Transforming contract management in the energy sector

Woman wearing glasses working at laptop computer (contract)
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The COVID-19 pandemic has irreversibly changed businesses in almost every way possible, continually disrupting how businesses respond to emerging risks and opportunities, writes Nathan Kale, general manager ANZ at contract intelligence company Icertis.

The energy sector is no exception, where organisations have learned that rapid access to supplier and vendor contract data is key for transparency and agility, in order to respond to an array of challenges, from supply chain disruptions to evolving customer demand. Across all sectors there’s greater interest in digitally transforming contract management processes.

According to Gartner, interest in Contract Lifecycle Management (CLM) technology—which facilitates the digitisation of contracting—saw high growth in 2020: Its report ‘Critical Capabilities for Contract Life Cycle Management’ cites a 40 per cent increase in CLM enquiry volume in 2020. A recent Forrester survey report stated that “CLM has universally gone from a nice-to-have to a critical-to-have in a post-COVID world.” This isn’t surprising, considering estimates by World Commerce & Contracting that inefficient contract management costs companies more than nine percent of total annual revenue.

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Contracts are the foundation of every commercial relationship. An effective contract management system can help energy companies reduce costs and speed time to market, all while ensuring compliance and minimising risk. Yet, as with all technology, there are important decisions that will determine the value an organisation realises from deploying a CLM system.

Here are five steps an energy company should take to ensure a successful CLM implementation.

  1. Lay the groundwork. It’s often said that “a failure to plan is a plan to fail.” Any successful technology deployment begins with careful planning and a clear understanding of the impact the new solution will have on the business. Because energy contracts represent multiple stakeholders across geographies, from exploration and production, procurement and sales to legal and IT, an organisation needs to be thoughtful about who is included in the CLM selection, implementation, and scaling process. Each division within the organisation has a different perspective on CLM. The more buy-in an organisation initially has in the process, the more likely it is to invest in the right choice and the easier it will be to scale future contract management capabilities as the company grows and business needs evolve.
  1. Select the right technology. As with any technology purchase, energy organisations should consider a CLM system a long-term investment. That means it should offer capabilities that address a company’s immediate needs, while also including advanced features such as artificial intelligence and enterprise integrations to ensure the system can address a company’s growth and future requirements.

But it’s more than just the technology itself; organisations should look for a CLM provider that can serve as a trusted adviser and partner. Even the best software serves little value if it’s too difficult to use, or doesn’t deliver the necessary results to secure stakeholder confidence. Choosing an experienced CLM partner with a proven track record of quick and successful implementations can help companies achieve a speedy return on investment.

  1. Invest in training. It doesn’t matter how advanced a technology tool is, or how revolutionary its impact will be on the business, if no one uses it. This should remain front of mind when companies begin rolling out a new CLM system. Fortunately, there are numerous options for effectively and efficiently training staff.

First and foremost is the CLM provider. Experts in their products’ functionality are best equipped to offer users the necessary in-person training and user guides that will ensure smooth adoption. Look for a technology partner that offers “train-the-trainer” programs that help prepare select employees in core function areas with in-depth product knowledge. These “super users” can help fellow employees get the most from the technology. In addition, if using a service partner for implementation, rely on its certified trainers to help get the team up and running.

  1. Implement a two-pronged strategy. Timing is everything when it comes to deploying technology across the organisation. Ensure there aren’t other technology implementations happening elsewhere in the organisation that could distract employees from learning the CLM system, which may also include new workflows.

Therefore, beginning a rollout of simple contracting functions across the business allows employees to familiarise themselves with the new system without being overwhelmed by complex features and functions right out of the gate. This simplified implementation will help build confidence and buy-in among stakeholders and employees alike.

Simultaneously, for those select “super users” identified earlier in the implementation process, share the complete capabilities, as this helps to create a core team of CLM champions who can evangelise the system to others. They also serve as in-house system experts who can help ensure adoption and identify opportunities for improvement.

  1. Report your success. Once the implementation has been rolled out, it’s vital to look at how the organisation is performing against its goals. Whether a company chooses to start with a project where it can secure a quick win or decides to tackle an issue that was problematic across the board, demonstrating incremental progress will help generate momentum for the CLM system.

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Energy companies should work with their CLM provider to not only benchmark the initial KPIs identified in the planning process, but also create 30-, 60- and 90-day reports to document how these KPIs have changed since the system was deployed. As those benchmarks evolve, it’s imperative to continue to showcase the success of the implementation, so stakeholders continue to see the value of the investment.

For energy companies considering a CLM system as part of their digital transformation journey, the time is now. One research firm estimates that contract negotiations will become 30 per cent faster by 2023 due to advances in contract management technology.

It’s important to remember to be realistic about timing and expectations when implementing a CLM system. If a company follows these core steps, it will be able to demonstrate early value for the project and secure buy-in from key stakeholders that will pay dividends for years to come.

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