Category Archives: contract management

Contract Lifecycle Management VII: Do You Know What The Nice-to-Haves Are?

In Part I of this series, we argued that CLM, short for Contract Lifecycle Management, while arguably one of the most humdrum acronyms in the Supply Management space, is also one of the most important. This is because, as summarized in Part III of this series, it overlaps S2C, P2P, and, as a result, S2S/S2P as well as intersecting with risk management, performance management, change management, and supplier (relationship) management. In other words, CLM touches almost every aspect of Supply Management and is taking a central place in your Supply Management organization.

However, as noted in previous posts, up until now, CLM has not been well defined and the best definition, which could arguably be that given by Gartner (see Part I), has been, more or less useless, because you already know proper CLM is a good process supported by a great platform. What you need to know is what that platform is as vendors, analysts, peers, and even professional organizations don’t, or won’t, tell you. That’s why, in a landmark effort, Sourcing Innovation and Spend Matters, as the two leading independent authorities on Supply Management, led by the doctor, the maverick, and the prophet, have joined forces to define, publicly and openly, the core Supply Management platforms, starting with CLM.

In prior posts we elucidated the need for a core CM (Contract Management) platform because traditional Supply Management platforms aren’t enough, in Part V we outlined the must-have core capabilities of a CM platform, and in Part VI we discussed the should-have capabilities that should be mostly present in any market-leading contract management platform.

Today we are going to outline all of the nice-to-have capabilities of a contract management platform, discuss a couple of them, and then refer you to “The Extended Contract Management Platform”, part seven of the landmark ten-part series co-authored by the doctor, the maverick, and the prophet over on Spend Matters Pro [membership required], for an in-depth discussion of each nice-to-have capability.

To make sure there is no confusion, a nice-to-have capability is a capability that, while not present in most solutions, can greatly increase the power, usefulness, and even the value of a Contract Management solution to your organization.

The following capabilities are defined as nice-to-have:

  • Contract Negotiation with Complex Pricing Support
  • Budget Management
  • Asset & Resource Management Tracking
  • License Management
  • Discrepancy & Sanity Checks
  • Violation Detection
  • Full Analytics
  • Contract-Based Project Management
  • Multi-Tier Contract Management
  • Process Integration with Sourcing, SRM, & GRC Platforms

As with the set of core and should-have capabilities listed in our previous posts, most of these you probably expect, and for some of these you probably have a fairly good idea why (even if you are not sure exactly what functionality is required for a proper implementation), but one or two of these are probably unexpected, including budget management and integration to 3PM/SRM (Third-Party Management / Supplier Relationship Management) & GRC (Governance, Risk, and Compliance) platforms. We’ll discuss budget management in this post, but refer you to The Extended Contract Management Platform, part seven of the landmark ten-part series over on Spend Matters Pro [membership required] for complete details on the other capabilities.

Budget Management is important because while spending should be against, and is supposed to be measured against, budgets, budgets are typically entirely disconnected from the Sourcing and Procurement process as they are created in the Finance system and typically not captured in most Sourcing and Procurement systems. However, once a contract is created, all spending on that contract needs to be tracked against the budgets that are impacted. Performance from Finance’s view is that not only is all spending covered by the contract made on contract at contracted rates, but that the impacted budget categories are also respected. If the contract is for office supplies, computing equipment, consulting services, etc., then just because all of the orders and invoices are compliant against the contract, it does not mean that the budget is being adhered to. If a department’s budget for office supplies is $10,000 and the department orders $20,000, it doesn’t matter if the savings was 20% if the department spent 100% more than they were supposed to. And since Contract Management naturally overlaps Finance, it’s a perfect place for budget management capability.

However, every other nice-to-have capability listed above could be just as valuable to an organization, and to understand why, and what the platform has to support with respect to those nice-to-have capabilities, check out The Extended Contract Management Platform over on Spend Matters Pro [membership required], part seven of the doctor, the maverick, and the prophet‘s landmark ten-part series fully defining CLM.

