Contract Management and the General Counsel

Dolphin Software recently took part in the inaugural European Corporate Counsel Exchange conference in the Hague, Netherlands, which was attended by the heads of legal of many of Europe’s leading corporations.

A consistent theme of the event was of course the impact of the economy on the legal operations of companies in Europe, but also how this has forced legal departments to become much more efficient and business focused than ever before.

Aligning strategy and execution with the core business strategy is something that CIOs and IT Departments have heard for the last ten years, but it was surprising to hear the number of General Counsels urging the same message and to become ‘more visible’ in the business.

Topics like Litigation support, eDiscovery, Legal Spend Management and Contract Management appear to be the primary interest and focus areas for European GC’s in the next 12 months. 

With regards to Contract Management, it was surprising to witness so much support for ’self-service contracting’, where the drafting of standard contracts and agreements is pushed out to business users through the use of contract automation technologies, where previously many internal legal departments would have insisted that all contracting is conducted within their own department.

With legal departments having to downsize, or cut their budgets, they are looking for new ways in which to deliver the same workload with fewer resources, and at the same time, demonstrate increased value to the business.  Contract Management solutions are well placed to deliver on these goals since they generally automate and control the contracting process, which up to this point in many companies, has remained a manual and inefficient process, while delivering true cost savings to the business by allowing contracts to be managed in the way that they were negotiated.

The bad news however, is that although economists and the media seem to be convincing us that the worst of the recession is over, the general expectation is that budgets for 2010 will continue to be cut, which will compel General Counsels to spend their money more wisely on products and services that add true value to their business, reduce inefficiencies and that will raise the profile of legal operations within the enterprise.

IACCM research: World recovery shows patchy progress

2009 has been an ‘annus horribilis’ for many, with the deepest recession and toughest trading conditions in living memory, that nobody had accurately predicted; but a new survey published by the IACCM (International Association for Contract and Commercial Management) indicates that market conditions are beginning to stabilise.

More than half of the top contract negotiators and managers who were polled by the IACCM expected economic conditions to improve in the next six months.

The research shows that 50% of the respondents noted that they were still experiencing significant pressure to reduce or renegotiate prices on existing agreements, with the same proportion of contract professionals entering in to new contract negotiations.

However, the IACCM research indicates that much of this new activity is due to buyers entering in to negotiations with vendors to switch incumbent suppliers in an attempt to reduce and streamline procurement spend. 

The big casualty of the economic recession seems to have been corporate ethics – with 34% of the survey respondents suggesting that ethical standards in contract negotiation had fallen since the beginning of the recession.  The main ethical issues at stake here are:

• customers who unilaterally extend payment terms
• unreasonable pressure to cut prices on existing agreements, and
• overselling by salespeople to win business

Many companies are now looking ahead to what 2010 will bring and best-in-class organisations are already positioning themselves to take advantage of new opportunities to streamline their contracting processes as trading conditions improve.   This will lead to a flurry of activity to improve and streamline contracting processes with tools, like Contract Management solutions, that help to automate and manage contract commitments and obligations more effectively.

If you are planning your 2010 budgets right now, don’t forget to include a contract management software project in to your strategic plans.

The IACCM research was conducted in September 2009 and surveyed 13,000 business negotiators and contract management professionals from 2,000 companies worldwide.

Contract Management market grows despite recession

Despite the recession, spending on eProcurement and Contract Management solutions is expected to increase by 2% in 2009, according to Forrester Research.

 “What we’re seeing right now is two conflicting forces at work,” says Andrew Bartels, VP and principal analyst, Forrester Research.  “One is obviously the desire of companies to try and save money through the use of technology. The other is that their technology budgets and particularly their capital budgets are facing incredible constraints.”

Operational efficiency has taken on a new importance in the current economic climate and many organisations are looking to streamline supply chain processes, eradicate unnecessary costs and keep a tighter control on contract-related spending.  This is all good news for Contract Management software vendors, like Dolphin Software.

