WHITE PAPER Better Contract Management: Less Paper, More Connections How do I get off the paper chase? The top priorities for busy purchasing executives are improving efficiency, reducing costs and building relationships relationships with suppliers and with other people in their organization. How can improved contract management help achieve those goals? By enabling faster processes, with fewer errors and more consistency. By developing a collaborative exercise that helps build relationships. And by making sure there are no misplaced contracts. OVERVIEW Let s face it. In boardrooms across the nation, contract management is rarely at the top of the agenda. At best, it s a routine process; at worst a menial task. But contracts are the underpinning of higher value fundamentals that are significant to the core of the enterprise. They clarify and define important business relationships. They set out hard-earned terms and conditions. And managing them properly can provide a critical competitive advantage. 1
Ineffective control and management of supplier contracts cost businesses $153 billion per year in missed savings opportunities. - Aberdeen Group. From negotiating terms, to coordinating with legal, to chasing signatures and filing the signed contract where it can be easily accessed, contract management is a time-consuming, costly process. Outdated tools and methods like simple spreadsheets to track dates and terms are common but they simply aren t up to the task. Without some centralized system, even finding the signed contract can be a challenge. The reality for many businesses, although few are willing to admit it openly, is that most contracts are stored in people s email inboxes. alert It s 3pm on a Friday and the audit team is in the boardroom. DO YOU KNOW WHERE YOUR CONTRACTS ARE? Rethinking Contracts The past decade has seen a revolution in the role of contracts transforming them from purely legal necessities for protecting against worst-case outcomes, into tools for optimizing ongoing business relationships. The way they are managed must be transformed too. (PriceWaterhouseCoopers) 1 The digital revolution and social media have played a major role in shifting corporate mindsets about the very nature of business, with new views on better ways to maximize opportunities. In the past, relationships with suppliers were largely viewed as adversarial where the purpose was to secure a vice-like grip on the vendor to extract the most for the lowest price. Today, however, there is larger value placed on building deeper, long-term relationships. Collaboration is at the center of that shift. 2
And it s not just outside relationships either. According to IBM s 2013 global survey, 65% of Chief Procurement Officers (CPOs) identified internal collaboration as a vital requirement for success, but only 15% of procurement functions were rated as top performers. Procurement professionals know that, in their role, the human element is a major success factor. While they have the skills to achieve that success, however, they haven t had the tools to get there. Rise of the CPO The role of the purchasing executive is transforming. No longer simply a discount negotiator, these managers and executives are taking stronger leadership roles within their organizations. They re focusing on higher-level strategies and innovation with more communication and more interaction, both inside and outside the organization. To transform the supply chain, companies need to have a strong desire for internal and external collaboration, says Sundi Aiyer, principal and Americas supply chain operations capability leader, Capgemini US, Dallas. Transformation cuts across departments and areas of focus within a company. It also usually links with the extended enterprise, such as key suppliers, customers, and channels. 2 New technology and tools can actually set the foundation for new ways of working together, where values like collaboration and relationship and innovation are more than just cool words. Ask yourself this: Are you managing a contract or building a relationship? 1 Contract management: control value and minimize risks, PriceWaterhouseCoopers, http://www.idii.com/wp/membapwcontractmgmt.pdf 2 Innovation: A Fresh Eye on the Supply Chain, Harps, Inbound Logistics, January 2006 3
The Options: From E-Signatures to Online Collaboration There are three general categories of contract management technology solutions: 1. Electronic signature solutions 2. ERP systems 3. Cloud-based contract solutions 1. Electronic signature solutions (e-signatures) are some of the more basic tools available. They are designed to eliminate three steps in the contract process: printing, signing, and faxing or scanning. Click to sign paved the way for legislation in many countries including the US, Canada, the European Union and Australia that confirms the validity of e-signatures for legal, binding documents. Although they ease a portion of the process, however, the bulk of the work still remains: generating the contract, reviewing/editing/ approving from various team members on all sides, negotiating and managing the contract. E-signature tools by themselves usually do little to enable data flows, workflows or sharing and managing contracts through their full lifecycle. checkmar close Pros: Cons: Easy to use; widely accepted for use. Designed for sending a contract for signature; limited or no opportunity for advanced editing, comments, negotiation and collaboration. Limited or no post-contract search and retrieval functions. 2. Integrated systems that include a combination of any or all of these systems CRM (customer relationship management), CLM (contract lifecycle management) and ERP (enterprise resource planning) are often an option considered by large enterprises. These types of systems are multi-layered in complexity and deep in scope. However, the time and costs 4
