A single source of the truth – If you are not in control of your contracts, you are not in control of your future

February 24, 2012

A single source of the truth - If you are not in control of your contracts, you are not in control of your future

As information is the most important asset for many industries and organisations, the race to manage information, in a proactive way has never been more challenging. The biggest challenge of all emanates from the sheer volume of information inside any organisation today.

Over recent years, contract management processes within global enterprises have become increasingly important and more complex. Many drivers have contributed to this change, such as increased business-to-business transactions and the need to lower supplier risk, due to potential corporate litigation and penalties for breaching industry regulations.

A major challenge for most is poor visibility into contracts and a lack of tactical and strategic intelligence, combined with the fact that contracts today typically do not reside in a central repository. More likely these contracts reside in multiple locations, in both digital and hard copy files, in paper archives, and even in some cases, outside the organisation’s physical boundaries.

Contract visibility creates a paradox for most organisations. On the one hand this requires management and monitoring of access and protection to ensure accuracy of data. To ensure integrity, contracts need to be locked down from a security perspective. But, on the other hand, contracts must be accessible to support the business and to make sure the contracts are adhered to, with visibility both inside the organisation, and at times, also for parties outside the organisation.

It is not hard to imagine and appreciate the challenges this could create in large or midsize organisations, with thousands of contracts spread out across major divisions/departments, over geographically disparate locations. The issue of contract visibility, security and risk management is beyond the scope of management by humans, with only fragmented manual processes to support them.

Contrary to the famous saying, “What you don’t know can’t hurt you”, this approach to performance management leads to “under-the-radar” problems, hidden costs and liabilities, which can remain unobserved within an organisation for years. These time bombs can have major impacts in reducing profitability; by increasing cost through inefficiency and leaving the organisation open for unsuspected disputes or litigation.

The picture doesn’t need to be so dark, there is hope and help for all. The Aberdeen Group has in a recent customer study http://www.seal-software.com/aberdeen_group_press_release.php shown what Best-in-Class organisations do compared to the laggards. The study outlines some very pragmatic and straightforward actions that in most cases are readily achievable and provide a rapid return on investment (ROI).

Once an organisation has implemented a contract life cycle management (CLM) system, that provides both total transparency and visibility to contracts and their key metadata, together with some well defined processes for review and approval of contracts, you have created a Single Source of the Truth!

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Why Contract Discovery is a strategic imperative for 2012 planning and budgetary processes.

November 24, 2011

Right now, most organizations are trying to finalize budgets and plans for 2012 and it’s more challenging than ever. These times of financial turmoil and uncertainty put unprecedented pressure on revenue planning, cost-control and investment during 2012.

Critical planning assumptions will be based on the judgment of which contracts can bring in revenue and what cost has been contracted already.

Knowing and understanding all of your contracts is vital to your organisation being able to plan proactively and accurately.

A monumental effort goes into creating contracts and negotiating favorable terms and conditions; without systematic controls in place much of this negotiated advantage is squandered.

Budget and planning are critical to your business and yet many companies still lose control of their contracts and pay the price. The objective of tightly controlled budgets and controls is to put the business in the driving seat;. the worst scenario is to discover an unavoidable contracted cost that has not been included in the new budget. I think we’ve all been there.

Can you answer the following questions?

  • Do you have visibility of all contracted costs?
  • Which customers have the right to terminate their contracts this year?
  • Which supplier contracts are due for renewal; can you terminate or re-negotiate?

Poor contract visibility creates lack of tactical and strategic intelligence
Contracts today typically don’t reside in a central repository and are not accessed via formal retrieval procedures. More likely, they reside in multiple locations, in both digital and hard copy, often outside the companies’ physical boundaries.

Contract management creates a paradox for most organizations. On the one hand, contracts must be accessible to ensure data accuracy and integrity, contractual compliance and monitoring, with the flexibility for the contract owners to make revisions, addendums, measure contract performance and support internal and external audits. On the other hand,data protection, contract access monitoring and security is of paramount importance.

Large and midsize organizations have thousands of contracts spread across countries, divisions and departments. It’s not hard to imagine the scale of the challenge in pulling together the relevant contract information that proactive business planning requires.

Resolving the issues of contract visibility, security and risk management with fragmented manual processes is a recipe for failure.

Ineffective monitoring, reporting and management of compliance 
Most companies have not implemented a system to monitor contracts from a compliance and financial perspective. The lack of such a system typically results in rear-view monitoring and ‘brushfire management’ with little chance of avoiding increased operational cost and risk as consequence of non-compliance.

