What Factors Influence the Cost of Contract Management Software?
A contract management system may be just what your company needs to effectively store, locate, and review contracts. While you may be an expert on contracts, finding a software solution (and figuring out how much it costs) probably isn’t something listed on your resume. Not to worry!
We work with companies in different verticals every day on evaluating solutions that best fit their needs and their budgets. This brief overview will tell you what you can expect for pricing and the evaluation and decision-making process involved with purchasing a contract management system.
How much are you really spending on manual document management? Use our custom ROI calculator to find out:
Typical Pricing: Cloud vs. On-Premise
A key decision to make is whether you are looking for a cloud or on-premise system. We won’t go into the benefits of a cloud system in this post, but you can read more here. Typically an on-premise solution is a one-time fee and any future upgrades and continued support require an additional annual fee.
Cloud solutions usually come with a software-as-a-service (SaaS) subscription model. While you pay an ongoing price (either monthly, quarterly, or annually) it is almost always much lower than an on-premise cost and there is no additional fee for upgrades, technical support, or new features.
The actual price of a system can vary greatly greatly - anywhere from $15/user/month, to a one-time fee of thousands of dollars. Determining the cost depends on several factors, including:
- Number of Users
- Many software companies offer discounts for purchasing a bulk amount of users, which may save you money in the long run, even if all the users will not start using the system on day one.
- The amount of space you use (both for the documents and stored data) may be a factor in the price. It’s important to consider how this will affect your budget long term as you start to accumulate documents in the system. Some SaaS companies charge for cloud storage; others do not.
- One of the biggest variables in the cost of any software system is implementation. Make sure your software provider gives a clear picture of what is needed for an implementation, what’s included, and what the costs are if additional services are needed. For example, you may find that additional training is needed or that the system requires customization to fit your specific business processes.
Before purchasing, and before even approaching vendors, it is well worth your time to write a requirements document. You can then use this to quickly eliminate systems that are not a good fit. As part of your initial research, it is extremely helpful to have your business processes clearly defined.
A contract management solution may look and sound good, but if it doesn’t have the flexibility or specific functionality that your company requires, it quickly becomes a waste of time to evaluate, and potentially a huge waste of money if the system is purchased without the proper due diligence.
Other Factors to Consider Before You Buy
- Longevity of the company
- New software companies are springing up every day, and while they may have a flashy website and slick interface, that does not necessarily mean that they will provide what you need, or that that they will be in business long term. Part of your evaluation process should also include looking into the software company itself - ask how long they have been in business and what the future of the company looks like. You should also ask what happens to your contracts and data if they should go out of business.
- Customer References
- The best way to find out how well a system works is to talk with someone that uses it. Once you’ve narrowed down possible vendors to a short list, ask them for customer references that have similar businesses and processes to yours. A phone call with an actual user is a great way to hear candid feedback and learn the pros and possible cons of going with a particular contract management system.
- Bigger isn’t always better
- Tech giants with a name you recognize may seem like a safe and reliable choice. However, like with anything, the more recognizable, typically the more expensive and expensive doesn’t always mean better. Because of their size, large software companies can create and offer a contract management system, but it may not be their focus, and thus not have the functionality that you need.
- Since large companies have been around a long time, they also may be offering a system that was developed years ago and is now using outdated technology. Getting tech support from a large company may be more difficult as well, as they have larger volumes to deal with and more challenges with customer support and retention. This isn’t to say that a large company can’t possibly have the product you need - but rather that you should still go through due diligence with them as you would with a smaller, less well-known company.
The Cost of Not Using Contract Management Software
71% of companies couldn't find at least 10% of their contracts according to a report in the Journal of Contract Management. Evaluating and purchasing a contract system may seem like a daunting task, but consider what your company stands to lose if you don’t.
How much time are you wasting looking for contracts, chasing down approvals, or redoing lost revisions? What does it cost your company to miss a renewal or replace a lost contract? And the longer you wait to transition to a software solution, the bigger a task it will be as documents accumulate and your company grows.
We hope that this post has given you a good starting point to begin your evaluation process and bring a true value-add to your company with a contract management system that fits your business and your budget.
Are there any hidden costs that you've found while looking for contract management software? Let us know in the comments below, and don't forget to calculate your potential document management savings with our ROI Calculator!