IT budgets will continue to be squeezed over the next year and CIOs will have to weigh up what investments in technology will produce the greatest returns, while delivering effective cost savings to the business.

According to Forrester Research, the primary emphasis for many organisations in 2010 will be on cost savings and the use of technology solutions to enable teams to identify and manage cost saving opportunities. 

Contract Management software plays a critical part in achieving this as most business-to-business transactions are underpinned by legal contracts and agreements.  Being able to provide Procurement professionals and other business stakeholders with management information to enable contracts to be managed in the way that they were negotiated will mark the difference between success and failure for many organisations as we emerge from the current economic recession.

Technology solutions for In-House Legal teams … and the enterprise

In this day and age few General Counsel would imagine managing the legal affairs of their employer without the aid of technology.   However, legal operations inside public and private sector organisations remain largely manual, costly and inefficient due to the poor adoption of technology solutions to support their work.

It is not the fault of in-house legal teams in many cases.  It is actually a failing of the large enterprise software vendors, who have for many years, assumed that the needs and requirements for in-house legal teams were the same as those for large commercial law firms.  The clear feedback that we have received at Dolphin Software, is that they are not.

There are a number of key technology solutions that General Counsel in both the public and private sector need to consider and evaluate for their organisations.  These are:

• Document and Records Management
• Legal Matter Management
• Contract Lifecycle Management
• Time recording/billing (if you are considering implementing a cross-charging regime)
• eDiscovery/Litigation Support systems

Looking strategically about how technology solutions can support the legal operations of an organisation, it is important to consider the needs and requirements of the legal function itself, but also how this strategy is going to impact the rest of the business.

There are a number of routes that IT and Legal teams can go down.  They can …

• select best-of-breed vendors in each category
• select a single vendor solution or technology platform that can span several core solution areas, while complying to corporate standards on IT infrastructure
• attempt to develop their own in-house solutions (If you select this route, be aware of the hidden costs in building your own solution.   Management time required to design the solution, the cost of development, support and providing enhancements and updates are only some factors that can end up costing more than a Commercial Off-the-shelf solution).

Then there is the issue of the wider picture.  One critical error that Legal teams often make is the limited belief that solutions like eDiscovery or Contract Management systems are only to be used by legal specialists.  There are many other key stakeholder groups, in the contracting process, for instance, who could benefit from access to contract documents and management information.

In this age of regulation and risk management, the legal department is rapidly becoming the guardian of key technology solutions for the enterprise.  The General Counsel and the CIO need to work together in ensuring that the solutions that they evaluate and implement are the best and most effective for their business.

New revenue opportunities for law firms in Contract Management-as-a-service

Law firms around the world are experiencing some of the toughest times in recent history, with billable work declining as a result of the recession.

Some innovative law firms are beginning to think out-of-the-box when it comes to new business development and revenue generating ideas.  Dolphin Software has been working with a number of law firms and legal process outsourcing providers to offer corporate clients a software solution for managing and automating their contracting processes, combined with the value-adding legal services that the law firm provides.

Focus on streamlining the contracting process, which remains a largely manual and inefficient process in many organisations, has become more important for both private and public sector organisations as they strive to reduce costs, avoid unnecessary contract-related penalties and maximise revenues.

Contract work remains the staple service offering of many law firms and there is a growing trend to providing a more complete and value adding service through the use of Contract Lifecycle Management software solutions.

Contract Management-as-a-Service
By providing Contract Management-as-a-Service to their clients, Law firms can find new ways of generating revenue.   

Contract Lifecycle Management solutions help organisations to streamline their contract drafting, approval and archiving processes, as well as allowing key business managers to manage key contract milestones and obligations more effectively through the use of advanced reporting and analytics.

Maintaining a portfolio of contract templates and legal clauses can be a significant overhead for in-house legal teams and is an area where law firms can identify potential new revenue streams by outsourcing this work on behalf of their clients.

Through the provision of a Contract Management service, law firms can gain predictable on-going subscription revenue from their client base and a platform to promote other value-adding services.

