5 Contract Relationship Management Pitfalls And Solutions

In this blog post, I will focus my analysis on the multi-billion-dollar global services outsourcing market serviced by matured outsourcers. Despite investments in technology, processes, people, and service offerings, they often lack the ability to manage their own contracts. Here is an analysis of some of the key gaps that, if bridged, may help outsourcers build relationships with rich dividends.

What Is Contract Relationship Management?

Contract Relationship Management refers to the ongoing process of managing the operational, financial, and strategic performance of a contract after it has been signed. Unlike contract lifecycle management, which focuses on the full lifecycle of a contract—from authoring to renewal—the contract relationship management zeroes in on post-signature performance, supplier accountability, and relationship health.

In large-scale outsourcing, where contracts govern complex multi-year service delivery, contract relationship becomes the foundation of trust, compliance, and mutual value realization.

Before we analyze the common pitfalls, let’s establish why contract relationship management deserves strategic attention—especially in high-value outsourcing agreements.

Why Contract Relationship Management Is Important

In global services outsourcing, the contract isn’t just a legal artifact—it’s a living guidebook for delivery, pricing, and partnership expectations. Without robust contract relationship management practices, even the best-negotiated contracts fall prey to inconsistent interpretations, missed obligations, and strained supplier relationships.

Effective contract relationship helps:

• Minimize value leakage through proactive performance tracking
• Maintain service levels through consistent obligation management
• Reduce conflict through shared contract understanding
• Enable relationship reviews grounded in facts and data

Strong CRM practices elevate the relationship from reactive management to proactive partnership building.

Despite its criticality, many suppliers struggle with operationalizing contract management practices post-signature. Let’s explore the top pitfalls that derail contract relationships—and how to fix them.

Understanding Contract Relationship Management 

Global outsourcers operate within complex, federated models. Customer relationships are often supported by numerous stakeholders, delivery centers across geographies, N-tier service models, and fragmented pricing structures—all stitched together under broad, multifaceted agreements.

While these models aim to strengthen the relationship P&L, they frequently fall short due to avoidable yet recurring pitfalls in contract relationship management.

Here are five such pitfalls that continue to hinder long-term value realization:

1. Poor Handover from Deal Teams to Governance Teams

Why it matters:
The transition from pre-signature to post-signature teams is where relationship misalignment often begins. There’s limited continuity between those who negotiated the contract and those tasked with managing it.

Symptoms:

• Inadequate transition frameworks and knowledge transfers
• No standardized training on legal terms, obligations, or interpretive guidelines
• Inconsistent understanding of SLAs, pricing bands, or ARC/RRC clauses

Example: Two supplier teams supporting the same customer may interpret identical service metrics differently, even when using the same tools—leading to trust erosion and reporting conflicts.

2. Weak Post-Award Contract Governance

Why it matters:
With multiple PMOs, finance leads, and commercial managers engaging with a contract throughout its lifecycle, gaps emerge when there’s no unified interpretation or platform to manage it all.

Symptoms:

• Fragmented contract knowledge across teams
• Dependency on informal knowledge transfer amid team attrition
• Cracks in performance monitoring due to varying interpretations

Fixing it:
Strategic deal governance needs sustained coaching, structured documentation, and technology that enables a single source of truth across the contract’s lifecycle.

3. Overemphasis on Legal Risk Terms During Negotiation

Why it matters:
Too much focus on legal protections and risk containment during contract negotiations can distract from setting clear terms around scope, outcomes, and service performance.

Symptoms:

• Legal and procurement teams prioritize risk clauses over relationship-enabling clauses
• Frequent disputes arise over “what’s in scope” or how credits should apply
• Misalignment on commercial terms and SLAs rooted in margin-protection, not data-backed realities

Insight: Gross margin obsession often trumps value creation, resulting in defensive relationships instead of collaborative ones.

4. Lack of Internal Performance Benchmarks

Why it matters:
Without benchmarking performance across similar engagements, suppliers enter deals without a clear sense of operational thresholds or pricing confidence.

Symptoms:

• Taking on stringent SLA penalties or aggressive credit terms without due diligence
• No access to empirical data to inform negotiation positions
• Inability to validate service feasibility or delivery costs

What’s needed:
A centralized performance intelligence framework—tracking delivery, pricing, and penalties across deals—to guide future negotiations with clarity.

5. Limited or Misaligned Technology Adoption

Why it matters:
Legacy SLM or CLM tools, while helpful in basic obligation tracking, often fall short in supporting strategic deal governance and relationship health.

Symptoms:

• Solutions act as static repositories rather than intelligent governance tools
• No consolidation of service performance data or pricing validation
• Inability to normalize data across contracts for strategic decision-making

Reality check: Simply implementing a CLM tool isn’t enough—especially if it can’t handle the layered complexities of service contracts, rebates, or consumption-based billing.

Closing the Gap

Once you’ve identified these pitfalls, the path to improvement starts with embedding contract relationship management into your operating model—through skilled handovers, performance benchmarking, and technology that supports strategic governance.

To operationalize these insights, use this checklist to strengthen your contract relationship management practices and close the gaps before they become costly.

Checklist: Building a Strong Contract Relationship Management Framework

• Align pre- and post-signature teams with structured handover processes
• Train governance, delivery, and finance teams on contract interpretation
• Establish a single source of truth for price books, obligations, and SLAs
• Implement a CLM platform that supports complex service-based contracts
• Consolidate operational data to create internal benchmarks
• Schedule recurring contract and relationship health reviews
• Link contractual terms to actual service performance metrics

Embedding these practices into your operating model turns contract governance into a scalable, value-generating discipline—not just a compliance checkbox.

With these structural improvements and consistent governance in place, suppliers can shift from managing friction to building trust and delivering long-term value.

Putting It Into Practice

All the above factors lead to an ever-widening gap in trust between the customers and suppliers and instead of earning relationship dividend, suppliers stare into a strained relationship trying to repair it through band-aids. Customers start asking the question of value realization against the business case.

Empirical data at Sirion shows over 9% of value leakage results from such inadequate strategic deal management functions. Invoicing errors range from consumption errors, unmanaged contract errors, computation-led errors, and unmanaged credits and rebates are core to such leakages. The impact of longer cycle times and its impact on DSO often only adds to the woes of the suppliers.

Global outsourcers have achieved scale where internal business services (read GBS) led organization restructuring may include strategic account management functions. Along with finance, HR, and other horizontal functions, strategic deal and contract management functions will bring dividends through the use of common technology, processes, and skills.

So as much is the need for building skills on newer technologies, creating new-age value propositions, to solve customer problems, so is the need for respecting your own contract. As outsourcers crave to build “relationships beyond the contract” – it would not harm to start with first understanding your contract.

Contracts don’t restrict relationships—they define them. And when understood and managed well, they elevate them.

Frequently Asked Questions (FAQ)