2021 Prediction: Digital Contract Transformation Takes Center Stage
Editor’s Note: This article was originally published on VMBlog.
By Dave Parks
Even before COVID, digital transformation was one of the top strategic priorities for organizations of all industries and sizes. Earlier in 2020, 92 percent of companies thought their business models would need to change given digitization, and business leaders were expecting that 80% of revenue growth would hinge on digital offerings and operations.
COVID has shined a light on how heavily reliant we are on digital technologies, as well as the multiple risks in the global supply chain. As organizations struggle with business process reengineering, the continued challenges of a remote workforce, and change management in today’s new operating environment, they will turn to data-driven solutions that improve and optimize business processes. Especially those that minimize risk without sacrificing opportunity.
Contracts play a critical role in helping companies manage their relationships with all parties in the supply chain and digitally transforming processes gives them the agility and flexibility to minimize business risk. Unfortunately, poor contract management continues to cost companies 9% of their bottom line. Given their importance, many organizations don’t have true insight into how their employees, partners, and customers access and manage contracts today. Digital Contract Transformation (DCX) helps address this by allowing businesses to digitize their contracts and contract lifecycle management (CLM) processes, and we predict that it will really take center stage in 2021.
What’s At Risk?
The risks due to ineffective contract lifecycle management include overlooked penalties, missed obligations, lost revenue, lost savings, lost contracts, unexpected renewals and expirations, hidden clauses that leave a company open to liabilities, and potential overall brand damage. Contracts contain a ton of valuable data that can and should be leveraged to mitigate risk, uncover business opportunities, and make informed business decisions.
When you digitize all this data with digital contract transformation, CLM becomes a fundamental pillar to overall digital transformation efforts. Harnessing the data gives businesses the ability to benchmark, track and optimize the key performance indicators most important to them. It essentially allows organizations to do more with less, finding underperforming services, and additional cost savings opportunities, as well as ensure governance and compliance.
Achieving Digital Contract Transformation
Having a centralized, secure and searchable digital contract repository is the first step to achieving digital contract transformation, and new technologies like data extraction using deep learning algorithms and Natural Language Processing will be extremely valuable to businesses that use shared folders or spreadsheets to track and manage legal agreements. From there, organizations can begin to embrace and execute more mature DCX strategies and benefits such as automating every step in a contract’s lifecycle including how the agreement is requested, assembled, reviewed, negotiated, executed, and managed post-execution.
In the end, digital transformation is all about data. Why? Because it’s the data that delivers business intelligence. With DCX, organizations can capture the vast amount of data in their contracts to benchmark and track KPIs associated with every aspect of their legal agreements with customers, vendors, partners, employees, and more. These KPIs can empower them with the business intelligence necessary to operate the business and compete at a much higher level.
Digital transformation efforts will not be going away anytime soon, and in fact, continue to accelerate. Contract Logix predicts that in an environment where everyone is under pressure to do more with less, IT departments will need to ensure that any cloud spend they make is data-driven and maps to leadership’s overall business KPIs and goals. DCX harnesses contract data and gives organizations the actionable business insights critical to recovery in a post-COVID economy, and organizations that neglect to digitally transform the way they manage contracts will be significantly more exposed to financial, legal, security and brand risks than those that do.
Want to learn more? Schedule a demo of our contract management software.