Most enterprise resource planning (ERP) systems, with the notable exception of Oracle's E-Business Suite 11i, don't really handle contracts at all.
The closest most ERP systems come to contract management is blanket orders that can never be as efficient as they need to be. Many industries, such as A&D (aerospace and defense), are government regulated in terms of adherence to contracts; in others, such as professional services and engineer-to-order products, there are revenue recognition rules that companies may run afoul of without the proper software controls. In still others, such as life sciences, complex pricing and bundling, complex relationships, and dynamic market conditions add complexity.
A new class of products, exemplified by Model N, hopes to solve this problem by providing the automated tools to give companies the control they need to recapture some of the lost revenue from ineffective contract management.
Model N, for example, includes applications for pricing, contracts, compliance, and deductions and rebates. The pricing application allows customer segmentation, useful for such things as buying groups, and product segmentation, useful for special bundles, and combines these with complex pricing algorithms that ensure customers get the right price and the right product. Contract management captures field offers, maintains the contract data, including a library of templates to make contracts easier to administer, and tracks price resolution and history. Compliance and deductions ensure that as customers' purchase levels increase, the right price for that level is offered and that rebates and administration fees are uniformly applied. It also provides up-sell opportunities by notifying users when a customer is near a price breakpoint in the contract so that they can suggest that the customer increase the current order to get the better price.
The Hurwitz take: All in all, Model N does an excellent job of covering the functionality needed by companies that live and die by the contract. The increased efficiency and monitoring provided by the application may mean the difference between profitable and unprofitable operations. Contract management is a concept whose time has come, and Model N is filling the need.
The Need for Contract Management
First Published on September 6, 2002
By Sharon Ward