Inadequate analysis and follow-up of contract performance
“What you don’t know can’t hurt you,” might be a successful strategy for your personal life, but in business it’s a strategy for going out of business! This haphazard approach to performance management leads to under-the-radar problems of hidden costs and liabilities that can remain undetected within a company for years. These time bombs can have a crippling effect by reducing profitability, increasing cost through inefficiency and leaving the company exposed to unexpected disputes and litigations.

So how do we avoid these problems and address the challenges surrounding contracts?

“What you can’t measure, you can’t manage.”

This classic performance management quote is the corner stone of a proactive contract management solution. While some contracts may still be simple many that are pivotal to the day to day running of the business are multidimensional. These complex contracts have tremendous impact on the bottom line and a company’s competitive position in its industry. Proactively managing contracts requires a system with the following key functionality:

  1. Discover: Automated discovery of existing contracts currently in both paper and digital form. Search for key terms and load into contract management system.
  2. Store: Central secure searchable electronic repository for all contracts
  3. Report: Sophisticated management reports and alerts connected to electronic calendars.

The above is a minimum requirement for you to be in control of your budget and destiny during a challenging 2012.

To learn more about our unique and market leading solution of Contract Discovery and how it can help you within a couple of days, take a look at our online demo.


Contract Management systems and what Businesses need to know

May 6, 2011

The following article was recently published in Business Computing World Magazine: http://tinyurl.com/3hvke4y

We may not realise it, but contracts help to drive and shape pretty much every business: Gartner estimates that between 60-80 per cent of all business transactions are governed by contracts or agreements in one form or another, particularly across finance, IT, legal dept, purchasing, sales, operations and HR. So, whether we are aware of it or not, contractual agreements are an important part of organisation’s underpinning structure.

And contracts aren’t just about ‘laying down the law’ with third parties and employees: on a more positive note, they provide the framework for how we work with people and other organisations, they provide the rules and guidelines for obligations so that everyone should be clear what is expected of them. And when managed properly, contracts can even help organisations to reduce costs and improve profitability, as well of course as mitigating risk.

So if contract management is so important, why hasn’t everyone been doing it for years? The problem is that traditionally, most contracts are created by individuals or departments, with no single central ownership or control. Forrester Research reckons that contracts take 3.4 weeks to create on average – not surprisingly, considering that they so often rely on unwieldy email communications or in many cases, snail mail and fax. The legal or procurement function will probably only get involved if a non-standard requirement or problem arises.

Once created, contracts are stored in multiple locations and formats – electronic and paper-based- making them hard to centralize and find again. Faulker estimates that 10 per cent of all contracts are actually lost.

Does this matter? Yes, because lack of cohesive contract management can lead to problems and missed opportunities. Here are some examples: automatic renewal of contracts can mean being tied into unwanted contracts; lack of foresight meaning that the chance to re-negotiate better terms were lost; lack of compliance or regulatory breaches, not to mention expensive litigation. Indeed, Fulbright & Jarowski has estimated that 60 per cent of corporate litigation in the USA and UK is caused by contract breaches.

Get it right and contract management has multiple benefits. Again, some examples help to demonstrate this: observing an early repayment clause leading to a discount; enterprise-wide favourable terms with the same supplier; only paying invoices on goods and services actually received.

Yet this situation is changing fast, as companies increasingly realise the importance of management contracts, as well as the advent of contract lifecycle management systems, a market sector that Forrester Research says is growing at 23 per cent per annum. Numerous vendors have now entered the fray, with systems on offer that range from simple cloud-based sytems for SMEs through to large solutions based on Microsoft SharePoint, which now adopted – or in the process of being adopted – by over 90% of large organizations worldwide.

Different vendors (and there are quite a few now) offer different feature sets, but a comprehensive solution might include: A contract clause tracker; compliance monitoring & regulatory requirements; automated alerts; tracking of price rebates; reporting; contract negotiation workspaces; workflow and reporting tools; author workspaces; contract drafting and storage; tools that support collaboration on contract with external parties.

The latest generation of contract lifecycle management systems also include e-discovery of legacy contracts. This is an important point, because while it is tempting to rush into implementing a contract lifecycle management system for all new contracts, unless existing contractual milestones and obligations are included, then an organization does not have the full picture.

Research shows that around 80% of companies admit to not having full knowledge of all their legacy contracts, yet considering that contracts many last for many years, then it is reasonable to assume that a large organization will have thousands of legacy documents. (I’ve recently helped a media organisation audit 30,000 contracts and their situation is certainly not unusual).

