SharePoint for Contract Management: Why It Falls Short

Many companies still manage contracts in SharePoint, putting a large share of their legal work on a system that was never built for the job. Often they do not realise how costly and time-consuming this becomes — or that SharePoint is a poor fit for scaling the contract process and making it more efficient.

SharePoint is best known as a collaboration and document-management system. It is not a solution built for large-scale contract management. That is exactly where growing teams hit a wall that folders and metadata alone cannot break through.

Before we dig into the detail, a few questions worth considering:

• Can SharePoint be used for contract management — and how well does it handle large volumes of contracts?
• Can SharePoint serve as a sales-support tool to close deals faster?
• What are the risks and hidden costs of SharePoint?
• What alternatives are there for managing contracts?

"SharePoint is a complete mess. If you had to compare it to a car, the only fair comparison would be that both are unsafe, inefficient and slow." — The average SharePoint user

The quote is deliberately harsh, but it lands on something true: SharePoint is a popular and, in many areas, useful tool — yet for managing contracts at scale it is simply inefficient. And a system that slows the contract process at every stage does not help companies build valuable business relationships. That is what this article is about.

What Is Inefficient Contract Management?

Inefficient contract management is a contract process that results in lost revenue and high spending on administrative tasks. Anyone who has tried to negotiate — and keep track of deadlines — with an outdated system knows the frustration that comes with it.

The most important symptoms of a broken contract process are:

• Inconsistent compliance. Sales teams want to close faster with standardised templates and predefined clauses, without looping in legal for every detail. When there is no framework for that, the whole negotiation process slows down.
• Lost revenue. Companies that cannot meet compliance requirements and mitigate risk lose real money. According to World Commerce & Contracting, poor contract management costs companies roughly 9% of their annual revenue. In a separate analysis we identified a plausible culprit: the mishandling of contract renewals.
• Painful negotiations. Friction builds up between departments such as legal and sales, through endless queries and a negotiation process that never seems to end.

If you want a deeper look at how poor contract management affects revenue, compliance and sales, read on here: The costs of poor contract management.

Why Isn't SharePoint the Best Option for Contract Management?

With SharePoint it often takes 6 to 12 months to get everything set up — and even then the expected benefit is not guaranteed. Because the software ships with no ready-made framework for contract management, adjustment problems are common. Setup involves tasks such as configuring workflows, modelling data from past contracts and standardising contracts with templates.

With top.legal, by contrast, setup usually takes no longer than 14 days. Our software is built to manage contracts and get the most out of them — we are deliberately not a document-management solution. The goal is to help you build strong business relationships and close deals much faster, without heavy IT spending.

Some of the steps we take to deliver value quickly:

• Identify templates and analyse your situation
• Determine the most important parameters and variables
• Automate your process with contract templates
• Create a human signing experience for all parties — as opposed to the clunky black-and-white process in tools like MS Word
• Continuously evaluate and improve your contract process

Here are seven key reasons why SharePoint is not a suitable solution for contract management.

1. Version control is too imprecise

Some claim version control is SharePoint's strongest feature, but it is far from good enough for managing contracts. An e-learning company with more than 500 employees found there was "no good built-in system for version tracking, apart from the file names users give the documents — which are often inconsistent or completely inaccurate." When you cannot see which changes were made, and when, you lose control over past contract versions.

The storage and versioning features of dedicated contract management software far surpass those of SharePoint. What a purpose-built solution also gives you:

• Internal and external negotiations. Internal alignment often costs sales leaders time and money because discussions never end. According to Harvard, well-run internal negotiations are a decisive success factor for external ones.
• A fully digital workflow with advanced eSignature. An eSignature solution alone is not enough to improve the contract process and team collaboration. Purpose-built software combines signing with the rest of a contract management system's features into one continuous digital workflow.
• Granular user management. Control access to individual contracts, add internal and external comments, pull in management and legal for targeted approvals, receive updates from counterparties, and decide who may add signatories.

2. No intuitive interface

SharePoint was released more than two decades ago, in 2001. Since then it has gained more storage, broader file support and some accessibility and design improvements — but little has changed about its underlying complexity in day-to-day use. The main reason it remains popular is that it is not easy to find an enterprise-grade contract management solution at a comparable price.

3. Free-text search quickly becomes a mess

This is not a simple search problem you fix by disabling a feature or correcting a permission. The cause runs deeper: classic folder structures lack the functionality to reliably find contracts again. A sensible search should at minimum offer:

• Intelligent tagging and the ability to find contracts quickly through advanced search across contract data such as term, counterparty or contract value.

4. Not suitable for larger organisations (hard to scale)

Is SharePoint scalable or not? It is one of the most common questions from teams assessing whether it fits their organisation. As this article explains, scaling always involves a trade-off: performance at the cost of scalability, or scalability at the cost of performance.

Two reasons SharePoint scales poorly:

• The architecture must be implemented correctly across multiple servers for SharePoint to scale at all. Over time this leads to unpredictable costs for servers and IT expertise.
• With a large volume of small and medium-sized files, the file system becomes a performance bottleneck. Very large data volumes can cause serious performance problems if not handled carefully.

"Fools ignore complexity. Pragmatists suffer it. Some can avoid it. Geniuses remove it." — Alan Perlis

5. Setup is laborious

If you opt for an on-premise SharePoint deployment, you are dealing with a demanding architecture. You have to answer questions such as: How many servers do you need? How much data must you process? How much storage do you have on your SQL servers?

Once you factor in disk space, the cost of the Windows operating system per server, plus SharePoint licences and storage, setting the system up becomes expensive and drawn-out.

6. Weak collaboration (on par with Google Drive)

"Despite Microsoft's best attempts to position the SharePoint platform for content and collaboration, many people still see it as a platform for managing business processes." — Forrester report, "Finding The Sweet Spot"

Forrester acknowledges that SharePoint is widely used for collaboration, but concludes this is by no means its most important use case. Other workloads — such as application development and business intelligence — matter more.

The problem with SharePoint and similar tools like Dropbox, Google Drive and Google Docs: as soon as you need to manage contracts and keep them accessible, you end up with a dysfunctional system in which past contracts are hard to find.

7. Administration and access security are a nightmare

Many of SharePoint's modern settings around security restrictions and hierarchy are hard to manage, and anonymous users are sometimes granted broad access by default.

A few examples:

• Members of a group get edit-level access by default. That lets them do all sorts of things, up to deleting content. Create a team site, and in effect the whole company can access it.
• Organisations quickly become cluttered when, for example, every user can create groups.
• Global administrators cannot make every important change within a group; the SharePoint Admin Center offers only limited access to storage-management information.
• Many administrative functions still live in the classic admin center, so you constantly switch between views.

As one user put it: "You can't build a company intranet with Microsoft Teams or OneDrive. They aren't meant for that. Both just create endless silos of information."

If you have been using SharePoint as a stopgap for your contracts, it is worth comparing it against purpose-built tools. Our comparison of the best contract management software shows which solution fits your team.