For our first expert interview, we invited Ms. Melanie Schneider. She is a certified IT contract and project manager and has gained a wealth of experience over the years and in many customer projects on the subject of “introducing digital contract management”. We asked her how companies should approach such an implementation.
ShakeSpeare® (ShSp): Which companies – in your opinion – benefit most from digital contract management?
Melanie Schneider (MSc): Basically, all companies benefit from digital contract management. Manual contract management involves too many risks and has no transparency at all within the company. Often, only the managing director or the purchasing department and their assistants know about contracts and conditions. Due to today’s demands on companies and with a view to the software implementation and further operational implementations, I consider the use of digital contract management to be sensible for companies that have to manage and coordinate more than 10 contracts. And, of course, the main issue is often cost. So it is very surprising that the implementation of digital contract management is treated so stepmotherly. Already in 2017, a published study by KPMG showed that up to 30% of annual IT costs can be saved through implemented and lived contract management! For example: A company calculates 3.1 million euros per year for its IT budget. This includes replacement of legacy systems / hardware / new developments and projects. The savings potential with an implemented IT contract management tool would mean here with a savings potential of 30% a cost saving of converted 930.000,00 EUR! The figure should speak for itself. However, this cannot be achieved without digital contract management. Against the background of digitalization and further requirements in IT, these can be supported and professionally accompanied in companies above all by digital IT contract management. Supplier control is improved and review/approval times can also be reduced by between 40-50% through the digital process, according to the KPMG study and other technical possibilities today.
Shsp: Which stakeholders are usually involved in contract management and what distinguishes them?
MSc: The view on this question is very different in practice. Often, companies only involve purchasing, legal, and executive management.
From the company’s point of view, these are the areas that usually have to do with contract initiation. However, the fact that the contract must be lived and correctly implemented after it has been signed is completely disregarded!
From my consulting practice, I have made the experience that it makes sense to involve all parties involved in the topic of the so-called “contract management”. This is the purchasing department, the technical department, the controlling department, the license management, project management and the legal department. In other words, all persons from departments that come into contact with the contract in its implementation during the contract lifecycle and up to the end of the contract. After all, the contract is far from being good just because it has been well negotiated and has achieved its purchase result.
How well a contract has actually been negotiated and implemented is decided by all the stakeholders, and this cannot be seen simply by comparing the negotiated price at the start of the contract with the actual costs at the end of the contract.
Stakeholders are characterized by their in-depth knowledge of the contract lifecycle, their ability to think outside the box, and their awareness that goals can only be achieved by working together.
ShSp: What should companies start with when selecting contract management software?
MSc: When selecting a contract management tool, the first question is what exactly is the goal? For this, there should be clear clarity whether it is about transparency/costs/reporting/processes and/or other strategic goals in the company. So, what exactly is the business objective?
Furthermore, it is indispensable to create a requirements catalog with all parties involved that reflects the requirements but also the results (company goals) that are to be implemented and achieved by the contract management software.
ShSp: What are the decisive factors for a successful software implementation in contract management?
MSc: From my point of view and consulting practice, it is the consideration of the technical factors and the process-related introduction.
A successful technical software introduction in contract management includes, for example.
✓ the technical requirements & interfaces are clear for all parties involved
✓ the technical boundaries are made transparent for all parties involved.
✓ the interfaces to other systems are checked and considered in the requirements profile in the implementation, i.e., where are interfaces to other systems needed or should be considered for expansion?
✓ the desired reporting structures and requirements are made clear in the technical implementation.
✓ all those involved have contributed with their experience.
Only if you sufficiently illuminate and agree on all these aspects can you speak of a successful software implementation in contract management.
Shsp: What advice would you give to companies before implementing contract management software?
MSc: My advice would be to seek external advice and guidance from technical and business experts. In addition, it is helpful for companies to allow different perspectives on the topic from the specialist departments involved in the company. There is never just one view.
Within the company, the goals that are to be implemented with the introduction of the system or software, but also the limits, must be clear. Which expectations can be met and which expectations cannot be met? In the company, the necessary roles and processes must be thought through, which flank the technical implementation and ensure in the long term that contract management is lived and implemented operationally. I also think it is necessary to ensure acceptance of contract management within the company and its implementation within the company. Otherwise, a lot of money will have been spent on a tool and the implementation will not be supported or, in the worst case, torpedoed. Last but not least, the right selection of employees who can and want to support contract management. What is needed here is staffing based on competence, not simply on brains!
ShSp: Can you give us a practical example of a successful project in contract management and why it was successful?
A few years ago, I was able to accompany the introduction of a contract management tool in a large company. From an internal audit, the division management had requested the introduction of a contract management tool – group-wide – for the company.
The project was successfully implemented due to
- a well-founded requirements profile
- the participation of all affected parties in the parent company and the subsidiaries
- the introduction of processes and standards for IT contract management with external advice
- the clear definition of roles, tasks and responsibilities (RACIS)
- Validation of project results against corporate objectives
- the support of the implementation of IT contract management by the division management.
Shsp: Dear Ms. Schneider, thank you very much for your input and the insight into your world. It was very exciting and we are looking forward to further collaborations with you.
