Fragmented

Contract
Management:
Challenges, Impacts
and Solutions
Introduction
Contracts form the foundation of commerce, governing every dollar in
and out of an enterprise. Yet contracting at many companies remains
siloed by department and geography, exposing companies to contract
delays, compliance risk and poor commercial outcomes.

To address these challenges, leading companies in every industry are

taking an enterprise-wide approach to contract management.

Enterprise Contract Management leverages AI-infused, cloud-based

contract management software to accelerate, protect and optimize
business. Yet this approach does not begin and end with software. Rather
the software enables and enhances people, processes and content
involved in contracting to arrive at a holistic approach to contract
management.

In the following pages we discuss in detail the challenges companies face

in each of these categories and best practices for driving improvement in
each area.

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Part 1: Contract Challenges and
Impacts in Today’s Enterprises

PEOPLE PROCESSES CONTENT TECH

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 PEOPLE

Challenge #1: Limited

Knowledge Share
Often the key to a company’s contract success lives inside the minds of a
limited number of seasoned contract managers, with no system in place to
address attrition or retirement.

I N T H E I R OW N WO R DS

CAUSES
“Our contract management
knowledge walks out the
• No system to capture IMPACTS door at 5 p.m. every day.”
institutional knowledge
from subject matter experts
• Weaker negotiation “We know some contract
• Communication about
contracts occurs in silos, positions with management teams have
counterparties
with no ability to access better outcomes than
information in the future • Weaker contract others. But we don’t
when questions arise management teams know why.”
• Limited institutional • Delayed contract
emphasis on the cycles as information
importance of contract
“At the negotiation table, it
is gathered
management knowledge feels like the other side is
• Time and resources holding all the cards.”
wasted recreating
contracting best
practices

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 PEOPLE

Challenge #2: No Definition of

Contract Management Excellence
A clear picture of what contract excellence looks like allows employees to drive
to the same goal across departments, geographies and functions.

I N T H E I R OW N WO R DS

CAUSES
“Every team has a different
definition of what good
• Contract managers not IMPACTS contract management
consulted in strategy
phase of business looks like.”
• Poor onboarding of • Cost and risk exposure
new staff on contract “I don’t know who to go
• Time wasted on
management practices ineffective onboarding to for insight into what our
• Unclear job definition and and training contract best practices are.”
progression paths for • Highly inconsistent
contract managers contract outcomes
• Lack of cross-functional • Importance of
definition of contract contracting devalued
management excellence across the enterprise
• Fragmented contract
management leadership

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 PROCESSES

Challenge #3: Lack of

Cross-Functional Collaboration
Contracting is not just one department’s job; every function is affected by
and reliant on the desired business outcomes embedded in contracts. Yet
companies lack a process for bringing stakeholders together for effective
contract management.
I N T H E I R OW N WO R DS

CAUSES
“When it comes to
contracts, our right hand
• Functional silos within IMPACTS doesn’t know what the left
departments (e.g.,
procurement doesn’t work hand’s doing.”
with contract managers) • Contracting processes
• Poor documentation of
and contracts that “After negotiating a deal
don’t align with broader
contract management we have to start over to
business goals
workflows and best practices write the contract.”
• A lack of continuous
• No system to capture
improvement in how
institutional knowledge on “Even when we get a
contracts are drafted,
contracting and
contract management reviewed and executed contract right, we’re back
• Contracts reviewed
to square one with the
• Undervaluation of contract
without adequate context next one.”
management as a
business-critical function • No data-driven
improvements in contract
• Lack of data on contract
management
outcomes

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 PROCESSES

Challenge #4: Common

Deviation from ‘Correct’ Process
Often times companies develop strong contract management processes,
then fail to ensure they are implemented across the company.

I N T H E I R OW N WO R DS

CAUSES
“I know our company has
best practices for contract
• No governance IMPACTS management. I don’t know
framework to reinforce
established contract what they are.”
management process • Inconsistent use of
• No visibility into contract
value levers “When a contract comes
management processes • High volume of across my desk, there is
across departments change orders no way for me to know
or geographies
• High risk exposure whether it’s been reviewed
• Poor education on by the right people.”
established process • Inability to drive
continuous
• Processes designed and improvements in
improved in silos contracting

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 CONTENT

Challenge #5: Incorrect Templates

and Clauses Used in Contracts
When the wrong templates or clauses are put into circulation, legal must
manually review every contract as nothing is standardized.

