Contract Management: Yes, You Do Need A Solution (and Here’s Why)

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Pierre Mitchell and I recently attended Icertis’ customer advisory board meeting in Seattle, where Pierre spoke about trends in the contract lifecycle management (CLM) solution space. Pierre’s speech quickly turned into a lively interactive session, one I figured readers of Spend Matters would want to listen in on.

For privacy and confidentiality reasons — we are talking contract management here, after all — I can’t name the specific individuals who spoke, but suffice to say there were some big companies and very senior-level people in attendance. After Pierre stressed the foundational concepts of contract management in procurement, we dug into when companies hit the “breaking point” that caused them to adopt a CLM solution.

I’m guessing some of our readers have found themselves in similar situations.

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Pierre said the primary reason companies decide to look into CLM solutions is the same reason they typically take an interest in risk management technologies: they get burned. Most organizations don’t take action until they’re hit by an event, whether that’s a tsunami or a a broken contract.

The second reason? A need for senior-level advocacy. Today’s off-the-shelf nature of delivery and immediate ROI is going to become too obvious to ignore. Also: dashboards and diagnostics tying to dollars, where you can actually show senior management how much is at risk based on specific data. As commercial functions are more elevated to centers of excellence and procurement acquires better tools to illustrate risk, senior management will come around.

After Pierre’s insights, we turned it to our group of peers to ask what pushed them over the CLM cliff. Here’s what they had to say.

The Business is Changing

“We ended up choosing to go with a tech solution for a lot of factors – mainly that we were going through a major business transformation to simplify the business and needed technology implementations and modern infrastructure to support the process,” one attendee said. As is the case in many organizations, “we needed to do smarter execution with a limited amount of resources. We can’t be experts in everything, so where possible, we need to leverage those that are a good long-term architectural fit.”

This organization ended up asking itself, “Are we experts on this?” If the answer was no, the next questions was, “Do we have experts?” If no, the team said hello to technology, with a careful checklist focused on choosing technology that had the capability to grow with the organization over time and matched the business’ culture and goals.

For another attendee, buying into CLM was about taming chaos:

“We didn’t have process: we had a way of getting things done with a lot of empowerment and zero control. We were allowing unilateral price changes, guaranteeing trade balances. It was the Wild West! The money savings were a big factor in our decision to go with technology, but it was also selfishness — I couldn’t get to pricing strategy if I had contracts that were undercutting my ability to be effective.

“We could have paid a consulting firm to come in and do process for us, or we could let a system dictate our process naturally. We needed the product to become the process. The first step is admitting we had a problem (thanks to our general counsel!). At the end of the day, the benefit was quantifiable outside of cost reduction or time of process — we were limited in our revenue scope. That’s what carried it over and allowed us to justify a better value solution (even though it was more expensive).”

Personnel is Changing

A new hire wants to make a splash. In this session, we were lucky enough to hear from an attendee who was the new hire, and another legacy employee who was working with a new CFO.

For the new guy, “Having an accurate and complete repository of our contracts was a fundamental for me. I’m fixing the plumbing and building business cases to reconcile disparate systems — it was hard. I was shot down repeatedly, because they wanted to use money elsewhere. I went through my general counsel, who let us know how much risk we were really facing. For me, the information security with internal stakeholders was key – IT, general counsel, finance, etc. We needed frictionless collaboration within the organization.”

“In our business, the new CFO was tasked with getting the company to ‘grow up.’ From her perspective, she’s looking for politically cheap money. Getting engineers to stop building what they want to build was politically expensive in this case! Also, the legal team had way bigger fish to fry — they didn’t need to expend legal horsepower on contracting when they were facing questions like, “What’s the FBI going to ask for next?”

When it comes down to it, contracts don’t just feed a legal or procurement process — they feed the enterprise, encompassing risk, compliance, performance, project and portfolio. Look for much more coverage on the area from Spend Matters in 2017.

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