Contracts bind, guide, and set the pace for every transaction, partnership, and agreement in the business world. But as the landscape evolves, so does the art and science of effective contract management.
From the rise of digital tools to the increasing demand for transparency, the world of contracts is constantly in flux.
Whether you're a seasoned legal professional, a business leader, or just keen to understand the nuances of modern contract management, we’ve got you covered.
Dive into this list of 43 contract management statistics highlighting the challenges, solutions, and trends shaping how businesses manage their most crucial agreements.
TL;DR
- Contracts are the backbone of every agreement, but their management is undergoing significant transformation.
- This post delves into the challenges facing modern contract management, the technological solutions revolutionizing the field, and the future trends set to redefine how businesses handle their agreements.
Why Contract Management Is Crucial
Every agreement, every deal, and every handshake is a promise. Contract management ensures these promises are kept.
But there are a lot of moving parts and there is a lot on the line:
1.) Nearly one-third of the entire workforce is in some way involved in contract management.12.) In 40% of organizations, it's a guessing game of who's in charge of which contract responsibility.2
3.) 89% of organizations don’t feel like their contracting process is “very effective.”
4.) Basic contracts cost an average of $7,000 to create, while more complex contracts can cost as much as $50,000.3
5.) Reviewing and processing a low-complexity agreement can cost as much as $6,900.3
6.) The overall cost of contracting can fall in the range of 2%-11% of the contract’s total revenue.3
With contract management software, businesses have a powerful ally, ensuring every promise made is a promise kept and every dollar spent is an investment in efficiency and clarity.
Contract Management Challenges
While contracts are crucial, they come with their own challenges, especially in today's complex business environment. These statistics delve into the most common issues businesses face in managing contracts.
Complexity and Volume of Modern Contracts
The modern business landscape has seen contracts grow in complexity and volume, and with that growth come unique challenges.
7.) 90% of professionals find contracts either difficult or downright impossible to understand.48.) 84% of contracting professionals are facing pressure to simplify agreements.4
9.) Human contract review takes an average of 92 minutes.5
10.) 89% of businesses grapple with managing a high volume of simple contracts.6
Navigating these challenges requires more than just due diligence; it calls for the right tools.
Contract management software with customizable templates, contract tracking, and optical character recognition (OCR) search capabilities offers a beacon of hope.
These features not only simplify and streamline contracts, but also ensure that every agreement is clear, concise, and easily accessible.
Inefficient Contract Retrieval and Storage
As businesses grow, so do their contract repositories. But storing them efficiently and retrieving them promptly is a challenge many face.
11.) Nearly half of businesses admit they're in the dark when it comes to a defined process for storing contracts post-execution.612.) 90% of contracting professionals feel like finding a specific document is a challenge.6
13.) Contract professionals spend up to two hours finding specific language in a document.7
Contract management software with AI-driven data extraction capabilities and intuitive storage solutions can turn hours of searching into mere seconds.
Contract Value Leakage
Contracts, while binding, aren’t immune to leaks, with value dripping away due to various inefficiencies.
14.) The average erosion of a contract’s value is pegged at 8.6%.8
15.) 40% of contract leakage can be attributed to poor management.9
16.) $122 is lost every hour in-house counsel spends on a contract.10
The antidote to this leakage? Contract management software (CMS). With features like real-time monitoring, automated compliance checks, and detailed analytics, CMS ensures contracts remain watertight, preserving their value and ensuring every dollar is well spent.
Negotiations and Transparency
Negotiations are the heart of any contract, but they're not always straightforward. The dance of give and take, the push and pull, can sometimes lead to friction, misunderstandings, and even disputes.
17.) Businesses are spending $870 billion on dispute resolution per year.1118.) 3 in 4 report they're facing increased demands for greater transparency in contracts.12
19.) 70% of friction points arise before a contract is even signed.13
20.) 13% of businesses feel that the virtual environment has hampered their ability to negotiate and finalize agreements effectively.12
The solution? You guessed it — contract management software. By offering features like automated negotiation tracking, transparent version histories, and digital collaboration tools, CMS ensures negotiations are smooth, transparent, and free from unnecessary friction.
The Digital Transformation of Contract Management
The digital wave has not just touched but transformed the realm of contract management. With the advent of automation, AI, and cloud solutions, the field is experiencing a revolution, making processes more efficient and reducing potential contract risks.
Automation in Contract Management
The future is automated, and contract management is no exception.
Organizations are keen to tap into the benefits of contract automation:
21.) 81% of organizations want to utilize contract automation.1422.) Two-thirds have earmarked funds specifically for contract technology tools.15
And the benefits are tangible:
23.) Contract digitization boosts compliance by 55%.1624.) Contract management software slashes administrative costs by 25%-30%.16
25.) Organizations using contract management software report an 80% faster average cycle time from bid to signed agreement.2
26.) 67% of survey respondents say they have evaluated the role of automation and advanced tech in improving their professional quality of life.15
Automation in contract management isn't just a luxury; it's a necessity. With tangible benefits in efficiency, cost savings, and compliance, it's clear that a digital-first approach in contract management is the way forward.
The Rise of AI in Contract Management
Artificial intelligence (AI) is no longer just the stuff of sci-fi movies; it's making waves in the world of contract management.
But it’s not catching on as quickly as you’d expect:
27.) 17% of organizations have outright banned generative AI tools like ChatGPT, while 31% have set guidelines for its use. Meanwhile, 38% are still unfamiliar with its potential.1728.) Only 20% of legal teams have embraced AI for tasks like contracts, e-discovery, or privacy. This is a drop from 33% in 2021, suggesting some hesitancy or challenges in adoption.15
So, what's holding businesses back?