Contract Lifecycle Management VI: Do You Know What The Should-Haves Are?

In Part I of this series, we argued that CLM, short for Contract Lifecycle Management, while seemingly one of the most bromidic acronyms in the Supply Management space, is also one of the most important. This is because, as summarized in Part III of this series, it overlaps S2C, P2P, and, as a result, S2S/S2P as well as intersecting with risk management, performance management, change management, and supplier (relationship) management. In other words, CLM touches almost every aspect of Supply Management and is taking a central place in your Supply Management organization.

However, as noted in previous posts, up until now, CLM has not been well defined and the best definition, which could arguably be that given by Gartner (see Part I), has been, more or less useless, because you already know it’s a good process supported by a great platform. What you need to know is what that platform is as vendors, analysts, peers, and even professional organizations don’t, or won’t tell you. That’s why, in a landmark effort, Sourcing Innovation and Spend Matters, as the two leading independent authorities on Supply Management, led by the doctor, the maverick, and the prophet, have joined forces to define, publicly and openly, the core Supply Management platforms, starting with CLM.

In our previous posts we elucidated the need for a core CM (Contract Management) platform because existing Supply Management systems weren’t enough, and then, in our last post (Part V), we outlined the must-have core capabilities of a CM platform, as discussed at great length in “Core Contract Management” over on Spend Matters Pro [membership required], Part V of the doctor, the maverick, and the prophet‘s landmark ten-part series fully defining CLM.

Today we are going to outline all of the important should-have capabilities of a contract management platform, discuss a couple of them, and then refer you to “The Standard Contract Management Platform”, part six of the landmark ten-part series co-authored by the doctor, the maverick, and the prophet over on Spend Matters Pro [membership required], for an in-depth discussion of each should-have capability.

To make sure there is no confusion, a should-have capability is a capability that, while not absolutely required, significantly impacts usability and performance by the absence of these features and most industry leading contract management solutions will support the majority of these capabilities to some extent.

The following capabilities are should-have:

  • Clause Library
  • Full Text Search & (Legacy Contract) Discovery
  • Collaborative Creation
  • (Fine-Grained) Roles Based Security
  • Contract Workflows
  • Rules Management
  • Contract Authoring via Rules-Based Contract Builder
  • Schedule & Rate Card Support
  • e-Signatures
  • Task Management / Tracking
  • Event Monitoring & Issue Escalation
  • Corrective Action Management
  • Dashboards and Contract Analytics
  • Native Integration to MDM Platforms

As with the set of core capabilities, most of these you probably expect, and for some of these you probably have a fairly good idea why (even if you are not sure exactly what functionality is required for a proper implementation), but a few of these are probably unexpected, including Corrective Action Management and Native Integration to MDM Platforms. We’ll discuss these two capabilities, but refer you to our in-depth piece on “The Standard Contract Management Platform” over on Spend Matters Pro [membership required] for coverage of the rest. (But the must-have, should-have, and nice-to-have function lists will be made, and remain, public as they are the common measuring stick that both Spend Matters and Sourcing Innovation will be reviewing and measuring vendors against going forward.)

Corrective Action Management is critical because issues will always arise during contract execution and they will not always resolve themselves or be resolved by the supplier. And while the organization may have a process for dealing with issues, and even a platform for doing so, those actions have to relate to, and be mapped back, to a contract to not only insure that both parties meet their obligations and performance hits necessary levels, but that resolutions are tracked and performance, pre-and-post issue resolution, is tracked and measured appropriately. After all, not all value in a contract is in the price list — sometimes it’s in the value-add, sometimes it’s in the staff augmentation, and sometimes it’s in the innovation.