involved with implementing an enterprise-wide process is a massive understanding and major investment. For large enterprises that choose this option, the return on a massive investment can be difficult and sometimes impossible to adequately measure. checkmar close Pros: Cons: Fully integrated solutions customized to enterprise use. A long-term enterprise-wide project with multiple stakeholders; extremely high costs. 3. Cloud-based contract solutions are new online tools that give organizations the ability to solve problems faster, easier and more affordably. Many of them also take things up several notches by focusing on user experience on the front end and sophisticated analytics on the back end, allowing businesses to have visibility into the entire lifecycle of each and every contract. These solutions provide a centralized repository for contracts so they can be accessed anytime, anywhere. Ultimately, these versatile technologies give companies an opportunity to work smarter together engaging with internal teams and suppliers in the kind of collaborative environment that helps drive innovation. checkmar close Pros: Cons: User-friendly; fast implementation; low costs; no capital investment. Requires adoption of cloud-based technology in general. Cloud Cover: Common Questions cloud While businesses of all sizes and industries are rapidly adopting cloudbased services, some businesses continue to grapple with concerns about security, privacy and reliability. 5
Security and privacy. lock If you re relying on a cloud-based service to back up and store valuable files and information, it is important to know exactly where your data is being stored. Different countries have different levels of privacy controls. Reputable cloud-based services will be able to provide detailed information so you can assess the fit for your organization. Reliability. filecabi The best solutions offer complete disaster recovery and impressive uptime numbers that are even better than the servers most businesses are using on their own. Make sure you ask questions about the specifics. Most companies are surprised to learn that servers used by cloud-based technologies are more reliable than their own. 5 Steps to Building a Business Case for Contract Management 1. 2. Assemble a team. Identify the business divisions that are involved: procurement, legal, finance and operations, technology and executive management. Assemble a small cross-functional team including colleagues from each division to begin a collaborative process of review and assessment. Consider including a representative from one or two established suppliers to bring valuable perspectives and reduce the risk of inside thinking. Define the current issues. Determine which issues can be resolved by having a streamlined contract process. For example: Legal - more visibility into the process, better compliance and reduced risk 6
Procurement - reduced costs, more productivity, faster turnaround, better teamwork, improved supplier relationships Finance and Operations - easier access to the correct version and visibility for audits Technology - functional integration, less time and lower costs to support users Management - achieving a competitive edge through efficiencies and an improved bottom line; enforcement of corporate policy 3. Define the current issues. OPTIONS Create contract Integration with Collaborate Negotiate and edit E-sign Store Find Time to set up Cost systems E-Signatures checkmar checkmar checkmar Fast Low ERP checkmar n/a checkmar checkmar Cloud checkmar checkmar checkmar checkmar checkmar checkmar checkmar Slow High Fast Low 4. Identify the solution that meets your needs. The types of features required will vary, but at a minimum you should expect: Centralized, highly secure, searchable contracts repository Ability to create and design contracts, either by importing documents or creating new templates Controlled permissions for reviews, editing and approvals with custom workflows Negotiation and collaboration features, with the ability to add schedules and attachments Automated reminders to keep contracts on track Encrypted electronic signatures for faster completion Status dashboard for visibility into the entire process Tracking mechanism for versions, with reporting on who made which changes Ability to integrate and sync with other systems (such as CRM or financial systems) 7
5. Choose metrics to measure. Choose the metrics that are most significant to your department and your organization, for example: Reduction in time and effort to complete contracts Savings in time and costs to chase down the correct signed version Number of contract renewals by default with missed opportunities for assessment Auditability of the contract lifecycle, from collaboration to review and renewal Finally, although hard to measure, consider the impact of collaboration for your organization. It s more than just playing nice in the sandbox. Companies are moving towards collaborative business practices because it s a smart thing to do. It saves time. It saves money. It builds stronger relationships. It might be more difficult to measure that impact, but you know it s there. Idea In Brief Purchasing executives continue to struggle with inefficiencies in their contract management practices; As the role of purchasing executives evolves in today s collaborative business environment, they are looking for new ways to automate routine processes, reduce costs and free up time for higher-level contributions to the enterprise; There are three main options for contract management: e-signature solutions, large-scale enterprise resource planning (ERP) software and new cloud-based collaborative tools. Each of these solutions has its pros and cons. E-signatures are fast and inexpensive but they only solve a part of the problem. ERP systems are comprehensive, but expensive and time-consuming to implement. Cloud-based collaborative solutions are versatile, fast and affordable, offering significant opportunities for forward-thinking businesses that have adopted cloud solutions. 8
About Contact Contractually makes it easy and fast to get contracts done. Email: Twitter: sales@contractual.ly @contractually We re a powerful cloud solution for companies who wish to dramatically reduce the time, complexity and effort around getting contracts done. Facebook: LinkedIn: /Contractually Contractually Contact us to learn more. Visit us at: www.contractual.ly 9