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?
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Managing contract obligations across the enterprise

March 23, 2011

For many organizations around the world, contracts and agreements govern the way that they conduct business relationships with external parties, like customers, suppliers and partners.  In order for business relationships to be effectively managed and for your business to extract the maximum potential and value from your contracts with external parties, it is necessary to track and proactively manage contract milestones and obligations effectively.

Contracts invariably contain two types of data that need to be tracked and managed:  Milestone data (like critical dates, contract parties, contract values, currencies, etc.) and obligations or performance-related data.

While some companies may capture contract milestone data in spreadsheets or databases, it is relatively rare to come across businesses that adequately track and enforce compliance to contract-related commitments and obligations.  One reason for this may be the fact that historically, Contract Management has suffered from a lack of strong enterprise sponsorship and ownership.  We are now observing an increasing number of General Counsels taking on this mantel on behalf of the business to drive through ownership and responsibility for contract-related obligations and risk management.

Contract obligations may be applied to both your business as well as the external party and may include conditions that need to be complied with or tracked to adhere to corporate governance or industry regulations, quality commitments, performance targets, payment terms and schedules, etc.

Dolphin Contract Manager treats contract obligations as dynamic tasks that can be created, classified and allocated to the relevant business stakeholder who will have responsibility for ensuring that the specific obligation task has been adhered to or complied with.  The system includes a unique closed-loop compliance funtion allowing contract managers and business executives to monitor compliance to contract commitments and obligations and to provide the senior management team with management information about the status of compliance to contracted commitments and obligations.

To understand more about the importance of managing contract obligations across the enterprise, why not register for Dolphin Software’s free-to-attend web seminar on Tuesday the 12th of April 2011.  Further information can be found at:  http://dolphin-software.com/lp_contract_obligations.htm


Is Microsoft SharePoint ready for mission critical business applications, like Contract Lifecycle Management?

February 15, 2011

A recent market survey published by Global 360, entitled:  How are businesses using Microsoft SharePoint in the Enterprise, highlights the significant strides that Microsoft SharePoint has taken in the last year in terms of enterprise adoption.

The Global 360 survey polled over 800 companies in 2010.  Here are some of the key highlights:

  • 90%  – organizations surveyed have and use SharePoint
  • 97% – organizations who will look to deploy SharePoint
  • 67% – have deployed SharePoint enterprise wide

The phenominal growth and adoption of SharePoint in the enterprise is truly disruptive to traditional ECM and collaborative incumbent technology solutions.  Of the 3% of organizations who were not currently looking to deploy SharePoint, most companies admitted that they would be considering SharePoint at some stage in the future. 

The table below shows how Microsoft SharePoint is currently being deployed amongst the organizations surveyed:

How widespread is the deployment and usage of Microsoft SharePoint in your organization?
Use within team or single SharePoint project site 4.94%
Limited SharePoint sites or department use (1-3) 11.03%
Several departments (4 or more) 16.98%
Enterprise-wide deployment of SharePoint 67.98%
Total 100%

With market saturation within reach, the big question for CIOs must be:  Is Microsoft SharePoint mature enough as a platform to deliver enterprise applications?

The Global 360 survey would suggest that this is rapidly becoming the opinion of SharePoint users.  Here is a summary of some of the key findings about how SharePoint is being used within the enterprise:

  • 67% – organizations using SharePoint for enterprise Document Management & Workflow
  • 27% – organizations who use SharePoint to support mission critical business processes

So, nearly one third of SharePoint users now deploy SharePoint to manage mission critical content and to support key business processes.

CIOs and IT strategists must now seriously consider business applications built on top of the Microsoft SharePoint platform that support critical business processes and compare the pros and cons against other enterprise platform solutions from SAP, Oracle or even .Net and Java based applications.

There is one significant fly in the ointment as far as SharePoint in the enterprise is concerned, however.  51% of companies surveyed complained that too much time and internal resources were being tied up trying to develop point and line of business solutions in SharePoint.

This is precisely where independent software vendors like Dolphin Software can help organizations and add value to SharePoint environments where it is most needed.  Most organizations do not, and should not, consider themselves to be software development houses.  Microsoft SharePoint has matured to an extent that it is now a viable platform for delivering robust business applications, but it should be considered as such – a platform. 

Dolphin Software would consider itself first and foremost as a best-in-class Contract Management software vendor that uses the Microsoft SharePoint platform as a delivery mechanism to its business users.  This has several advantages for Dolphin’s customers.   From a CIO’s perspective, a comprehensive SharePoint based business application, like a contract lifecycle management solution, is a compelling example of how SharePoint can add value in a business context.   From the business user’s perspective, a SharePoint based business application should be familiar and easy to use and therefore easier to deploy to enterprise users.

