Category Archives: contract management

Contract Lifecycle Management 2015 (Consolidated Links)

Contract Lifecycle Management — Do You Have Your Platform and Process in Place?

By now you should, especially since 8 parts of the doctor‘s and the maverick‘s series on Contract Lifecycle Management (CLM) have been up for your reading pleasure over on Spend Matters Plus (registration required) since October, but if you don’t yet have it in place, now’s a good time to review the current series end-to-end and get a grip on what your platform should contain.

While contract management is not new, and many first generation platforms have been including contract management modules since the late noughts, many features of next generation contract management platforms are reasonably new, and some are much more valuable than others. That’s why the focus of this series was on must-haves, should-haves, and nice-to-haves for contract management platforms since it’s almost impossible to implement a good process without a good platform, and selecting one is becoming harder and harder as more and more e-Sourcing and C(L)M providers, including those who started in the Sales / Legal space, hit the market, and not all are created equal (or anything close to equal).

For example, while a clause library is only a should-have capability and multi-tier contract management and drafting a nice to have capability, especially for a Procurement Organization that does fairly standard direct materials and indirect services contracts, some CLM providers will push them as essential (which they may be for Legal organizations that handle commercial [building] development contracts with a lot of work being outsourced to specialist providers) for every organization, this is not the case and for some organizations these features will not be used at all. Similarly, some CLM providers without native MDM integration (which is a should-have) and, gasp, expiry and renewal management (a must-have) will try to down-sell their importance, which is critical in an organization with a lot of auto-renew evergreen contracts (which can cost the result in the organization overspending by 10% or more on multi-million category) and price data in third party systems.

Plus, with so many e-Sourcing technologies, and a plethora of acronyms which mean similar, but not the same, things (for instance, do you know the difference between S2S, S2P, and P2P — don’t fib!), it’s hard to tell where CLM even fits, why you need it, and the extent of capabilities your organization is missing out on with an outdated system. (This is critical as good CLM can result in significant year-over-year cost savings. While the percentages aren’t as high as supplier relationship management, spend analysis, or strategic sourcing decision optimization (which can tops out at an average year-over-year cost savings of 12% in the last case), annual savings from an effective end-to-end CLM process, backed up by the right platform, have been known to generate 4% to 6% savings that go straight to the bottom line (and get Procurement credibility with Legal and Sales, who can all be on the same system), and that’s nothing to scoff at!

CLM is critical as good contract management, coupled with good supplier management, is what ensures that the sourcing plan is realized, and this is key to capturing the savings that Supply Management works so hard to negotiate. It’s pointless to negotiate a 10% savings if only 6% of it gets captured due to bad contract management practices (which result in poor supplier management, maverick spend, inferior order management, expedited shipment, lost credits, etc.). And this is the case in many organizations without good contract management practices. (And has been for many years, as chronicled in AMR’s (now Gartner’s) classic series on “Reaching Sourcing Excellence”.)

In other words, if you haven’t, you really should read the Series to Date on Spend Matters (membership required):

  • Part    I: An Introduction
  • Part   II: The CLM Platform Model
  • Part  III: The Upstream and Downstream Phases
  • Part   IV: The Traditional Solutions
  • Part    V: The Core CLM Solution
  • Part   VI: The Standard CLM Platform
  • Part  VII: The Extended CLM Platform
  • Part VIII: The Importance of Being Earnest Integrated

Contract Lifecycle Management VIII: Are You Ready for the Journey?

In this series, we have defined and discussed contract lifecycle management (CLM) and the requirements for an extended contract management solution. In the first few posts we laid the foundations for the series by discussing the various processes and supporting solution elements that surround CLM as a way of bounding the CLM solution space. We subsequently detailed the requirements for a CLM system from a data and process perspective, as defined by our CLM wheel model.

However, in our series to date, we’ve largely ignored the commercial performance management aspects that CLM also needs to support. This goes beyond the strategic aspects, and the performance and obligation management aspects, to the competency requirements and the integration requirements necessary for an organization to not only use, but maximize the value from, such a system.

