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As cost of negotiating contracts increases, new technology helps

When the costs of making business contracts rise, collaboration technology is coming to help in the shape of online negotiation solutions.

The cost of making contracts was found to have risen steadily in an article dating back a couple of years by Tim Cummins, President of the International Association for Contract & Commercial Management (IACCM). His findings were based on IACCM’s studies:

“Business spend on a low risk contract from draft, negotiation, to signature, has increased 38% in the past six years, to an average of $6,900. Costs for a mid-complexity contract stands at $21,300 and high complexity contracts run into hundreds of thousands of dollars.”

The drivers for growth were increased regulation and the growth of service contracts in business-to-business spending. In regulation, the drivers were more precisely anti-bribery, data protection and cybersecurity rules, for example. Cummins continued that:

“Services now represent 58% of business-to-business spend (vs product spend). Contracts for tangible goods (the main source of contracts in the past) are much easier to define and specify.”

With the spending so high and likely to even have increased since driven by, say, Europe’s GDPR data protection legislation and California Consumer’s Privacy Act, technology has come to help. Automation in contract analysis and generation has brought efficiencies to the contract process.

But there is a problem: the more complex and costly the contract, the less these technologies help. The reason is that the negotiation process typically gets more and more difficult in line with contract complexity. These technologies can do very little to speed it up.

Therefore, a new breed of contract technologies, known as online negotiation services, is entering the market. These solutions, including Documill Leap for Salesforce, offer radical help especially in two ways:

  • providing a shared online negotiation space for all parties. In this, any number of participants can edit any part of the contract at the same time, whenever they like. All changes are redlined, whereas comments can be made to all parties or kept to just one’s own team. Crucially, any change can be set to require approval by all parties. All of this brings clarity and control to the overall process.
  • automating the management of the negotiation with workflows. These allow splitting the process into steps and tasks for the contributors. Automated alerts for tasks are generated for each participant, to keep the action going without glitches. The workflows are surprisingly quick and easy to create and customize even for each negotiation, making it much smoother to run.

 

Says Terho Laakso, Vice President of Business Development, Documill Ltd:

“Contract technologies have so far been strictly about housekeeping for the electronic paper. Now, finally, is the time to put things right for contract negotiators by means of cutting-edge collaboration technology.”

By | October 21st, 2020|

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