Native Integration to Master Data Management (MDM) platforms is important because contracts are with approved suppliers on approved items and services under a well-defined categorization for agreed upon prices and delivery dates. All of this data is defined in existing systems, and much of it (with the exception of agreed upon prices and delivery dates) can come from the Master Data Management [MDM] system (which is generally the ERP, but could be a Sourcing or SRM platform with MDM capabilities). If the integration is not there, then a lot of information has to be manually rekeyed, which introduces considerable opportunity for error that can result in agreements for higher-than-negotiated pricing, slack delivery arrangements, or data miscategorizations that will result in erroneous spend analysis down the road. (Approximately one in one hundred keystrokes is erroneous, and this is one of the reasons that 88% of Your Spreadsheets are Garbage.)

However, every other should-have capability listed above is just as critical to usability and performance, and to understand why, and what the platform has to support with respect to those should-have capabilities, check out “The Standard Contract Management Platform” over on Spend Matters Pro [membership required], part six of the doctor, the maverick, and the prophet‘s landmark ten-part series fully defining CLM.

There’s Nothing Wrong With Using Upstream vs. Downstream

Only with trying to fix a continuous process to a discrete point in time.

Confused? Let’s back up. Last Friday the doctor‘s co-conspirator in the definition of Contract Lifecycle Management (CLM) went on a rant about the use of upstream and downstream without a paddle in contract management. In his Friday rant, the maverick claimed that if you put supplier management in the upstream bucket, you’ve violated the whole naming convention and that upstream can have a time dimension to it and represent earlier processes, but it can also have a supply chain connotation and represent multiple tiers farther upstream in the inbound supply chain – working back to raw commodities. So, it’s confusing in that regard in terms of time vs. space. However, the maverick‘s biggest gripe seems to be it puts the signature of the contract artifact as the singularity of the procurement universe – sort of like using B.C. and A.D. to define world history to non-Christians.

So what? We need a way to measure time and a milestone against with to measure progress.

As humans, we don’t know exactly when we first evolved (or, if you follow a religion based on a form of creationism, were created), so we can’t choose that date as a reference point for a precise timeline. We barely have decent records back to 0 AD, and if we go back more than a few hundred years beyond that, we don’t really have enough to establish a good date system. So the date chosen is just as good as any other date during that period.

Similarly, if you look at the full contract lifecycle, just when does the project start? When is the first analysis or opportunity identification performed that leads into the business case. Hard to say. We know the date a sourcing project is approved, but just like 0 AD, before that gets a bit fuzzy, but there could still have been significant events that led to approval which are really part of the Procurement process and which should not be overlooked just because a date can’t be fixed. Similarly. When does it end? The date the contract officially finishes? The date the post mortem is done? The date a new contract is signed? The date the switchover actually occurs to a new supplier? The date the supplier is officially retired from organizational service? Hard to say.
So choosing the date of signing as a reference point is a logical choice for dividing up the process and English commonly uses the same word to mean different things in different contexts so there’s no reason it shouldn’t be clear when someone is talking about upstream in the contract/category management process and upstream in the supply chain. (After all, we live with sourcing and sourcing in Procurement is much different than sourcing in HR.)

In other words, the definitions make sense and since they are now commonly accepted, let’s not bicker about how they are defined but about how some providers and analysts tend to misuse them by trying to fix-point activities that actually need to occur throughout the process, like category management, supplier management, compliance management, and risk management. Use upstream and downstream to indicate when particular activities in a process should occur, not to categorize processes that exist simultaneously with the contract lifecycle, and that build off of the primary artifact, the contract, in new and interesting ways (when done right).

Not everything fits in a one or two dimensional model, and we need to be prepared to accept the true complexity of the situation. That’s why many tenders these days are complex and why organizations that don’t have spend analysis can’t identify the inherent complexity and why organizations that don’t have strategic sourcing decision optimization can’t adequately deal with the complexity. Just like the world is not flat, neither is the sourcing model or the necessary execution process that follows. A spreadsheet won’t cut it and neither will point-in-time processes. However, we still need fixed points in time to measure against (forward and back), and at least the date a contract is signed is a point in time everyone across all departments in the organization can agree on.

