Procurement and Legal: The Great Contract Management Debate
Since 2009, LogicSource has delivered indirect procurement assessments, services and technology for hundreds of clients across a wide range of industry verticals.
One of the most common challenges that we help resolve for our clients is Contracts Management. Ownership of the technology used to manage the contracting process and subsequent storage of contract documents and meta-data is a frequent area of debate between Procurement teams, their Legal partners and business stakeholders.
Contract Lifecycle Management (CLM) is a process, and when automated in purpose-built tools has the potential to generate significant benefits. That sounds great at the high level, but as we get into the detail, we find that the expectations from Legal and Procurement teams are rarely both satisfied where CLM tools are implemented.
In fact, CLM implementations have tremendously high failure rates, and the future does not look any brighter. Gartner predicts that by 2024, 50% of first-time CLM implementations will fail to deliver the expected benefits.
Why is this? Here are some behaviors to avoid when selecting your partners for Contracts Management.
Know Your Use Cases: Two Different Owners, Two Different Priorities
Legal teams are responsible for the “pre-signature” contracting processes of document drafting, redlining, approval workflow and eSignature execution. Their priority is to be more efficient in responding to hundreds of new contracts requests they get each year. They are focused on the inclusion of key clauses and protecting the company legally, while at the same time ensuring business terms are clearly written to avoid risk and ensure compliance.
Procurement teams are responsible for the “post-signature” processes of ensuring properly managed and well-negotiated renewals as part of their overall category plans. Their priority is to ensure a smooth stakeholder and supplier experience by proactively managing against a comprehensive calendar of contract renewal dates. They are focused on buying at the negotiated price, measuring supplier service level agreements, driving new initiatives on areas such as payment terms and proactively working with stakeholders to avoid fire drills on expiring contracts or missing an autorenewal date.
These are two distinctly different sets of requirements, and each deserves purpose-built automation so that Procurement and Legal spend less time in the tools and more time with their respective business stakeholders and suppliers.
Don’t Forget About the Implementation
Contracts Management has moved up the priority list for many organizations as awareness of its value is more widely understood. Selecting a technology solution is just the beginning; however, a smart, well-executed implementation plan is essential to ensure full value realization.
In our experience, implementations of contracts technology platforms have most often been led by Legal as the budget owner for the solution. This has typically meant increased focus on the “pre-signature” aspects of the solution, leaving Procurement’s “post-signature” priorities under-served. Most commonly the meta-data fields available do not cover the full requirements, and there is almost always a need for additional (and unbudgeted) resources to do the work of tagging and uploading the metadata fields for the contracts post-implementation.
This is a very solvable problem, but requires proper understanding prior to selecting a provider and rolling out the solution, particularly when the measurable business case value comes, more often than not, from an organization simplifying its contracts creation-execution process and separating it from the ongoing contract management process. The “post-signature” priorities should be supported with a contracts metadata services from the provider to ensure contract metadata is kept comprehensive and up to date throughout the life of the relationship.
Contract Lifecycle Management Requires a Best of Breed Solution
We have not yet found the Contracts Management “Panacea” that will satisfy both organizations. That is why we built OneMarket Contracts to excel solely at Procurement’s “post-signature” requirements and deliver a market-leading portfolio of meta-data fields combined with an included service to ensure contracts are uploaded to the platform as part of implementation and then ongoing over the life of the agreement.
Legal teams need, and should select, their own upstream purpose-built tool to draft, redline, and route documents for approval and execution without worrying about procurement’s needs. There are numerous options the business has often already invested in to achieve this (notably Adobe and DocuSign).
Likewise, post execution of a contract, Procurement requires its own purpose-built repository to manage thousands of documents, tagged with rich procurement-relevant meta-data to empower fast and efficient advanced search capabilities along with alerts and notifications to ensure they never lose sight of acting proactively on a key event or date.
Contracts Management has arrived as the next initiative that every company needs to roll out alongside their sourcing RFx, spend analytics, e-procurement or supply chain tools. The value is significant, but the pitfalls are real if businesses do not choose the right tools for the job and think carefully through the implementation and longer-term business requirements.
The innovative leader in procurement services and technology, LogicSource is purpose-built to drive profit improvement, mitigate risk, and ensure supply chain continuity through better buying. LogicSource focuses exclusively on the sourcing and procurement of indirect goods and services, which typically represent 20% of an organization’s revenue and the area of greatest spending inefficiency. These include complex categories like marketing, packaging, corporate services, facilities, information technology, distribution and logistics and more, for which organizations often lack the capacity, focus and scale to achieve best-in-class buying. Unlike traditional advice-based consultants, LogicSource is a purpose-built buying utility with assets that are configurable to their clients’ needs and ready to deploy. By combining decades of sourcing and procurement expertise, superior market intelligence, cross-portfolio spending leverage, and their OneMarket® Source-to-Pay technology, LogicSource executes customized solutions that deliver immediate savings and sustainable value. For more information visit www.logicsource.com.