This article tells the story of how our Contract Analytics customers shaped our thinking and led us to Contract Performance Management. It took us from focusing on contractual terms and clauses to asking why those contracts exist in the first place - what business purpose they are meant to serve and whether that purpose is being fulfilled.
This changed both our audience and purpose, moving from supporting legal teams with risk mitigation to helping Procurement and Finance deliver on commercial outcomes. That shift also reflects a broader trend in the market. According to McKinsey’s report Mitigating Procurement Value Leakage with Generative AI, procurement leaders are evolving from “cost cutters” to “value protectors”, with contract performance central to making the transition.
Developing Contracts Analytics at Seal Software in collaboration with our legal teams, our primary goals were to understand and reduce legal risk. But we soon began fielding more commercially focused questions - often from Procurement, Finance, or Operations - looking to extract actionable information from contracts.
That sounds pretty magical, and in many ways, it is. But in other ways, it risks repeating the same shortcomings BPM systems faced two decades ago.
In answering those questions, we learned that the work of Procurement is challenging. On a daily basis, business needs (and expectations!) have to be translated into contract requirements that will meet those expectations within the legal guardrails the legal team put in place. That translation is only effective when the contract reflects and stays connected to the original business purpose behind it: the “why” it was needed in the first place.
To make these work, Procurement has to act as a translator between business stakeholders and legal counsel, which requires balancing priorities that often pull in different directions. Business expectations come in many forms, but speed, cost reduction, and flexibility are among the most common. These are frequently at odds with Legal guardrails built on risk mitigation, compliance, and enforceability, and managing that tension is an expert balancing act.
Just as challenging, procurement teams face a barrage of contract-related questions on a daily basis while also having to regularly assess supplier performance.
What discounts have been negotiated, and are they being realized over the lifetime of the contract? How have amendments affected pricing or obligations? Do we have the right to renegotiate based on underperformance or volume thresholds that weren’t met? These, and many other questions, must be resolved continually.
Unfortunately, whilst Contract Lifecycle Management (CLM) systems are helpful in creating and storing contracts, they were not designed to answer these questions, leaving Procurement to do much of the work manually.
McKinsey’s findings reinforce this challenge, noting that up to 80% of procurement teams lack complete visibility into competitive terms, and compliance failures alone can result in a 2% leak of spend. These gaps persist not because Procurement lacks capability but because traditional tools like CLM weren’t built to monitor or enforce performance at scale.
Even with a modest number of contracts, answering a question like ‘Do we have any contracts with automatic (or tiered) price increases or decreases?’ becomes an unenviable manual task.
The arrival of LLMs was starting to make it easier (though not easy!) to surface complex insights from contract language and performance data, which encouraged us to develop an application to address an unsolved challenge for underserved audiences – Contract Performance Management for Procurement and Finance teams.
We define CPM as the process of actively monitoring, analyzing, and optimizing the commercial outcomes of contracts, ensuring that negotiated terms are translated into realized value and that supplier performance aligns with business expectations.
Or, as we say on our website, we make it easy to see what matters in your contracts, identify where you’re losing value, and take action to fix it.
The feedback we received from our Contract Analytics customers, who loved what the system delivered, had a direct impact on how we designed the system. Ease of deployment and use were top priorities, and their usability requirements were more akin to a self-service app than a complex suite. Several emphasized the importance of being able to start small and scale up over time.
We aimed to address those requirements and build a system that was quick to implement and extremely simple to use. Just as importantly, we wanted to ensure immediate customer value, which led us to start to build in industry expertise.
So much for the inspiration! The ideas are powerful, but how do they translate into real-world outcomes for Procurement and Finance teams? Equally, how do we ensure those outcomes are delivered with consistency and quality? That’s what we will cover in the next post - From Questions to Action - Tackling Value Leakage in the Era of AI.