Enterprise Contract Management Lifecycle: A Reality Check

22 March 2017

Here is a list of top 5 ‘reasons’ (excuses rather) that we commonly hear from senior legal functionaries regarding Contract Lifecycle Management (CLM) software during the course of our engagement:

  • Enterprise Contract Lifecycle Management is a good-to-have but not a must-have
  • I have read a lot of positive press & heard some of the thought leaders too about why one should have Enterprise CLM, but where is the budget?
  • All said & done….Can you assure ROI?
  • My present team is highly efficient and equipped to handle all legal requirements in-house so I don’t see why do I need a CLM implementation right now?
  • Who is going to pay for this? I don’t have an ear marked budget for this purpose.

I prefer to label these as excuses primarily and not the true business justification for not having an efficient, modern and feature rich Contract Lifestyle Management software because while some of the above reasons represent short term thinking whereas the other represent ‘Silo’ mentality, which holds back a modern day business from achieving new heights. Let me elaborate why? To do so let us list a few common business challenges and ‘feedback’ that we usually uncover when undertaking a comprehensive evaluation of their present contract lifecycle management process:

Challenges:
A. Majority of the times Legal department is not in a position to track renewals/performance commitments against existing contracts. While some resort to achieving this through an excel spreadsheet (which simply is not meant for such a purpose & has limited functionality to satisfy such requirement usage), others rush at the end to gather feedback from stake holders about how a particular business counterpart did on keeping their end of the bargain? The end result is obviously insufficient information, unsupported conclusions, delayed action on renewal or holding the counter-party responsible for non-performance or imposing penalties for the non-performance.

B. A General Counsel often has to face a situation where he/she is suddenly asked important details or updates about certain important contracts. While a General Counsel would expect such questions but these scenarios sparsely get the pro-active attention where data could be available handy with the General Counsels at the very moment and it becomes a guessing game at the end. The General Counsel is a human and not a machine so they can only remember so much. Consequently, if asked for an important update about a participation contract that might have been missed on the radar they have to frantically reach out to the team and ask them to dig through the paperwork or scanned PDF to get them the requested info. Let me reiterate that the above happening are not make-believe scenario but a fact uncovered by us during the course of interviewing leading General Counsels in corporate India. Thus, you can imagine how tough (but extremely relevant) it is for businesses to track, record and act upon performance information relevant to individual contracts.

C. Microsoft Word has and will be the most important piece of technology being used by leading legal divisions across the globe. The reliance on MS-Word is so much that it is difficult to describe it in words; maybe we can call them quintessential element. Legal Agreements are red-lined, comments are inserted for relevant legal clauses and notes are exchanged among the parties. However, what seems like a highly efficient process is in reality in-efficient with significant scope for improvement. A world class CLM software can help legal teams shave off close to 60% of the overall processing time by leveraging automation and machine learning intelligence. NO! This is not a number pulled out of thin air but a number that often is reported by satisfied legal users about how Enterprise CLM Software helps them achieve target ROI. The number is achieved because a suitable Enterprise CLM completely automates basic control management requirements and standard contract types; thus, reducing the overall processing time.

D. A Modern business is built on pillar of collaboration among different business functions. Minus such collaborations it is evident that outcome would be sup-optimal and goals being missed. This is a universal business truth and holds true for legal division too. A common trend that emerges from the various interviews done by us with General Counsels is that they find inter-departmental co-ordination and real time communication to be a challenge. This is not surprising because in a hyper-connected world no one has enough time or availability. A typical business situation can be something like below:

    A ‘Master Service Agreement’ is being negotiated between a Software Service Provider and an End-Customer (a large enterprise manufacturer of automobiles world-wide) and the MSA has various annexures that deal with critical timelines with regards to TAT, performance metrics, penalties and credits, etc. Now, Legal has the unenviable responsibility to go through this entire stuff and make sure that what they are signing off upon is accurate, can be delivered and does not potentially expose the organization to any type of RISK (Legal, financial, performance or otherwise). However, Legal requires significant inputs from various groups (both on part of provider of software as well as the customer (the automobile major) to ensure that the above objective is met. Now, that is easier said than done because it requires co-ordination with different divisions and stake holders with in the company.

    General process would mean numerous rounds of emails, in-persons meetings, conference calls and filling up legal notepads, isn’t it? I would leave it to the readers to estimate the cost, money value of the time and money value of effort! Now, imagine the same being done via an enterprise CLM software environment, which represents an inter connected enterprise that ensures that all the relevant business functions are connected with each other and are aware of what they are supposed to do with regards to the approval process for the contract. Think of it to be something like a ring-fenced Twitter without the character word-limit and one business stakeholder can tag any other relevant business stake holder and ask a question or provide inputs or provide answers. Thus, you have a private real-time workspace with real time co-ordination and chat capabilities that make co-operation a breeze. Thus, no more setting up inbox or email reminders to follow-up on responses from stake holders to be on the top. Combine this with the ability of Enterprise CLM software to be present across various mediums – Desktops, Mobiles, Tablets, and you have a potent solution that addresses above listed challenges effectively.

E. A common ask that General Counsels get from the management is about real time tracking of key legal KPIs, which seems to matter the most to a CFO in the corner office. While the ask across various industries do not differ significantly but it is not an easy ask most of the times:

  • Real time view about contracts in- authoring, in-negotiation, in-signing etc
  • A funnel view of contract along with their value for different categories
  • Real time view of contracts in different categories along with monetary value of obligations (due towards the organization & those due towards the other party by the organization).
  • Contract numbers along with value that are up for renewal

Thus, legal teams spend a significant amount of time everyday uploading charts and pivot tables that are included in executive summary updates to be shared with the C-Level. In a CLM enabled environment there is no such need for any human intervention because of the presence of dashboards that capture such information from underlying reports and generate relevant charts. Periodic reports featuring high level numbers on-the-go that automatically get sent as email/push notifications to the C-level based upon values that are setup in the software. Imagine what a blessing this is for a Chief Legal Officer and their teams? In a hyper efficient and hyper connected world where CLOs are constantly asked ‘how can you get more work done with lesser resources and reduced cost?’ this is one shining example of immediate high level impact and a visible one.

The above is only a suggestive list of challenges and I am confident that my readers would be able to add a lot more to the above list and identify with those that I have listed above.

Insights

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