5 Challenges in Contract Management in the Business Services Industry
Companies in the business services industry provide ancillary services, such as marketing, consulting, staffing, security, telecommunications, Internet services, logistics and waste handling, to other players in the market.
To better understand the contract management needs of this sector, Contract Logix surveyed 264 U.S. individuals who are responsible for the creation, editing, and/or management of contracts at companies with revenues of at least $5 million. Let’s review what the survey revealed as the most pressing contract management challenges in the business services industry.
Editor’s Note: For more information, download our whitepaper on the top 10 contract management best practices.
- Lack of Visibility into Scope of Contracts
When asked to rate the extent to which certain contract management issues present a challenge within their organization, 66.50% of respondents put lack of visibility into scope of contracts as the most pressing issue. (Note: the percentages cited throughout this article don’t add to 100% because respondents could select multiple answers.)
Handling scope creep is one of the biggest challenges for contract managers in the business services industry. Setting expectations for change requests, stipulating what is a new project request, and budgeting for small discrepancies are some of the strategies to handle scope creep in contract management. Given that all the survey respondents were not using contract management software, it can be inferred that the current tools used to manage contracts aren’t providing valuable insight into contract scope. The top three tools used by individuals to manage their contracts were email (84.10%), spreadsheets (67.80%), and paper (65.20%).
- Lack of Security
A separate 2015 poll of key IT security professionals across 19 industries, including business services, revealed that 52% of respondents believed that their organization will likely be hit by a successful cyber attack. Given this statistic, it’s understandable that 65.80% of respondents to the Contract Logix survey were concerned with this issue as well.
One way to increase security for this group is to switch from email to software specifically built for contract management. Contract management software provides the ability to create and customize secure forms to collect any type of data from third parties as opposed to passing emails back and forth. Such forms render successfully on any internet-enabled device and operating system, providing convenience for the form recipients and speeding up contract management processes. Learn about other ways to increase the security of your contracts.
- Inability to Extract Key Data from Contracts
64.3% of individuals indicated that the inability to extract key data from contracts at least somewhat challenged contract management processes at their companies. Manually browsing through email histories, checking that spreadsheets are correctly interconnected, or taking files out of a cabinet can make finding contract data very burdensome.
This third challenge in contract management in the business services industry demonstrates why contract management benefits from automation. Even the most brilliant minds at top-performing organizations have suffered costly mistakes from relying on interconnected Excel spreadsheets. JPMorgan Chase provides a clear example with the $600 million fine due to an incorrect Excel model.
- Lack of Business Rules
While lack of business rules comes as the fourth challenge in contract management in the business service industry (64.10% of respondents), this is the second area most reported to be a significant challenge by all respondents. In the Contract Logix survey, 16.60% of participants cited lack of business rules as one of their most pressing issues in contract management.
When examining the relationship between the roles responsible for contract management and the challenges experienced, individuals in legal roles are the most concerned (72.97% of those in legal roles). 83.78% of those individuals in legal roles cite email as the most used tool for contract management, which could be the root of this challenge.
- Issues with Regulatory Compliance
Some industries are subject to stringent compliance requirements and business services is one of them. This is why 62.3% of respondents cited issues with regulatory compliance as a challenge in contract management processes.
Regardless of their role, more than half of respondents are concerned with regulatory compliance. Individuals in legal and contracting roles are the most concerned (67.57% and 60.00%, respectively).
Here are two additional resources for a deeper dive on how to address compliance issues in contract management:
Takeaway
The business services industry faces several challenges when it comes to contract management. According to a survey of business services professionals, the top five challenges for this industry are lack of visibility into the scope of contracts, security, inability to extract key dates from contracts, lack of business rules, and issues with regulatory compliance.