Dolphin Software provides a cost effective Microsoft SharePoint-based Contract Management solution for law firms that can be easily installed and configured, and is made available on a revenue-share model.

Expected cuts in government funding for UK local government increase the need for better contract management

The writing is on the wall for UK Local Government organisations:  public spending will fall over the next three years regardless of whether Labour remains in power, or whether the Conservative party wins the next general election.  This will have huge strategic implications on how Local Government organisations provide services to the public and must surely now be the primary issue on the minds of local government Chief Executives.

The UK now has record levels of public debt, which is set to increase to £175 billion ($289 billion) in the current financial year.  Gordon Brown has recently been forced to modify his planned public spending efficiency gains, which aimed to save £35 billion ($58 billion) to extract even greater cost savings; while the Conservatives, under David Cameron, have already made clear that they intend to reduce the onus on the public purse to support services provided to the public.

Some local authorities have already acted in anticipation of wide-ranging spending cuts and lower tax revenues that have resulted from the current recession.

Norfolk County Council has recently announced plans to review the roles of 600 of its most well paid employees in an attempt to find additional cost savings; while Barnet Council announced plans last week to embark on a radical overhaul of it public service provision by reducing the services that it provides to a core, and charging fees for enhanced services – something akin to the low-cost airline industry.

In all likelihood, this will result in a much greater emphasis on the outsourcing of core services to external providers.  The need to manage these contractor contracts and agreements will be more important than ever.  A point not missed by Liberal Democrat MP, Paul Morse, who states:

“I have no problem with the vision, but what I can’t see is how it’s going to be delivered.  It seems like we are going to have further contracting out and if they are going to do that, they’ve got to improve their contract management”.

The UK National Audit Office earlier this year issued a damning report on Central Government mis-management of supplier contracts that has led to over £290 million being wasted on IT Services contracts alone, caused primarily through poor management of contract terms and obligations.

If more public services are going to be provided by external parties, then it is clearly critical to be able to manage and control those supplier contracts effectively to ensure the quality of service provided and to control contract-related costs.

Contract Management software solutions, like those provided by Dolphin Software, have the potential to help local government organisations to streamline and control their contract management processes by providing managers with the right management information to manage contract milestones and obligations, and to allow contracts to be managed in the way in which they were negotiated.

Aberdeen Group survey: Contract Management as critical as Customer Relationship Management

A recent Aberdeen Group survey conducted with CRMToday highlights the strong feeling that many respondants have about the need to streamline and manage the sell-side contract management process to maximise revenue opportunities.

Aberdeen Group suggests that around 18% of a typical sales cycle is spent in contract creation, internal approval processes and external negotiation.

The Aberdeen study shows that on average respondants to the survey estimate that 9% of sales revenue is lost due to regulatory penalties, missed deadlines and obligations, lost sales orders, ‘maverick’ pricing and transactional errors. 

According to the research, a one day reduction in the sales cycle of company is worth $80,000 on average (this increases to $215,000 for larger organisations).  Best-in-class organisations have sales cycle times that are 10-15 days shorter than other companies.  So you can begin to see how an investment in streamlining the contract management process can have a major impact on the bottom line.

Aberdeen recommends that companies take the following actions to improve the ‘quote-to-cash’ cycle time:

1. Migrate all current active contracts in to a contract management system and make use of functions like contract clause libraries to streamline contract negotiation
2. Streamline the quote-to-cash process by integrating your Contract Lifecycle Management system with your CRM and Finance systems.
3. Use contract management software to track contract milestones and obligations
4. Utilise reporting and analytical tools to measure contract performance regularly

Contract Lifecycle Management solutions, like Dolphin Contract Manager, provide comprehensive contract management functionality across each stage of the contract lifecycle, allowing sales teams to:

1. streamline the contract creation process
2. automate internal reviews and approvals
3. provide a central repository for all contracts and related documents
4. provide secure external workspaces to speed up external contract negotiation
5. allow key stakeholders to proactively manage contract commitments and obligations through alerts and management reports
6. integrate contract data with back-end systems like CRM and ERP solutions.

