At what point does an “interesting trend” become “the new normal?”

That’s the question raised by the most recent ISG Outsourcing Index, a quarterly report issued by advisory services firm Information Services Group (ISG). The index tracks the number, type and value of contracts worth more than $5 million worldwide.

In its most recent report for the second quarter of 2015, ISG notes that the number of contracts hit an all time high — but the overall dollar value of these contracts is 7 percent lower that last year’s second quarter.

For the first half of 2015, the annual contract value (ACV) of all contracts actually declined 14 percent from the prior year. (It should be noted, however, that the Americas, as a region, bucked the trend. The Americas posted a record number of deals — and an increase in values a well).

This trend of ever-more deals while values stagnate or fall has shown up in other recent quarterly reports. So how can the number of contracts hit an all-time high while values decline?

One result, many reasons

“We’re seeing a clear and continuing trend toward more deals at lower value. From the start of the recession in 2008 until now, counts have nearly doubled, while ACV has risen only modestly,” said ISG President and Partner John Keppel in a press release. “Technology has changed significantly during this period, which saw the beginning of the Digital As-a-Service revolution and its continuing pervasive impact on the global services market.”

That may be true, but there may be other factors at play here. For instance, in a generally harsher economic climate since 2008, there’s been extra pressure on companies to perfect just-in-time inventory practices.

The last thing many companies want when the economic outlook is hazy is a warehouse full of way too many goods. Warehousing large inventories, after all, is expensive (whether you own the space or not).

And although the Americas have been fairing better than other regions in the last 24 months or so, everyone is connected, as they say.

China’s economy may have recently stumbled — but the warning signs have been in place for a while. Europe still seems to be on the verge of its EU identity crisis every other month. And even growth in some parts of Asia-Pacific has been tepid.

In an economic climate like this, there may be pressure on buyers of outsourced services to be very conservative. Why make a large, expensive commitment with a partner for outsourced services when a couple smaller contracts may serve the same end?

It may be short-term thinking — and it may not even be truly economical, but it’s safer than presenting the CEO and CFO with a huge new bill.

Dealing with the “new normal”

In any event, this trend of more contracts for smaller values may constitute “the new normal” for those buying and selling outsourced services and products.

Assuming a contract is “done and done” when signed may be a luxury these days. For those in contract management on the vendor side, this should place extra emphasis on forming close, results-oriented relationships with customers.

That means keeping an unusually diligent eye on contract performance — like ensuring follow-through on periodic contract reviews.

For buyers of outsourced products on services, this also places extra pressure to review contract performance — there’s little extra budget these days for poorly performing outsourced work.

Is there any better argument for close contract management?

[About the author: Todd Hyten is a former business journalist who now writes about B2B topics and consults on content marketing. You can find him on Twitter and Google+.]

It’s not every day you see the word “agile” in the modern business sense connected to the topic of contract management.

That’s why this recent post on the website for staffing and consulting company, Eliassen Group, caught our attention: Utilizing Agile in the World of Contract Management.

In the post, Rob Annis, senior agile coach for Eliassen Group, notes that “Agile” practices are relevant beyond the traditional areas it’s associated with (IT, software development, etc.).

They even apply to … contract management. Annis notes some examples of thinking “agile” that overlap nicely with recent thinking in contract management.

For example, Annis writes: “One of the key tenets of Agile is that of collaborative decision-making between customer and client” and “collaboration is a key part of Agile and should inform the contract writer’s behavior and its inclusion in the contract.”

This is a key theme of what’s been called outcomes-based contracting: the practice or exercise of a vendor and client collaborating closely on the desired end results of a contract — rather than a narrow concern with delivery of products or services in X quantity by Y date.

It’s a great way to discuss quality, not just quantity — and a way to build bridges and solidify relationships. So should we call outcomes-based contracting “agile contracting”? It’s probably not a good idea — but they are definitely in the same family of thinking.

You can find out a lot more about what people are saying about outcomes-based contracting in this blog post that also links to a great video.

The Eliasson Group post also reminded me of something observed among the winners of the 2014 Innovation Awards granted by the International Association for Contract & Commercial Management.

As mentioned in this blog: “It is clear that those companies reaping huge bottom-line rewards from contract innovation were willing to go deeper into the true nature of a business relationship than what a given contract demonstrated.”

So does this mean contract management is now a “hot” topic now that experts on agility are mentioning it? Well, I wouldn’t hold my breath on that … but it’s interesting how some similar ideas are popping up on what makes a good contract.

[About the author: Todd Hyten is a former business journalist who now writes about B2B topics and consults on content marketing. You can find him on Twitter and Google+.]

Ever on the lookout for facts supporting the need for contract management (and, yes, CM solutions), we found this recent post by Brodies LLP, “Scotland’s largest law firm.”

In a survey of 138 businesses across Scotland yielded the following findings:

• 22% said they had no system to manage contracts with suppliers or customers.
• Of the remaining 78% who said they do have a “system” 57% reported their “system” was based on “spreadsheets, online calendars or paper-based filing systems.”

Did you spot the puzzling response in the fact above reported by Brodies LLP? We’ve heard of plenty of organizations that still file contracts in paper, or track them in spreadsheets. But calendar?

All we have to say is: if you’re managing contracts primarily by using a calendar … you’re doing it wrong.

It’s not as bad as it sounds of course: who doesn’t want to alert themselves to key dates? But, using a calendar sounds like all you’re concerned with is when contracts expire. And that can mean you are not managing your contracts as much as reminding yourself when to panic every year.

A calendar can never do what a database (such as Contract Assistant) can do for you: It can’t record all the elements of a contract, create financial summaries, and help you identify key parts of the contract. It also can’t provide a single record where all your many documents related to a contract can be stored (or linked to).

As some of you who work with contracts may know … the red-letter day that a contract expires is pretty much the wrong day to review a contract. It all needs to happen long before (30-60 days out, at least) that day pops up on your calendar.

The article posted on Brodies’ site also reports that 36 percent of those surveyed said they only review contracts “once or less” a year and another 10 percent said they don’t know. So that’s a total of 46 percent who appear to do the minimal — or less.

And what’s “less than once”? … You got it. It’s zero. Of course, someone could have just forgotten to check their calendar that day.

[About the author: Todd Hyten is a former business journalist who now writes about B2B topics and consults on content marketing. You can find him on Twitter and Google+.]