In particular, at a minimum an organization needs to consider, and obtain support for:

  • Procure to Pay
    because CLM encompasses everything that happens between a contract being signed, which is where traditional strategic sourcing ends, and the supplier being paid for goods delivered and accepted
  • Compliance beyond Invoice Matching
    because while this is critical to prevent overspending (and the need for expensive cost-recovery), there are also insurance requirements, regulatory requirements, and other requirements that, if not met, could be much more costly
  • Risk Management
    as one unexpected, and then unmanaged, event can result in a 20% overspend instead of a 10% savings

And this is just the beginning. Depending on the organization, the following could also be critical:

  • IP Management
    if it has a lot of intellectual assets
  • License Management
    if it uses a lot of software products (and instances) or licenses a number of works for publication and distribution
  • Inventory Management / System Integration
    if the organization requires a lot of assets to be purchases, leased, and managed during the contract term to fulfill its obligations

And, of course, other commercial aspects could be important as well for organizations in a specific vertical. To find out more about some of these areas, and why you can’t forget the commercial perspective when evaluating contract management systems and prioritizing the must haves, should-haves, and nice-to-haves, check out Part VIII of the doctor, the prophet, and the maverick‘s series on Contract Lifecycle Management over on Spend Matters Plus (membership required).

Why You Should Not Build Your Own Contract Management System

A couple of months ago, SI ran a short series on Why You Should Not Build Your Own e-Sourcing System, which also included pieces on Why You Should Not Build Your Own Spend Analysis, Why You Should Not Build Your Own e-Negotiation Platform, and Why You Should Not Build Your Own Decision Optimization because he heard that a
few public sector organizations have this crazy idea that they can build their own and that it can, somehow, compete with best-of-breed solutions on the market today.

As per that series, this is not the case.

And even though SI has said in the past not to put too much emphasis on traditional, first generation, contract management solutions compared to analysis and optimization when the organization is seeking efficiency and cost savings, because most first generation contract management solutions looked like they were built by a high school student in Microsoft Access (and offered no more functionality than such a solution would contain), this doesn’t mean you should build your own either.

First of all, newer contract management systems go beyond simple document management functionality, and, thus, contain significant functionality that cannot be built by a high school student with Microsoft Access.

Second, most users want a Microsoft Word experience for authoring or versioning, regardless of whether or not there is a better way, so you will have to spend countless hours on a seamless Word integration, and Microsoft integration is no piece of cake.

Third, you will be wasting a lot of time and money re-inventing the wheel that has already been reinvented about a dozen time. Talk about a big waste of (public) money!

Consider the core absolutes of contract management that everyone can agree on.

1. Authoring & Versioning

As we just said, everyone, and especially everyone in Legal, wants Microsoft Word authoring & versioning, so no matter what you do, this integration will be essential. And most CM vendors have this, so why reinvent the wheel?

2. e-Signature

Most people think this is a core part of contract management, and while it is not, since not all jurisdictions recognize e-Signatures and not all companies will allow them, but if they are jurisdictionally accepted, or even mandated, this is core. However, implementing a secure e-Signature (which is not the same as a digital signature by the way, see this piece on “e-signatures and digital signatures in procurement definitions and considerations” over on Spend Matters that was co-authored by the doctor for clarification) is not easy, and will require some serious development chops on your staff. Plus, how will you get it adopted and proved when there are about 40 global providers (even though the top 4 dominate most of the market)?

3. Document Management, Search & Discovery

There might be a few dozen free open-source content management systems, but that doesn’t mean you can re-purpose them as good contract management systems. First of all, contract management requires the management of contracts, amendments, schedules, work orders and related insurance certificates, regulatory approvals, and documentary deliverables. These all have to be related, indexed, cross-correlated, and chronologically ordered when a user is looking for current prices, terms, or schedules or prices, terms, or schedules when a work order was submitted. Secondly, meta-data will never be complete so full text search on various document, and image, formats will also be required along with seamless integration with meta data search. This is a fair amount of coding, which has already been perfected in a number of contract management systems.

4. Alerts & Reporting

Contract Management requires the accomplishment of necessary tasks on a scheduled basis, which often only happens when people are reminded. That’s why alerts are necessary. And status updates across contracts often require reports, as well as updates on all active contracts against a supplier, spend against a contract, etc. Across the organization, dozens of different reports will probably be required. Do you really want to waste countless hours developing dozens of reports with dozens of variations to please everyone when a number of packages not only contain a full library to start from and a report builder to alter existing and create new reports? Hopefully not!

Plus, today’s next generation contract management solutions, which do a lot more than initial contract management solutions did last decade, often cost less than their predecessors? So why waste what could amount to millions rebuilding a shoddier version of the wheel?

For more information on what next generation contract management systems can do, please refer to the ongoing series on CLM by the doctor, the maverick, and the prophet over on Spend Matters Pro (membership required):

  • Part I: An Introduction
  • Part II: Understanding the Platform Model
  • Part III: Mapping the Upstream and Downstream Contract Phases
  • Part IV: Traditional Solutions
  • Part V: The Core Platform
  • Part VI: The Standard Platform
  • Part VII: The Extended Platform