Contract Lifecycle Management V: Do You Know What The Must-Haves Are?

In Part I of this series, we argued that CLM, short for Contract Lifecycle Management, while arguably one of the most tedious acronyms in the Supply Management space, is also one of the most important. This is because, as summarized in Part III of this series, it overlaps S2C, P2P, and, as a result, S2S/S2P as well as intersecting with risk management, performance management, change management, and supplier (relationship) management. In other words, CLM touches almost every aspect of Supply Management and is taking a central place in your Supply Management organization.

However, up until now, CLM has not been well defined and the best definition, which could arguably be that given by Gartner (see Part I), has been, more or less useless, because you already know it’s a good process supported by a great platform. What you need to know is what that platform is as vendors, analysts, peers, and even professional organizations don’t, or won’t, tell you. That’s why, in a landmark effort, Sourcing Innovation and Spend Matters, as the two leading independent authorities on Supply Management, led by the doctor, the maverick, and the prophet, have joined forces to define, publicly and openly, the core Supply Management platforms, starting with CLM.

In our last post in this series we discussed that neither sourcing nor procurement were enough because Contract Management, the core platform powering CLM, is not (traditional) Sourcing, which is the process of identifying a source of supply. Nor is it (traditional) Procurement, which is the process of acquiring products and services that have, in many cases, already been contracted for. Contract Management is the end-to-end negotiation, execution, and implementation of contracts that also supports performance, compliance, relationship management, and, when it happens, dispute management and corrective actions. And as a result, it requires a platform with the right mix of core and supporting capabilities. In today’s post we’ll list the core capabilities and discuss a couple of them, but for the full picture, you’ll need to check out our in-depth piece on Core Contract Management over on Spend Matters Pro [membership required].

The following capabilities are core:

    • Contract Library (& Document Archival)

    • Template Management

    • Key Contractual Data Element Search & Discovery

    • Tamper Protection for Signed Documents

    • Security

    • Amendment Control / Change Management

    • Audit Trails

    • (XML) Data Import & Export

    • Contract / Document Authoring / Versioning

    • Obligation Management

    • Alerts

    • Reporting

    • Expiry & Renewal Management

Most of these you probably expect, and for some of these you probably have some idea why, but a few of these are probably unexpected, including expiry management and obligation management. We’ll discuss these, but refer you to our in-depth piece on “Core Contract Management” over on Spend Matters Pro [membership required] for coverage of the rest. (However, the must-have, should-have, and nice-to-have function lists will be made, and remain, public as they are the common measuring stick that both Spend Matters and Sourcing Innovation will be reviewing and measuring vendors against going forward.)

Most people overlook the importance of contract expiry and renewal management because they figure that once a contract is over, it’s over, and no longer needs to be managed. That’s only the case if the contract is truly over, there are no future obligations, and, most importantly, the contract doesn’t automatically renew unless explicitly cancelled in writing. Without a good contract management system with auto-renew detection and expiry management, many organizations suffer evergreen contracts that lock them into above-market rates for outdated and inferior products because they don’t realize an evergreen contract exists until after the final date for termination has passed and they are locked in for another one to three years. Maybe your buyer got tired of constantly negotiating the office supplies contract and believed that getting 20% off of MSRP was a smashing success and locked in an auto-renew clause that said, if not cancelled in writing by the buying organization within 30 days of contract expiry, the contract would auto-renew for another year, under the same terms and conditions, at the same rates. But if the buyer, who didn’t do his homework very well, didn’t realize that the MSRP rates were 40% more than the vendor’s cost, then the vendor is, of course, going to let this contract coast forever (especially since the organization is providing double his typical profit margin as compared to his big GPO clients that negotiated 30% off MSRP), and the organization will likely be automatically locked into a renewal that is costing it an extra 10% on office supplies.

