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The 3 Contract Management Concepts that Will Enable Digital Transformation

06/19/2018 By

As we explored in the first part of this series, a successful digital transformation is defined by certain characteristics. These characteristics touch the core processes of the business, which means that driving a digital transformation requires changing the core systems of commerce as well. And there’s no better way to start reforming core business processes than taking a digital approach to managing your contracts.

With the strategy clear, the next step to enabling digital transformation is to understand the key aspects of a digital contract lifecycle management (CLM)system. Knowing these three key concepts will get you up to speed, and putting them to work will create the business and technical foundations you need for a successful digital transformation.

Ease of Use

To spur digital transformation through digitized contract management, the new system must above all be easy to use. At a minimum, this means users should be able to integrate the business’ current tools and processes with the new ones, as well as adapt their user experience to needed levels of complexity.

The most common way CLM systems work alongside other technologies is through API integrations. This allows the CLM system to communicate with and use data from systems that the business already relies on. Examples include technologies such as ERP, CRM, electronic signature providers and other single-purpose procurement systems (e.g., e-sourcing).

In addition, the system should support legacy contract management approaches to ease the transition to more modern tools. Since the ultimate goal is to group all legacy and new contracts in a singlerepository, ensuring easy migration of those legacy contracts into the new system is essential. This ensures that the maintenance of olderagreements doesn’t distract from the new processes the organization is trying to build to support new contracts.

Finally, when it comes to contract authoring, integration to Microsoft Word is a must-have — especially when involving legal teams. Most systems offer the ability to export and combine all contract information into a single compound Microsoft Word contract, which can then be edited under version control and digitally signed. The best CLM providers can also bring these changes back into the original system, synchronizing all clause-level data and metadata during the process.

If users encounter obstacles as soon as they try a new technology, a new system will never take hold, preventing the organization from realizing any potential benefits. By supporting needed integrations and currently used tools, businesses can ensure the first leg of their digital transformations is not thrown off by usability issues.

Intelligent, Autonomous Systems

Beyond usability, a digitized contract management system should not consist merely of digitized versions of an organization’s contracts. To support true digital transformation, the system must also be intelligent, offering both automation features that save time and analytics-based insights that help the business make better decisions.

The infrastructure that enables this concept is an analytics platform that underlies contract management functionality. When applied to contracts, businesses can use analytics to plan, prioritize, execute, monitor and improve commercial performance. This helps employees choose critical performance metrics to focus on, while also triggering other features.

Because contracting is often a component of other business processes, analytics applied to contract management can be used to automatically launch other workflows. With this in mind, a leading CLM system should offer a flexible workflow engine, one that can apply business rules based on spend category, geography, industry-specific requirements and more.

In addition, the workflow engine should allow organizations to automatically assemble and orchestrate the contract approval process. Because contracts touch multiple functions and follow complex approval procedures, the platform needs to notify appropriate parties and involve them only as much as needed to complete the contract. The ability to configure roles-based permissions and views for specific can help in this effort.

Finally, these capabilities become truly intelligent when augmented by artificial intelligence. New AI-powered systems can quickly convert legacy contracts into new formats, using machine learning approaches to extract clauses and metadata directly into the CLM platform. This allows the system to apply various algorithms to contract analysis, automatically identifying obligations and trends that can be integrated into broader risk management efforts.

From traditional analytics to AI-based insights, an intelligent CLM platform creates more than just a digital contract repository. These capabilities underlie new digital processes, helping businesses transform not only their information management practices but also their operational mindset.

Digital at Scale

With a CLM system easily usable and capable of supporting advanced digital capabilities, the business will be able to focus on the third element that enables a digital contract strategy: powering digital transformation at scale.

For a CLM system to effect enterprise-wide digital change, it must be usable in all applicable scenarios: on any contract, at any time, in any region where the company operates.

This means the system should be applicable to more than simply buy-side procurement transactions. Ideally, sales organizations should be able to create sell-side contracts during negotiations with prospects. Internal corporate contracts, such as those used in employment agreements or NDAs, should be supported as well. In a word, the solution should be flexible, enough so that users from any department can access the tool and adapt it to their unique needs.

Beyond fitting multiple contracting scenarios, the CLM system should also work in whatever context is necessary. This should include strong mobile support, so that activities such as approvals can take place at any time, as well as broad support for multiple language and currencies.

Finally, the system should offer high degrees of adaptability. For a global enterprise, each region in which the company operates will have unique requirements. Therefore, a CLM system must support localized variations in workflows, rules construction and templates. This degree of flexibility will also help companies adapt to new scenarios, such as changes to business processes necessitated by new regulations.

By ensuring that they can apply their CLM system within any scenario and in any context, enterprises can make sure that this digital approach to contracts is usable by anyone. This allows digital contract management to take root at the heart of the business, creating the foundation off of which to scale a broader digital transformation effort.