Who owns contracts? The organizational split

All well and good, but who owns all this stuff? Well, as I said earlier, contracts are traditionally very dispersed throughout an organization. However, the advent of contract management systems gives companies the means by which to remedy this and in theory, to everyone’s benefit. What do I mean? Well, if you were in charge of all legal affairs – perhaps you have the title of company secretary or general counsel – you’d be able to see the advantages of having overall visibility of all contractual obligations. After all, it’s your job. But you’d probably be worried about opening the floodgates.

The benefit of a contract lifecycle management system is that it allows individuals to still retain control over creation of a contract, as well as management of resulting milestones and obligations. But you, as the legal professional, would be able to keep track of status and through system alerts, be made aware of any impending problems. For instance, a particularly enthusiastic sales person may be able to agree to terms that are not appropriate.

Similarly, if you are the sales person (or the procurement officer, or the IT director, or the HR manager) you can see the commercial and performance benefits of contract management, but aren’t too happy about the idea of losing control to the legal department. Again, contract management lifecycle systems mean that you are still in charge of creating the contract, but you know the legal expertise is on hand if required.

Let’s also not forget the fact that many organizations spend huge amounts of money with third party legal firms. By automating much of the contract creation process – for instance, standard clauses and templates – then this area of expenditure can potentially be reduced.

Starting steps

So what should companies be looking out for when implementing contract management and looking for a system that fits their needs? Here are a couple of ‘best practice’ suggestions:

  • Find out what already exists – without full visibility of all existing contracts, then implementing any contract management system is only addressing part of the picture. Invest in a contract audit or choose a system that has an e-discovery element that can automatically locate legacy contracts and extract milestone and obligation data.
  • Assign roles and responsibilities – technology can only do so much. Since contracts have rarely had a single point of overall ownership, this is uncharted territory for many organisations. Regardless of where they sit in the organisation, the best contract gatekeepers are people who understand that contract negotiation is a ‘people’ process. Get these champions on board and think about creating cross-function working groups to help facilitate the adoption of contract management across the organisation. After all, contract management processes and systems are going to touch on most departments in one way or another.
  • Find a system that suits your organisation – if you are a small one-man band, then a simple cloud-based system will probably fit your needs. But if you have potentially thousands of contracts stored in multiple formats, locations and systems, then obviously you need a system that will scale, but ideally one that will sit on top of existing IT infrastructure, rather than adding an additional level of complexity or investment. For instance, if you are using Microsoft SharePoint, then there are various SharePoint-based contract management solutions now available. Also consider the usability of the system for staff without legal or IT expertise: are there management dashboards that are easy to use? What about reporting tools? Can the system link with existing organisational KPIs? Will it integrate with other systems?

Understanding your contract landscape

February 24, 2011

Understanding your contract landscape should be the first key stage of an enterprise contract management strategy.

Contracts are central to the way that business is conducted. As business-to-business transactions become more international and complex, so too have the contracts that support those transactions. Contracts contain a myriad of milestones, commitments and obligations that need to be identified and tracked in order to manage contracts effectively.

Lost or hard to find contracts
Unfortunately for many companies, much effort is put in to the negotiation of terms and conditions and less attention to what happens to the contract once it has been signed. Contracts that should be proactively tracked and managed end up lost or hard to find in file shares, computer desktops and other repositories.

Three key questions to ask yourself
Here are three questions that should be asked as a litmus test to assess the level of visibility and control over contracted commitments:

  • Do you know exactly how many active contracts your company has?
  • Do you and other key stakeholders in your company have visibility of all contract milestones, commitments and obligations?
  • Can you demonstrate to your senior management team that all contract related commitments and obligations have been complied with?

For most General Counsels, there are two options to address the issue of legacy contract visibility:

  1. do nothing
  2. conduct a time consuming, complex and expensive audit using specialist external consultants.

Dolphin AutoCapture – the legacy contract discovery engine
Dolphin AutoCapture is the first legacy contract discovery engine that uses search and artificial intelligence-based technologies to:

  • Rapidly locate lost or hard to find legacy contracts in Windows File Shares and computer desktops
  • Automatically extract key contract milestone data from contract documents
  • Present key contract related data to senior managers in a simple management dashboard.

Dolphin AutoCapture automated contract audits are significantly faster and cheaper than conducting manual audits with external specialist consultants.

Understanding your existing contract landscape should be the first stage in your contract management strategy.

