November 29 by Linda Chuan
The future of contracts will empower procurement and sourcing professionals to create an array of agreements using a law department driven playbook featuring a library of key terms and clauses. They will leverage natural language technology to generate contract analytics that gauge the quality of those contracts and use dashboards to track renewals and expirations.
Most organizations currently track aging accounts payable or accounts receivable because they serve as the foundation of their respective businesses, but few treat again contract terms in the same manner. Better information will drive richer conversations with corporate business owners and management to develop proactive strategies as sourcing professionals take on more of a leading role in managing the end-to-end contract process.
Contract analytics will become as important as spend analytics with software applying pre-approved legal terms and conditions into master agreements and subsequent statements of work. Supplier relationships will eventually be determined at the contract level, rather than at the spend level. For the sake of efficiency, attorneys will focus on supporting sales more frequently than purchasing.
Standardization will permit sourcing professionals to negotiate directly based on a series of approved terms, with limited authority to adjust them, resulting in the use of fewer legal resources. Companies will also use more natural language and machine learning solutions to manage the Big Data captured by future contracts to accommodate a fourth industrial revolution where they extract business insights from their agreements.
As companies continue to grow revenue, they will allocate more valuable legal resources to the commercial side and fewer resources to non-revenue generating functions, such as procurement. Consequently, many tasks will need to scale through technology to drive more automation and productivity.