Contract Management 2.0: why AI and RPA will boost outsourcing results

Contract Management 2.0: why AI and RPA will boost outsourcing results

The world is changing in a fast pace due to the overwhelming developments in Technology and operational models. Just like any market, also Contract management is subject to the influences of digital transformation. Technologies like artificial intelligence and robotic process automation are slowly entering the Contract management market. How will contract automation impact contract management? Technology evangelist Arjen van Berkum wrote an interesting article on these topics. We are happy to share his vision with our readers. 

Overall, technology is improving the way we work. When it comes to managing contracts these improvements – mostly contract automation related – have a positive impact on  Business results, supplier management as well as on customer and employee satisfaction. Technologies like artificial intelligence (AI), robotics and blockchain can improve contract management issues like compliance, data management, invoice settlement and contract analysis.

Technology does not need any sleep, it is not bound to a nine to five mentality and it doesn’t get sick. It offers a 24/7 availability and, when implemented well, it is more accurate than humans can ever be as long as it is bound by rules and repetition. As like almost everything in our professional lives, contract management is being influenced by digitization. Contract managers are changing their way of work and are eager to embrace the technological developments surrounding them. This is only logical, because technology carries a lot of potential in the contract management field, and I will explain how.

Let’s start at the beginning. What exactly is a contract? A contract is a legally enforceable agreement between two parties. In practice this translates to one party demanding a good/service, and the other party supplying this good/service. The catch in good contract management carries a good methodology with it. A great example of such framework I have seen is CATS CM®, developed by the Dutch contract experts of  CM Partners. It defines a set of rules and tools needed to achieve contract goals and get the most out of collaborations with suppliers.

According to the CATS CM® method the demander and the supplier experience a different contract lifecycle. The contract lifecycle starts when a demander specifies a certain need. What the demander then does is contact a potential supplier. The demander will contact enough suppliers, until he/she has found the right supplier for him/her. After the contract is agreed upon, the actual execution starts. This is where both parties perform the acts described in the contract.

Currently the operational phase makes  limited use of technology, resulting in loss of efficiency and value. Some organisations have a contract administration system in place, but that is mostly not more than a central source for all documentation. It does not facilitate good contract management nor does it automatically validate purchases.  To carry out a contract organisations should look for the ultimate synergy between methodology and technology.

Next to the value technology can add in terms of taking advantage of contract terms and renewing on time, digitization of your contracts is already a huge step in the right direction. Nowadays most contracts are still on paper within organisations and often unstructured. Searching for a specific contract can proof difficult, and browsing through the contract for a piece of information can be time-consuming. A good contract manager should avoid spending time on tasks like these. When contracts are stored as online data you increase contract visibility, improve document management, and enhance accessibility. This is a nice feature of technology, working digitally has more to offer. We have for instance seen that in preparing for Brexit automation has helped a lot of organisations to get to understand the effects fast.

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