Free webinar
Join Dolphin Software for a free-to-attend web seminar to find out more.  Visit http://dolphin-software.com/lp_contract_landscape.htm for further information and to register.


Dolphin Software CFO Mark Williams – Is contract management becoming more complex?

February 9, 2011

CIO and Computerworld magazines recently published interviews with Dolphin Software’s parent company CFO being interviewed about whether contract management is becoming more complex.

Read the CIO Magazine article here:  http://tinyurl.com/4lf6bfw


Are contracts the icebergs of your company?

January 23, 2011

Are contracts the icebergs of your business?An estimated 80% of business-to-business transactions are underpinned by legally binding contracts and agreements. Though many of these contracts contain clauses, terms, conditions, commitments and milestones that need to be tracked and managed over the contract’s life to maximize business benefits and minimize associated costs or risks, most organizations never actively manage their contracts during the agreement period. Contracts are archived away in departmental filing cabinets never to be reviewed again until a problem arises or the contract has already expired.

Research firm, Faulkener Information Services estimates that as many as 10% of contract documents are lost each year.

Some of the world’s most respected companies have contract management practices that leave much to be desired.  Many companies do not simply have control over contracted commitments, milestones or obligations because key business stakeholders are not able to readily access relevant or timely information about what is contained within contracts because the contract documents are either lost or hard to find.

It is common for General Counsels and other contracting professionals to express frustration that they do not know how many contracts their organisation has or what commercial terms and commitments are contained within them.  Contract Management software systems play a significant role in gaining control over the contracting process, but they largely ignore the issue of capturing existing or legacy contract contracts and data.

Dolphin AutoCapture is a unique Contract Discovery solution that makes use of advanced search and artificial intelligence-based technologies to conduct an instant and automated audit of your contract landscape.

Starting at as little as $15,000, Dolphin AutoCapture will automatically locate lost or hard to find contracts in Windows File Shares and computer desktops, identify duplicate documents and tell you exactly how many contract documents (and by type) you have throughout your organisation.  Dolphin AutoCapture also extracts key contract milestone data from recovered contracts (like start/termination/renewal dates, contract parties, locations, values, currencies, right to assign, etc) and presents this data instantly for Legal, Finance and other contracting professionals to analyse and interrogate.

To find out more about Dolphin AutoCapture, visit http://www.dolphin-software.com/autocapture.htm and navigate around your contract icebergs.


Before last weekend, did you consider printer cartridges to be a risk?

November 2, 2010

No, nor did we.  It is surprising to discover what other unknown risks you may have hidden in your organisation.  Take contracts, for example.  Do you have full visibility and control over your executed commercial and procurement contracts?  Are there inherent risks in your contracts that you do not have ready access to, or that your business is not managing effectively?  Do you base your business plans on contracted obligations and commitments that you do not have control over?

As Andy Kyte at Gartner says, ‘contracts are the lifeblood of an organization and if you are not in control of your contracts, you are not in control of your business’.

So, what should you do about hidden or hard to find legacy contracts that are not being managed effectively?  Typically, you will normally have two choices:

  • Ignore the problem and leave your legacy contracts as they are (but run the risk of contracted obligations and commitments not being managed)
  • Hire resources to locate, scan (if in paper format) and manually profile legacy contracts and milestone data. (For many organisations, this is too costly and too complex to consider).

Dolphin AutoCapture – the world’s first discovery engine for legacy contracts
Dolphin AutoCapture is a solution that has been designed specifically to address the issue of locating lost or hard to find legacy contracts hidden in Windows file shares and user desktops.

For many organisations, legal, procurement and commercial teams spend significant energy and resources negotiating and fine-tuning the terms and conditions of contracts, only to disguard the contract document once it has been signed and executed.  An average procurement or commercial contract will contain a mixture of critical dates that need to be tracked, as well as obligations or commitments that need to be managed effectively in order to maximise the value from the business relationship.

Dolphin AutoCapture is the first solution that will:

  • Discover and identify list or hidden contracts in Windows file shares and computer desktops
  • Automatically extract key contract milestone data from contract documents
  • Provide a management dashboard with instant visibility into contract milestones and key terms

If you are planning for your next financial year at the moment and you are formulating plans on your understanding of what you have committed to in procurement and commercial contracts, but you feel that you do not have complete control or visibility of your contracts, consider deploying Dolphin AutoCapture to provide instant visibility and control over your contracts and commitments.

For more information, visit: http://www.dolphin-software.com/autocapture.htm