29.) 25% of businesses cite security concerns as the biggest barrier to adoption.17
30.) AI is expected to cut manual labor in the contract review process by half in 2024.18
31.) AI outperformed trained lawyers by 10% in accuracy.19
32.) Compared to 92 minutes for humans, AI can complete a contract review in just 26 seconds.5
As businesses look to the future, integrating AI into their contract management processes will be key to staying ahead of the curve.
Embracing the Cloud for Contract Management
The way we work is evolving, and with it, the tools we use. The cloud, once just a tech buzzword, is now a cornerstone for many businesses, especially in the realm of contract management.
The shift in work dynamics is evident.
33.) 71% of legal teams now operate in a hybrid model, blending traditional office settings with remote work. 2034.) 45% of organizations have faced new hurdles tied to remote work.20
35.) Over half of businesses have fully embraced cloud-only solutions for their contract management needs.21
The cloud is more than just a storage solution; it's a paradigm shift in how businesses manage and access their contracts. As hybrid work models become the norm, cloud-based contract management solutions will be indispensable for businesses aiming for agility, efficiency, and seamless collaboration.
Legal Trends Shaping Contract Management
The world of law is dynamic, with shifts and changes that ripple through every facet of business. Being at the intersection of business and law, contract management feels these shifts acutely. Let's delve into how legal teams are navigating this evolving terrain.
Legal Teams and Their Involvement in Contract Management
Legal teams are the gatekeepers of contracts, ensuring they're watertight and compliant. But with the growing volume of contracts, costs are adding up:
36.) Nearly half of legal teams report that the need for contract management is growing.1537.) 99% of general counsels are on a mission to reduce contracting costs.6
38.) 67% of legal teams are putting their money where their mouth is, allocating budgets specifically for contract management tools.15
It's not just about managing contracts; it's about doing it efficiently and effectively.
Technology Adoption in Legal Departments
Technology is the new frontier for legal departments — a frontier brimming with challenges and opportunities.
While the potential of technology is undeniable, it’s not always easy to use and comes with a hefty price tag:
39) E-signature technology is leading the pack with 87% adoption.2240.) Contract management software follows closely at 74%.22
41.) 47% of legal teams find themselves grappling with implementation.6
42.) 24% report that high workloads and competing priorities hamper their ability to support their tech strategy.6
43.) The average legal tech spend stands at a whopping $1.2 million.22
As legal departments venture deeper into the tech world, the choice of tools becomes crucial.
ContractSafe offers easy-to-use contract management software, e-signature integrations, robust support, and just the right features — ensuring adoption is smooth, and benefits are maximized without unnecessary bells and whistles.
Trends Shaping the Future of Contract Management
In the ever-evolving world of business and law, contract management stands at a fascinating crossroads. As companies pivot, adapt, and innovate, how they handle contracts is also transforming.
Environmental, social, and governance (ESG)
The corporate world increasingly recognizes the importance of sustainability and ethical practices. As businesses become more socially conscious, contracts will likely reflect this change. We might see contracts with clauses prioritizing sustainable sourcing, ethical labor practices, and more.
However, these custom clauses pose a challenge for contract management. Standard agreements might not suffice, and CMS will need to be adept at identifying and analyzing these differences. The goal is to ensure that these unique stipulations are not just included but are effectively managed and executed.
The digital leap
The future is undeniably digital. As more CEOs recognize the importance of tech, we could see contracts integrated with real-time data feeds. Imagine a contract that adjusts its terms based on live market conditions or global events. This would make contracts more adaptive and relevant.
On the management side, the emphasis is on seamless e-signature integrations, automated reminders for milestones like auto-renewals, and digital storage solutions. These digital tools ensure timely actions, reduce the risk of oversight, and streamline the entire contract lifecycle.
The rise of AI
While AI is already making inroads, its potential is vast. Future contracts might be drafted with the assistance of AI, ensuring optimal terms for all parties. Predictive AI could even alert businesses to potential breaches or disputes before they escalate, enabling proactive solutions.
Changing work dynamics
The COVID-19 pandemic has already shown us the potential of remote work. As businesses adapt to hybrid or fully remote models, contracts and legal teams will need to address new challenges and opportunities.
Anyone who works with contracts, irrespective of their location, must have seamless access to a secure, centralized repository like ContractSafe’s. This not only ensures continuous workflow but also emphasizes the importance of robust security measures to protect sensitive contract data in a decentralized work environment.
Globalization and regulation
As businesses become more global, contracts will need to navigate the complex web of international regulations. Advanced CMS platforms, equipped with features like optical character recognition (OCR), play a pivotal role here. OCR makes contracts searchable and translatable, ensuring that language isn't a barrier.
Moreover, we might see contracts armed with tech that auto-updates based on regulations in different countries, ensuring businesses remain compliant without manual interventions.
In essence, the future of contract management is not just about streamlining processes or reducing costs — it's about leveraging technology and societal shifts to make contracts more adaptive, intelligent, and impactful.
As we move forward, those at the intersection of technology and contract management will be the trailblazers, shaping a new era of business agreements.
Ready To Get Started With ContractSafe?
Throughout this exploration, we've delved deep into the intricacies of contract management, the challenges faced, and the solutions that can make a difference.
But knowledge is just the first step.
The real transformation begins when you apply this knowledge, leveraging the right tools to optimize your contract management processes.
ContractSafe is more than just a tool; it's a comprehensive solution designed with the modern business in mind.
Whether you're grappling with the complexities of modern contracts, navigating the digital transformation, or looking to stay ahead with the latest trends, ContractSafe is your partner in ensuring every contract is managed efficiently, securely, and effectively.
If you're ready to revolutionize your contract management process, schedule a demo today and see for yourself how you can bring your processes into the future.
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