I N T H E I R OW N WO R DS

CAUSES
“We have so many
templates in use it’s hard to
• No enterprise-wide IMPACTS call them ‘templates.’ ”
repository of approved
templates and clauses
• Proliferation of templates “We know we have
• No system for surfacing
necessary clauses based
and clauses, slowing contracts that don’t
down legal review
on contract conditions comply with our standards.
(geography, deal size, etc.) • Slow contract authoring But we can’t do anything
• Contracts originate on • Unnecessary use of time about it.”
hard-drives, obscuring and negotiation capital
legal line-of-site on clauses that don’t
impact business outcome
• Legacy agreements that
do not include the latest • Exposure to risk due to
legal and regulatory improper contract usage
clauses or have extraneous
language unnecessary for
the business at hand

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 CONTENT

Challenge #6: Inability to Identify

and Address Nonstandard Clauses
Manual review of legacy and third-party paper is time-consuming and still
exposes a company to risk.

I N T H E I R OW N WO R DS

CAUSES
“Our legal department
takes forever reviewing
• No standardized system IMPACTS third-party contracts. It
for intaking legacy and
third-party contracts and hurts business.”
matching them to internal, • Third-party contracts carry
approved clauses extra risk for organization “When emails start going
• Email-based redlining • Redlines difficult to track back and forth, what’s
workflow and interpret changed in a contract
• Lack of fallback clauses to • Negotiations delayed when becomes impossible
be used during negotiations nonstandard clauses to track.”
are encountered
• Inability to efficiently extract
metadata from third-party “Our contract process is
contracts
too rigid and doesn’t allow
us to stay agile.”

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 TECH

Challenge #7: No Single Source

of Truth for Contract Data
Contracts scattered across an enterprise and stored in email inboxes make it
impossible for companies to get a true picture of their contractual landscape.

I N T H E I R OW N WO R DS

CAUSES “Our c-suite cannot get

a single view of contract
• Lack of unified system for IMPACTS commitments across the
creating, approving and enterprise.”
storing contracts in enterprise
• Difficulty tracking down
• Disconnected systems (ERP,
necessary contract information
“Each department is
CRM, CLM) creating data
using a different contract
silos between business units, • Undetected contract
geographies management platform—
noncompliance, including off-
contract spend and obligations and none of them speaks
• Ownership of contract
management dispersed to the others.”
• Commercial and reputation
across enterprise with no damage due to missed
central management obligations “Our contract
• Low adoption of contract • Money wasted through
management system is so
management system due to disparate contract hard to use our employees
poor usability or functionality, management software
causing contracts to originate
circumvent it to get
initiative across different
outside central system departments
business done—creating a
huge mess.”

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 TECH

Challenge #8: Missed Contract

Milestones
Contract milestones must be tracked in order to maximize value and avoid
risk. Yet many organizations lack any systematic way of tracking them.

I N T H E I R OW N WO R DS

CAUSES
“I don’t know where my
contracts are or what
• Non-digitized contracts IMPACTS they say.”
make it impossible to
extract expiry dates,
SLAs, obligations and • Time and capacity drain “We’re missing obligations
other milestones from the in collecting and collating
contract documents
we don’t even know we’ve
contract milestones
committed to.”
• Contracts not stored • Missed rebates and
centrally, obscuring single threshold savings
view of all contract risk
and opportunity • Missed obligations
resulting in fines and
• Extracting contract penalties for failure to
data requires slow, deliver on commitments
manual effort
• Rushed sourcing and
sales events with weaker
negotiation stances

• Poor compliance

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 TECH

Challenge #9: Limited Access to

Usable Sourcing and Sales Data
Contracts and contract data feed systems across the enterprise, yet
companies often lack access to the sales and sourcing information
they contain.

I N T H E I R OW N WO R DS

CAUSES
“It’s impossible for us to get
a global view of who we’re
• Contract data locked IMPACTS doing business with.”
in paper or dense
legal copy
• Time and capacity drain “Every term and condition
• Lack of systems to
connect invoices to in collecting and collating we put in a contract
contract data
contracts needs to be manually
• Highly manual systems • Supplier overbilling or brought over to our spend
customer underbilling management system.”
for collecting data and
making it usable and • Misprioritized efforts
meaningful
“We don’t have the agility
• Incumbent suppliers and
• No automated transfer customers advantaged to switch suppliers even
of data from RFQ/ in negotiations when it’s right for
proposal phase to
contracting phase the business.”
during deals

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 TECH

Challenge #10: Limited or Inaccurate

Contract Performance Metrics
Contracts are often stored away once they are signed, meaning it’s difficult to
assess how effective contracts are in advancing a company’s interest.

