Knowing the Terms

Most companies lack contract management

Do you know where all your contracts are? Eighty percent of companies surveyed by contract management systems vendor Nextance Inc. can't say yes.

This outrageous number is independently corroborated. "When I came across this issue of contract management in 2001, I found it difficult to believe some of the scenarios being painted for me by clients that were experiencing problems with contracts," says Andrew Kyte, an analyst with Gartner. "They seemed to be describing quasi-medieval practices." But the more research Kyte and his team conducted, the more apparent it became that these "chaotic, undefined, poorly controlled processes around contract assets" are typical, even in world-class companies.

Gopi Kallayil, director of strategic marketing for Nextance, cites the prevalence of lost contracts as one of the top three findings of his study. The second: 40 percent of companies believe they could collect more revenue from customers if they managed their contracts better. Third, proper risk management depends in part on proper contract management.

Kyte says the contract management market is expanding rapidly, with growth centered in the United States but on the verge of spreading to the rest of the world. The growing prevalence of business process outsourcing, increasingly heterogeneous contract terms, and the strictures of Sarbanes-Oxley are cited as demand sources.

In 2002, the market was worth only $150 to 200 million, but in 2003, Kyte expects it to grow 250 to 300 percent. Business for the leading organizations will grow 300 to 400 percent, in the U.S. market alone. Kyte says the two "major, publicly quoted" software vendors providing contract management are American Management Systems and I-many Inc. The top five startups are, in alphabetical order, Accruent Inc., Determine Software Inc., diCarta Inc., Nextance, and Upside Software Inc.

For a self-assessment of your company's contract management practices, go the Nextance Web site and click on "Discover Best Practices."

— Jeanette Burriesci

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