For further information about deploying mission critical business applications, like Contract Lifecycle Management on the Microsoft SharePoint platform, visit: www.dolphin-software.com


HR contract management and why it is important for your business

February 6, 2011

Many companies admit that they could do a better job when it comes to contract management.  However, those companies that do consider contract management solutions, usually only consider operational contract processes, like procurement or sales contracting.

HR often gets left out in the cold.  It is fair to say that some business executives still view a contract as a  tactical ‘insurance’ policy for when things get difficult.  World class organisations who look at contract management from a business critical and strategic perspective, view contracts as the outline of the business relationship between themselves and a third party – with terms and conditions, that if effectively managed, can be exploited to maximise commerical gain or minimise risk exposure.

So why should a business care about its HR contracts?  There are several areas where deploying a contract management solution to automate the HR contract process can provide significant benefits.

First and foremost is staff turnover.   Average staff turnover for US organisations is 15% (closer to 100% in the fast food industry), according to a recent report by Nextera.  This can produce a significant burden on HR functions and business managers looking to contract with new permanent or temporary staff.  Contract drafting for most companies is a slow and manual process that involves duplication of effort and multiple stakeholders. 

Self-service contract authoring
Self-service contract authoring solutions, available in contract mangement solutions like Dolphin Contract Manager, allow business managers to create tailored and compliant contracts by answering questions provided in online wizard-driven questionnaires.  Contract Managemnet solutions with self-service contract authoring will automatically save contracts created in a central repository and can instigate internal approval workflows.  These solutions also make contract amendments, when employees change role, a simple and rapid possibility.

Implementing organisational change
Senior business executives who are looking to restructure their businesses have a need to have accurate and timely information about their human resource pool in order to assess how rapidly and smoothly they can instigate organisational change.  Information like length of service, termination terms, remuneration and notice periods are all required, but it many cases, current and accurate data relating to HR contracts is not easily accessible.  When employment agreements are lost in the myriad of corporate file systems, it can be even harder to efficiently gain access to contract-related information.  Contract Discovery solutions, like Dolphin AutoCapture, aim to make locating lost or hard to find contracts a thing of the past.  Dolphin AutoCapture locates lost contract documents in Windows file shares and computer desktops, automatically extracts key contract milestone data and uploads the contracts and data seamlessly in to the Dolphin Contract Manager system for proactive tracking and management.

Managing HR contract related litigation
Digruntled employees who sue their employers is a common cause of contract related litigation and costs businesses millions in disruption to business, expenditure on external legal and audit and discovery services, particularly when the current version of the employment contract cannot be readily located or where the contract has not been updated to reflect changes to the employees role or employment status.

Human Capital Management
A growing number of companies have begun to look at managing their people and talent as resources that have a financial value to their business.  Human Capital Management and the on-going requirement to enhance the training and qualifications of employees to enhance their asset value, requires micro-management of contract related terms and conditions to extract the greatest value and potential.

Managing outsourced service providers
For those businesses who have outsourced their Human Resources function, will be be aware of the need to manage contract milestones, performance targets and obligations closely in order to maximise the value and savings expected when key business functions are contracted out to third parties.  Contract Management software is key to allowing HR and key business stakeholders with the right management information to manage these relationships effectively.

In short, contracts are central to Human Resources and HR executives who are looking to improve efficiencies and erradicate unnecessary cost and risk in HR contracting should consider deploying a contract management solution.  Dolphin Software holds regular free to attend web seminars.  Visit: www.dolphin-software.com/events.htm for more information.


Can legal do a better job at supporting sales contract management?

January 26, 2011

The International Association of Contract and Commercial Managers (IACCM) are currently polling legal and contracting professionals to record their thoughts and opinions on how contract management is handled in the companies that they work for.  One of the early conclusions of the survey (which can be accessed here:  https://www.surveymonkey.com/s/StateofSalesContractManagement), is that many sales and commercially focused staff still view Legal as being too risk averse and a cause of inertia in the commercial or sales process.

Perhaps, Legal would argue, that if they are not going to be risk averse and cautious, who else in the organization is going to be?  On the other hand, with quarterly sales targets to meet, it is faster (but thorough) contracting that is required to facilitate risk managed, but commercially optimized deals.

Contract Management software solutions, like Dolphin Contract Manager do have a key role to play here.  The contracting process for many companies can be manual and inefficient.  Technology based solutions that support the contracting process can reduce contract cycle times and allow key stakeholders, like Legal, to add value in the right places and at the right time, instead of having to become involved in all transactions that tie up limited legal resources.

Self-service contract authoring, where non-legal users, like sales teams, are able to create tailored contracts and agreements by completing intelligent questionnaires is a major development in corporate contract management systems.  Previously technology that was used by law firms to automate the creation of standardized contracts, is now available to free up legal resources so that they can focus on the exceptions and non-standard contracts.

