The Case for Contract Management on the Cloud

Market analyst McKinsey & Co.’s report, “Winning in the SMB Cloud: Charting a Path to Success,” outlines the reasons why small and medium-sized businesses (SMBs) are leading the growth of the cloud services market.

McKinsey is pointing out to cloud service providers that the SMB market is ripe with opportunity, but its conclusions can also be instructive to SMBs who haven’t yet begun to take advantage of the cloud for services such as contract management.

Why the Cloud Makes Sense for SMBs

McKinsey projects that the combined public and private cloud market will grow to at least $65 billion by 2015, up from about $11 billion in 2010. McKinsey expects that large enterprises will account for most of the spending on the private cloud (i.e., cloud infrastructure operated for just one organization), but that SMBs will dominate growth in the public cloud market, accounting for $26 billion to $32 billion in cloud spending by 2015.

McKinsey identifies three primary reasons why SMBs are moving en masse to the cloud — each of them a compelling justification for any SMB still considering the move.

1. Pay-per-use access to the latest software.

SMBs no longer have to invest in costly software to keep up to date. With SaaS providers, the cost is always matched to real usage and not projections.

2. Scalable and reliable infrastructure.

One of the greatest advantages of the cloud for SMBs is that they can have access to secure computing resources and storage on-demand. With infrastructure-as-a-service (IaaS) providers, computing infrastructure can become a variable cost in the same way that utilities are, allowing growing companies to match costs with usage, as well as to lower IT capital costs.

“Cost savings to SMBs for moving infrastructure to the cloud can be well over 50 percent,” McKinsey states.

3. Integration.

With cloud services, SMBs can share use of customized or commercial service applications with end consumers and vendors. This sharing allows for integration that makes doing business easier.

Why the Cloud Makes Sense for Contract Management

In a survey of CIOs, McKinsey asked if the CIOs if their companies were planning on migrating to the cloud in particular areas. The top three responses were: customer relationship management (46 percent), e-commerce/web (42 percent), and collaboration (35 percent).

For SMBs who are considering moving to the cloud, it’s worth noting that all three areas relate directly to contract management. Contract management should be integrated into any customer relationship management system; e-commerce involves a steady stream of customer contracts; and the ease of collaboration is one of the greatest benefits of contract management software.

It’s a dubious plan to automate the management and operation of customer and vendor relationships without also automating contract management. Once an organization understands the importance of contract management integration, then it becomes a matter of cloud solutions or on-premises software.

But as McKinsey points out, the shift to the cloud is so dramatic for good reasons, and SMBs that use the cloud for contract management will be able to reap the benefits of scalability, integration with vendors and customers, and always-up-to-date applications.


The “cloud” receives a lot of hype, but it’s not an overblown trend that will die away — it’s the way business is moving. As SMBs automate contract management, or any other essential business function, cloud solutions should be given much consideration.