This is a “tremendous transition” for CIOs who were previously seen as technology experts but “increasingly have to be commercial experts”, says Tim Cummins, CEO for the International Association for Contract and Commercial Management (IACCM).
In the past, the CIO’s oversight was on acquisition of technology as a commodity, he says. But as organisations move to cloud based services, they also have to manage these new supplier relationships.
Cummins, who was recently in Auckland, says an area CIOs and their executive peers can focus on are contracts.
It is time to ‘rethink’ the purpose of today’s contracts and to view these as core business assets.
He says it is time to ‘rethink’ the purpose of today’s contracts and to view these as core business assets.
This is important as business leaders recognise the need for more collaborative relationships and improved management of complex supply networks, says Cummins, who has extensive experience in contract management at IBM, and in various roles in the banking, automotive and aerospace industries.
Citing the results of IACCM research from members across the globe, Cummins notes that in highest performing organisations, contracts and the contracting process were viewed as instruments of quality control.
In more than 90 per cent of organisations surveyed, these were seen primarily as instruments for control and compliance, rather than as business enablers and tools for improved communication and understanding.
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He says the growth of IACCM, which is a not-for-profit organisation, is a recognition of the need to build more of a lifecycle capability around contracts.
“It is not about trying to get the best deal at the point of acquisition but actually trying to develop overseeing the overall successful and effective relationships.”
Companies could be generating over 9 per cent improvement to their bottom line if they tackled the commercial issues that usually undermine contract performance, says Cummins
Focus on the fundamentals
He talks about some areas CIOs can focus on as they increasingly work on a range of contracts with their suppliers.
For instance, in their survey, the terms and conditions that attract most attention during negotiations relate to liabilities, indemnities, liquidated damages, intellectual property, data protection and price.
“They actually tend to focus on negotiating clauses and terms that are all about what happens when things go wrong.”
And yet, when organisations were asked what will have the greatest impact on success or failure of the contract, they cite scope and goals, responsibilities of parties, change management communication and joint working.
“These terms are very much to do with governance performance and relationships aspects of their arrangements,” he says. “But these are not on top of the list when it comes to what they negotiate on."
“If you want the contracts to be a success, they need to be focused on making sure the negotiations come up with points of business values rather than using contracts as a legal weapon.”
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