Legal clause libraries that allow legal language to be formatted in to reusable objects and then used to speed up new contract drafting or to be inserted in third-party contracts during contract negotiations, also play a significant part in empowering key business stakeholders in the contracting process, while legal maintain an oversight role.

Providing a central electronic repository for contract documents with version control and security profiling would seem obvious, but it is surprising to see how many companies exercise little or no control over where contract documents are stored.  Without strict control mechanisms in place, an organization will soon lose control over contracts and commitments contained within them.

Post-award contract milestone and obligations management is typically lax in many organizations, and it has been suggested that perhaps legal advisors take an overly conservative and risk averse stance when the focus of the contract is on its worth as an insurance document in preparation for when there are breeches, rather than as an outline document detailing the commercial relationship between the two parties.   After all, over 60% of commercial litigation matters now relate to contract disputes.

If legal resources can be freed up to focus on non-standard and exceptions and if there is an efficient and effective way to proactively manage contracted milestones and obligations, then perhaps we will be able to see the legal team being able to spend more time overseeing the contracting process and adding value where it is most needed.

Dolphin Software has recently published a new white paper entitled Why contract management should be a strategic imperative for your business, which can be downloaded here: http://www.dolphin-software.com/lp_cm_whitepaper.htm


Post-award contract management becoming more adversarial

January 23, 2011

In a recent blog post by Tim Cummins of the IACCM, he observes that members of the international body of Contract and Commercial Managers that the IACCM represents, have noted that contract negotiations are becoming more adversarial and relationships between customer and supplier, increasingly one-sided.

This is despite efforts in recent years by the IACCM and others to promote win-win based collaborative commercial relationships.  It would seem that when economic times get tough, buyers of goods and services will revert back to old practices of pushing for the lowest cost for the highest quality.  Contracts that were negotiated before the recession, with long term goals in mind, are now being amended and changed to incorporate changes in payment terms, early terminatation clauses and other buyer-centric conditions.

Recent research by US law firm Fulbright & Jarowski would appear to back this observation up, as new research published by the firm, now indicates that over 60% of corporate litigtation is related to contract disputes.

Technology cannot change human behaviour, but contract management software solutions can have an important part to play in the development of long term win-win relationships between customers and vendors.  Contract Management systems provide key business stakeholders on both sides of the commercial relationship with the right data and information to make sure that contracted commitments and obligations are adhered to; and if they are not, how to go manage amendments to contracted terms in the least disruptive way.

Visit www.dolphin-software.com to read more about how best-in-class contract management software can improve the management and productivity of relationships with your key customers and suppliers.

Download a free whitepaper on why Contract Management should be a strategic imperative for your business here: http://dolphin-software.com/lp_cm_whitepaper.htm


UK coalition government looks to improve contract oversight in public sector

November 20, 2010

One of the first actions of the new coalition government in the UK led by David Cameron in May 2010, was to enact new legislation to compel central and local government organisations to disclose details of all expenditure and contracts worth in excess of GBP 500 (USD 800).

In an environment where contract commitment management has been lax and almost non-existant (the National Audit office claimed that the central government wasted GBP 300 million each year on IT and Telecom contracts alone in 2009), this will prove to be a major challenge for local and central government organisations.

There is much fear at the local government level that this new legislation, aimed at “Labour’s secretive and wasteful contracts regime”, will add significant cost and workload at a time when budgets have are being cut as part of the Government’s austerity measures.

Proper contract oversight is always recommended, but never has there been a greater need in the Public Sector to get a handle on contracts and commitments.  A Freedom of Information search relating to contract search should take a matter of seconds to comply with, if an organisation has proper control over contracted milestones and commitments.  With more and more public services being outsourced (the BBC claims that Capita has gained outsourcing contracts worth in excess of GBP 3 billion in the public sector), it is becoming more and more difficult to adquately manage contract spend and obligations.

Now is the time for public sector organisations in the UK to evaluate the benefits of using technology solutions to manage and control contracts more effectively, so that adequate funds are put aside in the new financial year.  Contract Management software solutions play a key part in an organisation’s governance, audit and compliance regime.  In the public sector, there is a real need to extract more value out of contracts with external suppliers and service providers as budgets and tax revenues decline; as well as the requirement to avoid costly reputational damage when poor contract oversight is exposed through Freedom of Infromation requests or via the media.

Dolphin Contract Manager from Dolphin Software provides best-of-class contract management functionality across the entire contracting process to allow organisations to keep track of supplier performance, contract spend and control over contracted obligations much more effectively than can be achieved through manaual means or managing contracts by spreadsheet.

Download BearingPoint Consulting’s authoritative 2010 Contract Management study from www.dolphin-software.com to assess how contract management software can benefit your organisation.