What 2015 Holds for Contract Management
New year, new opportunities.
Like the rest of us, members of contract management departments around the world are excited about how 2015 is shaping up. There are strong reasons to believe that 2015 will be a great year for business and particularly contract management.
Here is a review of three of the top opportunities for 2015 for contract managers.
1. Falling Gas Prices
The U.S. Department energy reported that U.S. gasoline prices ended 2014 at lowest levels since mid-May 2009. Around the country, there are more and more cities reporting prices per gallon beyond the $2 mark. The cheaper gas prices have two important implications for the contract management industry:
- Lower transportation costs: Not only are contract managers able to negotiate at lower price points due to the lower gas prices, but also contract managers are able to air travel more cheaply. According to forecasts from the International Air Transport Association (IATA), flight tickets should drop an average of 5% in price.
- Lower commodity prices: From milk to poultry to corn to bacon, there are several prices that will drop in 2015. It’s a good idea to review the prices of your contracts because plenty of commodity prices are falling. You may not be able to benefit from the cheaper prices just yet (e.g. most airline carriers are still tied to old gas prices until about the second quarter of 2015), but you have to be aware of market prices at the time of renewing or renegotiating your contracts.
Set an email reminder in your contract management system for the renewal dates of contracts affected by lower commodity prices.
2. Cheaper Cloud Storage
The “Race to Zero” is on for cloud storage. 2014 saw sharp drops in the prices of cloud-based storage of data. Throughout last year, Microsoft and Amazon dropped cloud storage fees by up to 50%. If you’re paying for cloud storage, you have a strong case to demand a price reduction from your vendor. You can easily point out that Dropbox is currently offering 1TB for just $9.99 per month. If your vendor doesn’t budge, then look for cheaper (and still reliable) alternatives for cloud storage.
While you can expect cloud storage prices to decrease, you shouldn’t expect that trend to catch on with SaaS vendors. As this post at KissMetrics explains, SaaS vendors are very creative at coming up with different prices points and presenting what you get for your money. SaaS pricing doesn’t depend just on cloud storage so that is why they are able to keep up higher prices.
3. Still Opportunities for Off-Shoring Activities
According to a 2015 survey of procurement executives from ProcurementLeaders.com, 45% of Chief Procurement Officers were looking to increase offshore provision of non-core activities in 2015. However, it’s not just CPOs that are looking into leveraging the global supply chain. Managers across several categories believe that there still room for off-shoring both core and non-core spend categories.
Given that the scope and depth of outsource operations are likely to increase, it is important to achieve the scalability required by stakeholders by designing a pre-determined outsourcing process with clear guidelines for accountability and compliance. Even if your enterprise outsources its activities, your enterprise may still be legally liable in case of problems. Pay special attention when off-shoring any core activities to third parties.
Still, it’s a good idea to review past offshoring decisions, particularly those related to core areas of your business that may have been too readily offshored without weighing the full risk implications. After all, in the same survey 17% of CPOs are thinking of reshoring some core activities.
2015 may provide three exciting opportunities for contract managers: falling commodity prices, cheaper cloud storage costs, and additional opportunities for off-shoring activities.