Similarly, most buyers or category owners often feel that obligations are the responsibility of the supplier, so obligation management isn’t that important. But even if everything is the responsibility of the supplier under the contract, it is still up to the buyer to insure that the supplier meets their obligations. Specifically, if there are insurance requirements then the buyer has to make sure the right policies are in force (or risk opening his organization up to multi-million dollar lawsuits). If there are compliance requirements, the buyer has to make sure that the right tests, reviews, or approvals are in place before the products are shipped or sold (or risks goods being delayed, seized, or even destroyed at the border). And if the organization needs to acquire, or renew, licenses to meet its end of the contract, it has to make sure it does so at the right time (or risk losing access to critical IP or software tools).

And even though we only called out renewal and obligation management, each and every other core capability listed above is just as critical and to understand why, and what the platform has to support with respect to that core capability, check out
Core Contract Management over on Spend Matters Pro [membership required], Part V of the doctor, the maverick, and the prophet‘s landmark ten-part series fully defining CLM.

Contract Lifecycle Management IV: Neither Sourcing Nor Procurement Are Enough.

In Part I of this series, we argued that CLM, short for Contract Lifecycle Management, while arguably one of the most blah-blah-blah acronyms in the Supply Management space, is also one of the most important. This is because, as summarized in Part III, it overlaps S2C, P2P, and, as a result, S2S/S2P as well as intersecting with risk management, performance management, change management, and supplier (relationship) management. In other words, CLM touches almost every aspect of Supply Management and is taking a central place in your Supply Management organization.

We also argued that while the common definition of CLM was correct, as it stated that CLM required the right processes and the right platforms to support those processes, it was not useful because while an average organization has a decent understanding of a good contracting process, it does not have a good understanding of what the right platforms are to support them.

Why? Because most organizations don’t have anywhere to turn for a good, solid, stable definition of what a good supporting CM system is. Vendors only educate on their platform. Analysts only educate on the definition that is common across the cross-section of the market they are covering. Peers can only educate you on what they have, which might have been chosen randomly. And professional organizations stay out of the mix by focussing on process.

That’s why for the first time, Sourcing Innovation and Spend Matters have come together in a joint effort led by the prophet, the maverick, and the doctor to, once and for all, define the core Supply Management platforms, starting with CLM, the most misunderstood of the Supply Management misfits.

In our last post we asked if you knew where contract lifecycle management came from because one can’t move forward until one understands where the space is today, why existing platforms on their own (and Sourcing and Procurement platforms in particular) don’t meet all of an organization’s contract management needs on their own, and how what is out there now currently fits together.

That’s why “Part IV: The Traditional Platforms” of the landmark series over on Spend Matters Pro [membership required] by the prophet, the maverick, and the doctor examines all of the core Supply Management platforms out there today: e-Sourcing, e-Procurement, 3PM/SRM (Third Party Management / Supplier Relationship Management), GRC (Governance, Risk, and Compliance) and traditional CM; describes their core capabilities; indicates how they address different parts of the contract lifecycle; and sets the stage for our discussion of what defines the core of a(n integrated) CM platform that actually meets an organization’s contract management needs.

One might be tempted to think that just because their e-Sourcing platform (or P2P platform) contains a Contract Management module, that their contract management needs are met, but nothing could be further from the truth. This is because Contract Management (CM) is not (traditional) Sourcing, which is the process of identifying a source of supply. As a result, such platforms mainly focus on contract archival and meta-data management, and maybe contract authoring, but contract management is more than authoring and signing, it’s also execution and implementation. It’s making sure each party meets their obligations, complies with identified regulatory requirements, minimizes risk, and collaborates when issues, or disputes, arise. Remember, contracts not being executed as intended is a large reason that 30% to 40% of savings identified during the sourcing process never materialize.

The situation is similar if you have a P2P system with a CM module, a 3PM / SRM platform with a CM bolt-on, or even a first generation CM solution that was written to please the lawyers and not the day-to-day buyers and relationship managers. (But to understand why, you’ll have to check out our full post on The Traditional Platforms over on Spend Matters Pro [membership required].)