Contracts provide the terms, pricing, and service levels of customer, partner, and supplier relationships. There are significant opportunities for improvement in contract management, from creation to performance measurement, both on the buy-side and the sell-side.

Estimates are that about 80 percent of B2B purchases involve some sort of contract. That makes for a great deal of "paper" floating back and forth between buyers and suppliers. PricewaterhouseCoopers suggest that companies could realise savings that equate to 2% of total annual costs through contract automation. There are significant opportunities for improvement.

Research by AberdeenGroup (2007) revealed that:

• processes for supplier contracts are still largely inefficient and labor-intensive
• over 50% of companies admit having poor visibility into their supplier contracts, making it difficult to track and monitor them
• few companies have effective policies and procedures
• an astounding 83% of enterprises are using manual (37%) or only partially automated (46%) processes to carry out contract management activities
• approximately 40% of companies either lack formal procedures for creating and managing contracts or use approaches that vary across organisations
• at most companies, contracting cycles are executed in a series of disparate and largely manual activities – it takes 20 to 30 days, on average, for a company to create, negotiate, finalize a contract after the initial sourcing cycle is complete
• almost 30% of enterprises are not using the same systems or databases in various business units or sites, making it difficult to aggregate information and get a holistic view of contracts
• nearly half of companies continue to store at least a portion of their contracts in paper format or in disparate systems / databases, limiting their ability to locate contracts, let alone monitor and manage compliance, access revenue and rebates, and analyse performance
• lacking effective contract visibility and tracking procedures frustrates efforts to evaluate contract performance
• many procurement executives report challenges locating contracts, let alone manage compliance and performance

Inefficient management of supplier contracts can have a significant impact on the enterprise.

Best in Class companies are out-performing the industry norm in compliance to contracts, resources employed for contract management, and capturing discounts and savings:

• they show a much higher rate of compliant transactions (93% best in class average vs. 65% at all participants), allowing them to capture more of the savings related to on-contract purchases
• their average savings of transactions that are compliant with contracts is 22%
• Best in Class companies also have a higher percentage of suppliers that comply with prices and discounts (91% best in class average vs. 73% all research participants average), thus allowing a buying company to capture a higher percentage of discounts and rebates (55% best in class average vs. 41% all research participants average)
• Best in Class companies are able to achieve all this with much fewer resources
• Best in Class companies report significant benefits from using contract management automation at three main areas of value: improve the effectiveness of negotiations and implementation of contracts, establish a more efficient organisation, ensure the value of agreements is delivered and sustained over their life cycle

PriceWaterhouseCoopers suggest that companies could realise savings that equate to 2% of total annual costs by eliminating inaccuracies and non-compliance through contract automation.