I N T H E I R OW N WO R DS

CAUSES
“Our contracts get filed away
as soon as they are signed,
• Contract clauses not IMPACTS never to be seen again until
linked to systems to
intake performance data there is a problem.”
• Unidentified sources of cost
• End users not granted
and risk exposure “When contracts are up
access to performance
data for security concerns • Poor supplier and for renewals, we have no
• Performance data commercial performance data to look at to measure
sourced directly from • Contracts requiring how well the previous
contract counterparties, renegotiation due to contract performed.”
not internal systems insufficient terms
• Ill-defined or generic • Drawn-out contract disputes “We have to rely on the word
KPIs in contracts make with little data to refer to of our suppliers that they are
it impossible to truly
measure contract efficacy • Weakened negotiation posture fulfilling contracts—and not
the contract itself.”

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Mapping the 10 Challenges to the
Contract Management Lifecycle
PROCESS | Business strategy
developed independent of
PROCESS | Expiries and renewals contract data and requirements
not systematically tracked
PEOPLE | Contract managers
not consulted in strategy phase
De
TECH | Lack of integration with act wal fin
ntr e
enterprise systems makes it Co Rene Str Busi
iry/ ate ne
gy ss
impossible to track completion Exp
of contract requirements PROCESS | Contract strategy
varies project by project, with no
PEOPLE | Contract managers standardization or automation

Co
ce
rm ct
enforce provisions outside

ntr
an
rfo tra

Exe t Stra
context of business needs

ac
Pe on

cut tegy
C

e
Contract Contract
PROCESS | Poor internal and Performance Creation
external collaboration delays
execution PROCESS | Contract requirements

sal
Co cutio
Exe

not factored into selection/proposals

po
PEOPLE | Poor controls around
ntr

Pro
the ‘right’ person seeing each TECH | Past contract data not
act

Q/
contract before execution surfaced during RFQ/proposal event
n

RF
C
Ne ontra t
go c trac
tia t
tio Con fting
n D ra
PROCESS | Lack of integration
CONTENT | Redlines and leads to data loss from RFQ stage
third-party clauses difficult to CONTENT | Clauses and
track; fall-back clause unavailable templates pertinent to business
when needed needs unavailable to contract team

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20 Questions
Which of these statements describe your current state of contract management? Check all that apply.

PEOPLE PROCESS CONTENT TECH

We don’t have a system Even within departments, We don’t have an We don’t have the
to capture institutional contract managers enterprise-wide ability to automatically
knowledge from don’t work closely with repository for approved extract contract data
subject matter experts business partners templates and clauses
Our contract
There is limited We don’t document We have to manually management data does
institutional emphasis contract management insert clauses based on not flow into other
on the importance of workflows contract conditions systems
contract management
We don’t collect data Most contracts are Our contract
Our contract managers on contract outcomes drafted on local PCs, management does not
are not consulted during with no enterprise intake data from other
strategy sessions We don’t reinforce visibility systems
contract management
Our contract managers processes with a clear Contract templates We do not have
don’t have a clear governance framework commonly include contract management
career path extraneous clauses data to measure
Contract management performance
Different departments processes are defined We don’t have well-
have different ideas and improved defined fall-back We rely on contract
of what contract within silos clauses for use during counterparties to
management best negotiations provide performance
practices are data rather than
internal systems

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Enterprise Contract Management:
A Holistic Approach to Contract
Management Excellence
Leading enterprises are addressing these challenges by taking an enterprise-
wide approach to contract management. Enterprise contract management
accelerates, protects, and optimizes business outcomes through a unified,
standardized and automated approach to contract lifecycle management.

PEOPLE PROCESSES CONTENT TECH

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Requirements for Enterprise
Contract Management Derived
from Challenges

PEOPLE

Successfully implementing an enterprise

approach to contract management means
REQUIREMENT 1 bringing together a core team to define
CO R E CO N T R AC T what contract excellence looks like in the
E XC E L L E N C E T E A M organization. This team should be
cross-functional, bringing in voices from
legal, sales, procurement and corporate.

Companies must get a granular view

REQUIREMENT 2 of who does what with contracts in
the organization: initiators, approvers,
W E L L- D E F I N E D
reviews, signees, etc., so they can fully
BUSINESS ROLES map contract workflows to the real-life
organization.

