This is a guest post by Nadine Rochester. Nadine talks about contract management and the forces shaping its future.
Most projects require contracts to be agreed with employees, clients, suppliers, customers or other business partners, in order to administrate various financial, operational and technical aspects.
Therefore, the development of contract management skills is a priority within many project management training courses.
For service businesses and digital agency leaders, contract management is especially important. After all, most service businesses deal with a large number of clients and are increasingly reliant on cross-domain knowledge, while speed is also top priority. This means contracts need to be drawn up quickly, enacted quickly, and made easily accessible, which is why contract management training courses can be so beneficial in the digital age.
However, project management is continually evolving, and it is essential that businesses make an effort to equip project leaders and contract managers with the skills needed to succeed in the long term, rather than the short-term.
In this article, we take a look at the changing nature of contract management, examine its importance for service businesses and project managers, and predict what it will look like in five years' time.
Artificial intelligence (AI) is one of the emerging technologies disrupting many industries and job roles, and over the next five years, it is likely to have a significant influence on contract management.
In particular, it has the potential to make organizations more efficient and to allow crucial data to be extracted more easily.
As Beverly Rich points out in an article for the Harvard Business Review, one of the primary challenges associated with modern contract management is the vast number of contracts organizations need to keep track of, and this is likely to increase over the next five years. This can be especially problematic and time-consuming when a large number of contracts need to be renewed routinely, but when they all have different renewal dates.
It is much easier in this instance for artificial intelligence to sort through the vast amounts of data and pull relevant information. In the example of contract renewals, AI has the potential to be more accurate and efficient at identifying contracts that need to be renewed, thus eliminating the risk associated with contracts quietly lapsing.
"Traditionally, most CLM applications have had only limited search capabilities that require strict parameters for the query to successfully find the requested document," explains Shelly Lu, writing for ContractWorks. "AI can drastically improve CLM database searches using techniques from natural language processing, and information about users themselves, in order to better understand the meaning and context of each search."
The aforementioned Harvard Business Review article also highlights the fact that organizations that make use of advanced software with AI capabilities tend to experience improvements to productivity and efficiency in contracting. It is likely, therefore, that future contract management training courses will emphasize how to work with AI.
Another trend that is likely to fundamentally alter project management training courses, as well as the way digital agencies approach the discipline of contract management, is the emergence of blockchain technology. This allows for the creation of a list of decentralized records which are permanent, resistant to modification, verifiable and time-stamped. All of these traits can be hugely advantageous when dealing with clients and business partners.
Critically, with regards to contract management, this will help to improve transparency, and increase both trust and reliability. The nature of the technology itself means that contract information stored on a blockchain can be accessed by anyone on the network but cannot be edited without the majority approval of everyone involved. As it is decentralized, it also circumvents problems associated with having a single point of failure.
"A blockchain contains an accurate and verifiable record of all pertinent transactions," Paul Martyn explains, in an article written for the Forbes website. "It can provide a foolproof way for multi-agent systems, typical members of a blockchain, to exchange information, creating a single version of the truth."
The permanent and verifiable nature of blockchain can also be extremely useful within contract management as a means of conflict resolution. For example, it can potentially help to resolve disputes before they ever reach the point of litigation, saving time and money, while improving the quality of the relationship after resolution is achieved.
The premise of digitalizing contract information can help to reduce storage space needed for paper contracts, and can help to improve an organization's environmental record, which can be beneficial in terms of reputation. Moreover, it opens up the possibility of allowing more automation, freeing up contract managers and other project leaders to focus on more complex and intricate tasks, requiring direct human involvement.
At present, one of the barriers to blockchain contract management is the lack of a mainstream application, which can be universally adopted by all parties. However, with the huge number of advantages associated with the technology, this is likely to change in the next few years and within five years, blockchain may well be widely utilized, and a technology emphasized by contract management training courses everywhere.
The Last Word
Contract management forms a crucial part of most modern projects, as well as the day-to-day operations of many digital agencies and service businesses, as these are complex and may require a number of different parties agreeing terms with each other, including customers, employees, suppliers and other business partners. It is, therefore, of the utmost importance that organizations adapt to the latest trends and prioritize the right skills.
While many changes are unpredictable, it seems highly likely that artificial intelligence will play a larger role in the next five years, helping those involved in contracting to acquire data more efficiently. Meanwhile, blockchain is also likely to offer key benefits, such as data entries being decentralized, permanent and verifiable.
With this in mind, it stands to reason that, over the course of the next five years, both AI and blockchain technology will be given more focus during contract management training courses and coaching programs.