In the business world we have become accustomed to identifying manual and inefficient processes and automating them with technology solutions.   However, in many organisations, critical business processes like the Contract process and Quote-to-cash process remain largely paper based, slow and wasteful.  Contract Management software solutions, as the research from Aberdeen Group has shown, have the potential to create a significant and immediate positive impact to the bottom line of a company. 

As companies continue to struggle and compete in a challenging economic climate, now is the time that you should start to think more strategically about how you are managing your contract process.

What will a new Conservative government in the UK mean for public sector Contract Management?

It is no secret that David Cameron, the leader of the main UK opposition party – the Conservatives, and likely next Prime Minister, will seek to reduce public expenditure by cutting central and local government spending.

If the Conservative party does get in to power after 12 years of Labour rule, it will have dramatic consequences for many people who have become used to public sector budgets and expediture balooning year on year under Tony Blair and latterly, under Gordon Brown’s ’spend our way out of recession’ strategy.

The reality is that the United Kingdom now has unprecedented levels of debt, and coupled with the Conservative party’s strategy of reducing the reliance on central government to increase government spending, will mean that the next likely government in the United Kingdom, will have to reduce public expenditure significantly.

According to the UK Office of National Statistics, ‘Public sector net debt, expressed as a percentage of Gross Domestic Product (GDP), was 56.6 per cent at the end of June 2009, compared with 44.4 per cent at end of June 2008. Net debt was £798.8 billion at the end of June, compared with £641.4 billion a year earlier’.

So, what will this mean for central and local government organisations?

Almost certainly, it will mean that they will have to cut back core services, but it will also mean that they will have to streamline their processes and procedures to deliver public services in a more efficient way in the future.   Public sector organisations are already under pressure from the National Audit office to become more efficient and to ensure that public expenditure is properly managed – a report published recently highlighted that central government departments are wasting around £290 million annually in IT services contracts through poor contract management and enforcement of contract performance obligations.

Public sector procurement will come under much closer scrutiny after the next election.  This means that there will be an increased focus on how public sector organisations manage key contracts with external providers.  The recent MP’s expenses scandal has also focused attention on how public money is spent and justified.

Streamlining contract management processes and procedures will become ever more important and will become a central strategic issue for public sector managers. 

How can Contract Management technology solutions help?

Contract Management solutions help to streamline and manage the contract lifecycle process by ensuring that contracts are drafted and negotiated in an efficient manner.   They also enable key stakeholders to track and manage contract milestones and obligations that are hidden within contracts and that are rarely tracked and managed today.

You should consider investing in a Contract Management solution if you are unsure or not able to answer any of the following questions:

1. Do you know how many active contracts you have?
2. Do you always enforce contract terms and conditions that lead to penalties for poor supplier performance?
3. Do you know how much your organisation has contracted to spend and how much you have spent year to date against your budgets?
4. Do you know where your contracts are?
5. Do you always review supplier contracts coming up for renewal or termination?
6. Are you confident that your contracting process will stand up to the scrutiny of an official audit?
7. Do you pass on key information contained within contracts to other stakeholders in your organisation (like making the finance department aware of all contracts that contain non-standard payment terms, for instance)?
8. Do you feel that you and your colleagues have all of the management information to manage your contracts effectively?

Whoever wins the next general election in the United Kingdom, the writing is on the wall:  Public expenditure is going to diminish.  Now is the time to start planning for this new spending regime by putting in processes and solutions that will make public sector organisations more efficient.  Since contract processes are typically poorly automated and managed, and therefore represent the best chance to erradicate unnecessary costs and wastage, focus on improving Contract Management should be the primary strategy for Legal, Procurement and Finance managers in the public sector.

Contract Management on the government’s radar

Since the creation of the US government Stimulation Package, or American Recovery and Reinvestment Act 2009 to be precise, there has been a noted increase in activity and interest in the discipline contract management.  Interest in Contract Management has largely been driven by pressure from the public to force government agencies to provide greater transparency and justification for the vast sums of taxpayer’s money being spent to bolster the fragile economy.