REQUIREMENT 3 Companies should have clear definitions

TA I L O R E D C O N T R A C T of who can access what contracts and
ACC E SS contract data.

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Requirements for Enterprise Contract
Management Derived from Challenges

PROCESS

REQUIREMENT 1 Contract management excellence relies on

CO N T R AC T I N G POLICY a deep understanding of how contracts
AND PROCESS FO R E AC H move through each department of
O P E R AT I O N A L AREA the company, e.g. legal, tax, sales and
DOCUMENTED procurement.

REQUIREMENT 2
Contract processes should be tailored
CO N T R AC T P O L I CY based on type of contact, value of
AND PROCESS FOR contract, terms of contract, risk category
C O N T R A C T M E TA D ATA or contract, geography/governing law, and
DOCUMENTED preferred counterparty classification.

REQUIREMENT 3 A key to contracting success is to

CLEAR SLAs FOR define what success looks like and get
commitment from every stakeholder to
CO N T R AC T I N G
hit SLA targets to drive faster end-to-end
PROCESSES contract turnaround.

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Requirements for Enterprise Contract
Management Derived from Challenges

CONTENT

Every contract template, including

MSAs, CDA/NDAs, SOWs, amendments,
REQUIREMENT 1 addendums, etc., should be available
to users as drafters of those contracts.
A L L T E M P L AT E S A N D
Primary clauses as well as fall-back clauses
C L A U S E S AVA I L A B L E must also be available to accelerate
negotiations within defined guardrails.

REQUIREMENT 2 There should be no question as to whether

GEO-SPECIFIC CLAUSES/ clauses included in contracts are valid
T E X T S / L O C A L I Z AT I O N S in the jurisdiction the contract is active
AVA I L A B L E B A S E D O N in. Rules should be defined that dictate
M E TA D ATA contract clauses based on geography.

Systems should be in place that guard

REQUIREMENT 3 against templates and clauses entering
circulation without prior legal approval
L E G A L A P P R O VA L A N D
as well as the retirement of outdated
CONTROL OF ALL CLAUSES content. Defined workflows should be in
A N D T E M P L AT E S place to maintain clause and template
library integrity.

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Requirements for Enterprise Contract
Management Derived from Challenges

TECH

In order to achieve true enterprise

contract management, a single, cloud-
REQUIREMENT 1 based contract management repository
C LO U D - B AS E D is necessary to eliminate geographic and
CO N T R AC T R E P O S I TO RY departmental silos and create a single
source of truth for all contracts across the
enterprise.

In order to facilitate the process and

document requirements above, enterprise
REQUIREMENT 2 contract management software must be
D E E P LY C O N F I G U R A B L E flexible enough to model even the most
complex contract workflows, approval
BUSINESS RULES AND
matrices and geo-specific requirements,
WO R K F LOWS while still providing semi-automated
authoring and routing for faster
turnaround.

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Requirements for Enterprise Contract
Management Derived from Challenges

TECH

An effective enterprise contract

management system must deeply
integrate into ERP, CRM, SCM and other
REQUIREMENT 3 systems to push and pull data. This
F U L L I N T E G R AT I O N W I T H enables real-time analytics of supplier
performance, spend vs. contract,
A DJAC E N T SYS T E M S TO
obligation fulfillment and other KPIs
P U S H A N D P U L L D ATA that define contract compliance and
optimization. It also allows for automatic
triggers of rebates, royalties and other
processes housed within a contract.

Contracts are a wealth of data, and

with the right technology can provide
REQUIREMENT 4 deep insights into core risk and
D E E P, I N T U I T I V E performance factors. Effective contract
management software must provide
REPORTING AND
out-of-the-box analytics that provide
A N A LY T I C S real-time presentation of spend against
contract, obligation fulfillment, supplier
performance and other KPIs.

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Icertis, the leading enterprise contract management platform in the cloud, solves the hardest contract management problems on the easiest to use platform. With Icertis,
companies accelerate their business by increasing contract velocity, protect against risk by ensuring regulatory and policy compliance, and optimize their commercial
relationships by maximizing revenue and reducing costs. The AI-infused Icertis Contract Management (ICM) platform is used by companies like 3M, Airbus, Cognizant,
Daimler, Microsoft and Sanofi to manage 6.5 million contracts in 40+ languages across 90+ countries. For more information visit icertis.com.