The report "The Contract Management Benchmark Report: Sales Contracts" surveyed approximately 165 industry executives to uncover the market pressures that are driving improvements in contract management. It found that a full third of customer contracts on average are not tracked, improperly serviced or forgotten entirely -- leaving the door wide open for the kinds of risk described above. However, nearly a third of these companies are planning to invest in contract management technology in the near term, which points to significant momentum for the rapidly-growing CPM industry.
As the report explains, contracts are simply becoming more complicated, containing increasing amounts of critical information that demand precise and unblinking attention. At the same time, businesses continue to look for more revenue wherever possible, while navigating a maze of financial and other compliance requirements. Taken together, the logical conclusion is that businesses need to evolve their processes and technology to more proactively manage their contracts.
Vishal Patel, research analyst at Aberdeen, elaborated in his report: "Sales contracts now often have very detailed terms and conditions, complex payment options and various channel sales strategies. Partner sales and distributor relationships, for example, can get complicated when it comes to revenue sharing and discounts or rebates. Also, certain regulations (e.g., SOX and Basel II) require documentation and reporting, requiring management to assess the internal controls and procedures for financial reporting. Regulations also require that revenue be recognized at the right time, not too early or late."
Patel continued, "According to our research, almost 88% of survey respondents report that their sales contracts address varying combinations of products, services (including consulting services), warranties, and upgrades. Despite this complexity and the obvious need to now manage them more carefully, contract management in most organizations usually involves largely manual, labor-intensive, and disjointed processes -- resulting in poor visibility into contracts and compliance, as well as missed renewal opportunities."
The analyst report also recommends best-practices and benchmarks the success of companies identified as "Best in Class" by Aberdeen. For instance, these business leaders are able to achieve contract renewal rates of 92% on average, or 35% better than other companies. They are also able to close deals 75% faster by reducing the contract cycle times to about one week, compared to the average of nearly one month.
"Given all the risks to which companies expose themselves by not paying attention to this critical issue, the Aberdeen report makes a clear case for large companies to invest in CPM technology," said Kyle Bowker, president and chief executive chairman of Nextance. "Nextance in particular has always been a market favorite, given our solution's high-ROI and low-cost approach and the fact that we offer the only fully XML-based solution available today."
To download a complimentary copy of the Aberdeen report, please visit: http://www.aberdeen.com/link/source.asp?cid=2856&pid=PR050306.
About Nextance Inc.
Nextance is setting the standard for contract performance management (CPM) solutions with innovative software and best-practices professional services. Global 2000 companies are improving financial and business performance by using Nextance CPM to improve the standardization, visibility and control of their contractual relationships. Countrywide, Covenant Health, Eastman Chemical Company, Fireman's Fund, Genzyme Corporation, Juniper Networks, Sasol, Sun Microsystems, and others are using Nextance software every day to tap into the value that is written into each of their thousands of revenue, procurement, intellectual property licensing, and partner agreements. Nextance is based in Redwood City, CA, and is privately held. For additional information, visit: www.nextance.com.
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