It may have been a coincidence, but the topic of contract management in the military has also come to the fore in recent weeks, with the publishing of a highly critical report by the Wartime Contracting Commisssion on the wastage of public funds in Afghanistan and Iraq, where billlions of dollars have been unaccounted for and certain defense contractors, like KBR Inc., have scooped millions of dollars in performance bonuses because of poor contract oversight.

“One example of wasted money cited by the commission involves construction of a $30 million dining facility at a U.S. base in Iraq scheduled to be completed Dec. 25. The decision to build it was based on bad planning and botched paperwork. Yet the project is too far along to stop, making the mess hall a future monument to the waste and inefficiency plaguing the war effort”, says Richard Lardner of the Associated Press.  The US Army is due to withdraw from that location before that date.

With a bit of luck, increased visibility in to contract management issues at these governmental levels will be akin to new technological developments in the car industry through Nascar or Formula One, where the benefits technological developments infiltrate down to production vehicles; so in the world of contract management, hopefully greater attention on contract management issues at a governmental level will infiltrate down to other government organizations on a local level, and companies in the private sector.

The role of Contract Management software in Government contracting oversight
Contract Management in the public sector remains a  largely manual and inefficient process.  President Obama and the UK government have already gone on record in recent months bemoaning the lack of skilled and qualified resources to provide effective contract oversight needed to track government contracting.

Contract Management software solutions are not, in general, designed to eliminate people from the contract management process, but can provide significant efficiency gains and greater management information to allow more effective contract oversight and management. 

Contract Management systems effectively allow organizations to track and manage contract obligations, spending and commitments, as well as helping to streamline the contract drafting, review, external negotiation and archiving process.

Many people and organizations understand that they need to manage and control their contract processes more effectively, but few are aware that there are robust technology solutions to streamline this effort.  Contract Management software systems should generally provide the following core areas of functionality:

1. Contract Authoring, to streamline the contract creation process
2. Internal approval workflows
3. Central electronic contract repository
4. External secure workspaces for contract negotiation
5. Reporting and analytics, to track and manage contract milestones and commitments

With greater attention on where and how taxpayer’s money is spent, government agencies that contract with external parties to provide services to the public will need to become much more efficient in the way that contracts are created and managed in the future.

Aligning IT with the business: The holy grail of IT – does Contract Management software make it possible?

A great article written by Windows IT Pro magazine recently indicates that there is possibly light at the end of the tunnel for beleagered IT managers hoping to achieve the seemingly impossible goal of aligning IT with the business – in the form of Contract Management software.

Is contract management a problem?
Well yes, for many organisations, who spend 3.4 weeks on average (according to Forrester Research) drafting and negotiating contracts, often involving expensive external lawyers and highly paid senior managers, only to effectively throw away the contracts into departmental filing cabinets, computer hard drives or electronic repositories once the contract has been signed.  That is a problem because all of the obligations, commitments, milestones, penalty clauses and bonus payments that comprise an organisation’s contract landscape are now effectively hidden and lost to the enterprise.

Contract Management software
Contract Management software solutions help organisations to streamline their contract drafting, approval and archiving processes, as well as allowing key business managers to manage key contract milestones and obligations more effectively through the use of advanced reporting and analytics.

Dolphin Contract Manager
Dolphin Contract Manager  from Dolphin Software provides all of these functions within the familiar environment of Microsoft SharePoint and Office 2007.  Dolphin Software’s Contract Management system provides role-based access to the system, allowing both contract-specialist users and non-specialist business users to use the system. 

Microsoft Office Business Applications (OBAs)
For the 60,000 organisations that have licenced Microsoft Office SharePoint Server 2007 (MOSS 2007) around the world, solutions like Dolphin Contract Manager provide a compelling business context to SharePoint.  Dolphin Software has used SharePoint as an application development platform that exploits the existing functionality of SharePoint and enhances it to provide a world-class contract lifecycle management solution.