 21 we noted that after Supplier Management came Contract Management because the only way to lock in the opportunity was to get a contract signed on the bottom line. However, like Supplier Management, Contract Management isn’t consistent across vendors because each has a different idea on what Contract Management actually is … and sometimes isn’t. (And most vendors are jumping on the AI bandwagon faster than fleas on the only stray dog in town, but that’s a rant for another day, or week — there’s so much absurdity here.)

However, as noted in our last post, Part 22, most of the definitions, and the implemented capabilities, tend to fall into three categories: Negotiation, Analytics, and Governance. Yesterday we started by breaking down negotiation and today we’ll continue with analytics.

Before we begin, we should point out that contract analytics is not contract spend analytics, which in many platforms is merely a summary of spend under contract, but an analysis of the contractual documents of the organization. We will also remind you that this is not meant to be an exhaustive list of capabilities you may find, or need, but a starting list of capabilities that should be present in any tool you are considering.

BASIC

Clause, obligation, term, deliverable, etc. identification and extraction
The foundation for contract, not contract spend, analytics is the ability to semantically analyze, parse, and extract key pieces of data and metadata on a contract on which to do contract, and contract pool, analysis. An organization wants to know more than just how much contracts contribute to spend under management, but how they contribute to risk mitigation (by ensuring the supplier is responsible to adhering to key governmental requirements), policy compliance (by ensuring there are clauses for mandated diversity programs or industry certifications), insurance, privacy, and other business factors in addition to providing the contracted product (using only approved parts and/or raw materials) or service (using only certified personnel).

While an advanced Negotiation offering will include some of this semantic capability, it may not support anything beyond basic clause identification and not support the necessary meta-data extraction and enrichment necessary for the analytics the organization wants to perform. Significant up-front research and live confirmation of capability (against organizational paper, not demo documents in a vendor system) may be required to verify this.

Search by clause type, obligation type, payment terms, deliverables, etc.
In addition to being able to parse a contract for key meta-data necessary for contract (pool) analysis, the platform must also support extensive search and filter capability on this meta-data. Knowing that 20% of your contracts do not address privacy in a country where a new privacy regulation has just been approved is good, but being able to quickly identify all of the active contracts is better. When an organization needs to assess readiness for a regulation or a risk or revisit their payment policies, they need to be able to quickly figure out what the precise impacts will be, and this will require advanced contract search and filter capability.

Analytics on document/clause/obligation/payment term/deliverable types
As indicated above, its more than just analytics on spend, but analytics on how many different contract types are used in an organization, how common/prevalent a clause is or isn’t, how often a variation is used, the average number of obligations, the OTD (on-time delivery) of those obligations, standard and variant payment terms, the direct and indirect cost of those payment terms and potential cost avoidance from changes to those terms, typical deliverable categories, and how these metrics change over time from one-period to the next. Also, average contract lifespan, renewal rates, decreases in evergreen renewals over time (as these are typically bad — out of sight, out of mind, out of control), and shifts in contracted supply base, geographies, etc. are as important as the spend the contracts control.

Process / state analytics
An organization also needs to understand its overall process and its state of affairs relative to contracts at any time. It’s not just how many contracts are active, but how many are now expired and how many are in process for signing/renewal. What’s the average time from award identification to signing, for implementation, and for conclusion. And how does it vary by category, geography, and supplier and how does that change over time?

Summaries
It must also allow for the construction of custom summaries (views, widgets, etc.) of any and all analysis each role and stakeholder wants to see when they sign into the system, and must support full drill-down and filter to individual contracts, clauses, and terms as required.

equal support for buy-side and sell-side
Why should you have one system for analyzing buy-side contracts and another for sell side? It’s just as critical to understand revenue, margin, profit, risk, obligation, etc. on the sell-side contracts as well!

ADVANCED

Contract Component based spend / supply / supplier analytics
A great contract analytics solution will not only support best-in-class spend analytics capability, but also allow all of the contract meta data to be defined as cube dimensions and used in formulas, filters, and metrics and allow spend to be sliced and diced by contract dimensions — to find out how much spend is covered by an appropriate risk mitigation clause, and how much is not; how much spend is adequately insured and how much is not; how much is tied to performance and may be recoverable as damages for late delivery/project completion; and so on.

Performance analytics & benchmarks
In addition to process/state analytics, the platform should also support performance analytics with respect to overall contract execution and completion timeframes; performance against obligations, payment terms, agreed upon rates and costs; expected demand and utilization; spend to budget; and so on. It should also support the creation of internal benchmarks by year, category, geography, etc. for judging contract performance (over time), and support the importation of external price / rate benchmarks and standard public contracts for relative analysis of organizational performance to the extent possible.

Duplicate / redundant clause analysis and suggested standardization
If you don’t have a contract negotiation platform and all contracts have been created free-form by the legal team, chances are you have more variations of every “standard” clause than you have standard contracts. (Yes, you read that right. Remember, you have expired contracts too that you should be maintaining for 7 to 10 years to backup any spend that you made for financial purposes, as well as maintaining for the length of time any non-compete, warranty, or liability clauses remain valid — so you can easily have more clause variations than you have active contracts when every lawyer uses their own preferred wording of a clause).

Contract risk analysis based on key contract factors
We know that there are separate solutions for “risk” in our space, but most of those solutions are focussed on supplier/supply-chain risk and compute that risk based upon external factors. However, every contract you sign carries risks — risks defined by whatever the contract didn’t cover (and explicitly transfer liability to the supplier for if they violated a regulation or law) and what it does. Your contracts not only explicitly define the products and services you are buying, and the regulations you are subjected to, but your sell-side contracts also define the associated liabilities you are assuming! And a good CLM should support all of your contracts, not just buy-side, even though chances are the sell-side will be initiated by the supplier (and negotiated in their system) and all your system will store is the final contract (which you also want to be able to analyze as well).

Next up: Governance in Part 24!