Nextance Survey Reveals Corporate America Faces Big Challenges in Effectively Managing Its...

Business Editors

REDWOOD CITY, Calif.--(BUSINESS WIRE)--Feb. 25, 2003

Industry's First Benchmarking Study Reveals Lack of Best Practices

in Contract Management, Resulting in Lost Contracts,

Unrealized Revenue and Increased Corporate Risk

Nextance,

Contracts have become the lifeblood of corporations with the explosive growth in the number and complexity of contractual relationships with customers, suppliers, partners, and distributors. Until now contract professionals and executives have had little concrete data or best practices to work with on how to improve their contract management processes. The recent focus on corporate governance and internal controls has further elevated the importance of this function on the financial and operational health of a company.

"Contract management as a profession has had good, dedicated people operating with no tools, little data, and a dearth of best practices," said Kirk Krappe, President and CEO of Nextance. "We conducted this survey to address the needs of this underserved community."

The Role of Contracts Has Evolved

According to the National Association of Purchasing Managers, the average Fortune 1000 company now uses between 20,000 and 40,000 vendors, up 20% in the five years between 1996 and 2001. Meanwhile, the META Group estimates more than 90% of organizations rely primarily on manual processes to manage enterprise contracts, including signature/approval routing across buyer and seller organizations.

Key Findings

The survey revealed that the vast majority of companies do not have the desired level of control over their contracts, from initial contract creation through the lifecycle of each contract. It also showed that company executives are quite concerned about the amount of contractual risk and how it might affect the corporate bottom line and risk exposure.

-- Contract Creation and Accessibility: a paper-based contract system is still the most prevalent form of contract management. Over 80% of respondents said that simply finding their contracts was an area of concern and most said they would be unable to locate up to 10% of their contracts.

-- Revenue and Cost: more than half the companies said they were unable to analyze their contracts by vendor or customer, limiting their ability to optimize contract performance. Over 40% said they could realize large incremental revenues and cost savings through better contract management.

-- Contract Risk: 71% of the companies said contractual risk is a major area of concern, yet three out of four companies did not have a reliable system in place to alert key parties when a contractual risk was triggered.

Overall, Nextance found the vast majority of companies severely lacking in all four areas of contract management: creating contracts, gaining visibility and access, managing commitments, and tracking contractual risk. Companies wanting to speed business operations, maximize profitability, and reduce contractual risk should evaluate and create a plan of action for improving their own contract management operations. The upside is that leading edge companies are beginning to address these issues with a new class of enterprise software which enables the central creation and storage of contracts electronically and the automation of the contract lifecycle delivering better contract performance.

The survey was conducted by Nextance over a three-month period with C-level executives and managers at more than 100 Global 2000 corporations. The survey also included members of contract management industry associations seeking to promote industry best practices and the development of the contract management profession.

"Currently, corporations lack the data necessary to drive improvement in contract management -- whether it be vendor or opportunity selection, monitoring of market reaction to their terms and conditions, or the identification of best or worst-performing relationships," said Tim Cummins, Executive Director of the International Association of Contract and Commercial Managers. "Contract management software is a strategic tool that illuminates an area that for today's business executives remains shrouded in mystery."

About Nextance, Inc.

Nextance, Inc. is a leading enterprise software firm providing applications that assist corporations and public entities in better managing their contracts, commitments, and supporting business processes. Companies using Nextance software gain control over their contracts, rights, and obligations and realize increased revenues, reduced expenses, and reduced contractual risk. Nextance is privately held and is headquartered in Redwood City, Calif. Additional information about Nextance is available at http://www.nextance.com.

Nextance(TM) is a trademark of Nextance, Inc. All other company names mentioned herein may be the trademarks of their respective owners.

Editors Note: for additional findings from the survey, please contact one of the representatives listed.