Our Contract Lifecycle Management Experience - Identifying the Keys to a Better Selection
If you’ve worked in Corporate Operations, you can likely relate to this scenario… Your CIO or other senior executive contacts you to inquire about the status of an important vendor contract—Do we have a copy? Was it fully executed? Is it still active? If your company had the foresight to plan and implement a formal contract management tool and policy, then providing the answers is an easy task. If not, you embark on an anxiety producing, multi-step challenge beginning with a hunt to locate documents from various departments within your organization and concluding with an evaluation and serious discussion about what can be done to prevent this dreadful situation from happening again. Hopefully, the following account of Endurance’s experience selecting a CLM tool will provide useful insight and tips to help create a roadmap for your organization’s successful CLM selection and implementation.
Having a central contract repository for general operational contracts can be critical given the increased complexity of a company’s operations and the need to support a fast growing business. With various types of agreements, multiple global locations, and legal entity complexities, implementing a CLM tool can provide the necessary base level for contract management. Prior to implementation of a CLM tool, companies often manage contract details through home-grown and very rudimentary solutions utilizing existing tools such as document repository software, Microsoft Access, or corporate shared drives. Following significant growth in the number and types of contracts managed, it will become evident that in order to scale to meet this growth, management needs to reevaluate the long term contract management strategy to ensure that the company can effectively manage the increasing demand for contract management processes. It doesn’t happen overnight, but after carefully defining requirements, reviewing multiple products and testing various solutions, you will be able to identify the most appropriate system for your company. With many quality solutions on the market, small/ large, sophisticated/ simple, client based/ fully hosted, the takeaway is that if you do your homework and really pinpoint the specific needs of your organization, the right CLM solution is out there for you.
It sounds simple, right? “What do we need?” Solutions are not typically one size fits all and responses will likely vary greatly based on your organization’s specific type of usage, so be sure to consider the following:
- Review of organizational needs with your key stakeholders (i.e. Legal, Operations, IT)
- Does your organization need the complexity offered by a larger vendor’s solutions or would a simpler solution from a smaller, niche vendor provide greater flexibility better suited to your needs?
- Keeping the decision simple. New vendors or upgraded applications are entering this market quickly to try to fill voids in required functionality, so the tools will continue to mature over the next few years.
- Request references from current customers and seek access to the vendor’s online support groups or chat forums to gain insight into how others are using the application.
SaaS products are becoming key players in this area. It’s important to understand the tradeoffs of on premise vs. SaaS solutions. For example, while it is typically easier to stay on top of current system releases with an on premise solution, SaaS tools often provide greater flexibility and offer ongoing support with little required support. The ability for the Procurement/Contacting and Legal departments to self-manage the process to free up internal IT support can be a critical requirement.
With the growing need for organizations to integrate different key software applications, understanding system limitations upfront is important
In order to really understand if a product will meet your needs, completing a pilot or trial period of the tool is essential. This will provide your project team with the ability to truly evaluate first hand a product’s critical functions, including data attribute requirements and reporting capabilities, implementation and support services, and will help identify any critical weaknesses upfront. While most vendors are reluctant to provide free trial periods and often charge a small fee, it’s worth the investment and can prevent you from being stuck with a sub-par tool that fails to meet your needs later on. Be careful not to let the lead vendor know your preferred solution and be sure to have more than one top selection. With vendor consolidations taking place as well, sometimes option two may become the best solution.
With the growing need for organizations to integrate different key software applications, understanding system limitations upfront is important. Having a clear understanding of what API’s are available–both those that may be included as part of the software and those that will require additional costs— will help planning future application usage. For example, integration with e-signature tools, single sign-on and standardized workflow processes are often some of the most important in the selection process but this varies by organization and whether the CLM tool will be used on the buy-side or sell-side processes.
For many, the largest and most crucial requirement is that the CLM tool provides a means to standardize many contract templates, contract clauses, or approval processes. Your ability to dictate standard company terms and conditions provides speed and flexibility when changing requirements. Therefore, when confronted with new or changing contract requirements, having a CLM tool reduces administrative support and improves overall contract compliance. Having standard and repeatable workflow processes is critical to ensure process efficiency, as deviations, whether tool or policy exception based, can cause the breakdown of even the strongest CLM process.
Your CLM tool selection and integration may be overlooked and considered a low corporate priority, but the reality is that choosing the right tool can provide immediate benefits felt company wide. Given the increasing demand for new corporate and/or audit requirements faced by all firms (e.g., Dodd-Frank, HIPAA), improving contract documentation and compliance is key. Choosing the right tool comes down to creating and following a formal plan and carefully addressing your organization’s requirements. It can mean the difference between deficiency and overall process efficiency and reduced costs. If you do it correctly, choosing the right CLM tool will also mean that you never need to send that dreaded reply to your CIO stating you just can’t locate that crucial or important agreement.