Manual Contract Management Is Holding the Tech Industry Back from Growth

January 5, 2022 Digvijay Singh

Innovation is paramount in the technology sector, where solutions and services move and evolve at lightning speeds. Therefore, technology organizations must continuously strive to be more agile and resilient to keep up with the pace of business and stay ahead of the competition.

Indeed, as one McKinsey & Company study found, given the competitive nature of the technology industry, it's "grow or die."

Analyzing the life cycles of approximately 3,000 software and online services companies since 1980, McKinsey found that growth was the key driver of success in this industry. High-growth companies yielded returns to shareholders five times greater than medium-growth companies. In addition, companies that McKinsey dubbed "supergrowers"—those with annual growth greater than 60% after passing $100 million in revenues—were more successful long-term and eight times more likely to reach $1 billion in revenues than companies growing at less than 20% annually.

With so much pressure to grow fast, tech companies rely on increasingly complex commercial models involving an extensive partner, supplier, and reseller network. As an industry rich with M&A activity (mergers and acquisitions), the complexity of managing partner networks in the technology sector continues to grow.

Without a complete understanding of the contractual relationships they have in place, technology companies can see revenue and margins erode because deals are finalized without considering the commercial factors and relationships.

Meanwhile, innovative business models make the net profitability of a deal even more challenging to calculate and optimize. These contract-driven models include indirect sales through partners, hardware licensing agreements, and "-as-a-service" cloud offerings.

Post deal execution, technology companies must monitor contract performance throughout the relationship. Today, when companies no longer buy the software outright but gain access to it through subscription models, these relationships last longer than they would have even a decade ago. Moreover, as software and hardware companies enter complex sales deals at scale, potential failure points can multiply exponentially as relationships are built, expanded, and evolve. These inefficiencies don't just impact the contracting team but also the organization’s mission.

Why Digitally Transforming Contracts Is Key to Growth

Contracts govern these relationships and everything that flows through them. Contracts define every business activity—what a company buys, what it sells, how it operates, and how it manages its IP (intellectual property). Contracts manage the increasingly strained and complex supply chain, control the speed at which a business can act, and, ultimately, determine its abilities to be profitable and enact change.

That's why any efforts to address the biggest challenges facing today's technology companies must include reimagining how you manage and get value from your contracts. Unfortunately, manual, inefficient contract processes are an often-overlooked barrier to an organization's success.

When it comes to closing business, it's not just about hitting end-of-quarter sales targets. The company must also be sure the deal is structured to deliver the intended benefits and then, after execution, it must make sure those benefits are fully realized.

AI-powered contract lifecycle management (CLM) can help. For example, as deal desks accommodate fast-moving negotiations, the right CLM technology can translate complex information into intuitive visualizations. In addition, with a better understanding of how licensing, service agreements, rebates, and incentives are associated, deal decks can ensure that no revenue is left on the table.

And by integrating seamlessly with pre-and post-sales systems—customer relationship management (CRM), configure, price, quote (CPQ), and billing systems—the actual intent of each clause in every contract performs as intended.

How Icertis Can Help

At Icertis, we do more than provide contract solutions. We see contracts as opportunities. The Icertis Contract Intelligence (ICI) platform is the only contract management system tailored specifically for technology companies, drawing on deep industry experience and best practices.

ICI for Technology specifically addresses the challenges and needs of the technology sector by delivering quicker deployment and time-to-value.

ICI Technology solution is powered with a preconfigured data model including workflows, rules, and associations. This will help your company realize real value in a compressed period. This will also empower your organization to compete more effectively and close deals faster through a better understanding of contracts and their context within your business.

ICI for Technology is tailored to technology companies, providing capabilities such as SaaS and subscription model support, ready-to-use contract assembly, and prebuilt smart links for visibility; and more.

As your business grows, your contract intelligence grows. This leads to better insights, decision-making, and business performance.

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