Contracts Management Presentation for ACC’s Law Department Management Committee

Today Jason Mark Anderman, of Becton, Dickinson and Company, and I presented a “legal quickie” for ACC’s Law Department Management Committee on the topic of “Contract Management Systems.” This is becoming a hot topic for law departments, as more forward-thinking general counsel are realizing that their departments can make a significant contribution to corporate performance (as well as Sarbanes-Oxley compliance) by implementing better systems and processes to manage their contracts, contract processes, and contract-related information. 

 

Jason described the steps that his company has taken to streamline their contracting processes, including flexible and comprehensive templates for procurement contracts and better processes and systems to manage the contract lifecyle and contractual information. 

 

But as impressive as Becton, Dickinson’s results have been, the kinds of processes Jason described can only take you so far. Any company with a significant volume of contracts or contract activity should be looking at a contract lifecycle management system (CLM — also known as an enterprise contract management system) to help manage and automate the entire contract lifecycle. A CLM system can be defined as:

 

An integrated system that applies business rules to manage contracts of the enterprise on a worldwide basis, from request, through contract creation, negotiation, approvals, distribution, and filing in a central, searchable repository, and that allows people and systems within the organization to access, analyze, and act on contract-related information to improve efficiency, consistency, reporting, and control.

 

Companies that have implemented CLM systems have reported significant improvements in these and other measures. Many companies have been able to decrease the involvement of their legal departments in routine contracts by using CLM systems to implement controlled self-service contract creation processes. There are many examples of revenue improvement through better management of contract renewals and escalation clauses that in some cases are enough to pay for the costs of the systems.

 

Finally, tangible benefits to corporate law departments include better control and visibility of contracts and contract-related risks, the ability to share contract-related knowledge across the enterprise, and the ability to allow highly paid legal resources to focus their efforts on higher-value activities rather than administrative tasks. Many of these systems also allow legal departments to measure and report on performance and performance improvements, something many general counsel struggle with.

 

We didn’t get a chance to discuss the latest trend in contract management, which is CLM systems that combine a technology platform with a team of offshore and/or onshore resources to help manage the often labor-intensive process of inputting information into the system (especially legacy contract information), configuring the system, and mangaging and maintaining it. More information on that topic is available here http://davidmunn.wordpress.com/2008/03/13/next-generation-contract-management-systems-more-than-software-more-than-lpo/.

 

For mor information on contract lifecycle management systems and a list of vendors, see   
http://davidmunn.files.wordpress.com/2008/03/contract-management-systems-session-409.doc

 

The International Association for Contract and Commercial Management (IACCM) is also a great source of information regarding contracting and contract management systems.

 

David Munn

 

Disclaimer: My company, Pontus Global, Inc., provides contract management systems and services using a combination of technology, processes, and people. This was an interesting call for me because I’m currently in Bangalore visiting the Pontus India team, which meant the call started at 10:30 pm Bangalore time. Although the cell phone system in India disconnected me from the call just as I was starting the presentation, I was able to reconnect fairly quickly and the rest of the call went off without a hitch.

IACCM Americas 2008

Another outstanding IACCM Americas conference concluded yesterday in Fort McDowell, Arizona. A record 400+ attendees heard more than 30 presenters on the theme of “Collaborate to Innovate.” This was my second IACCM Americas, and once again IACCM delivered a number of informative and thought-provoking programs.

If I were to summarize the themes of the conference in one sentence, it would be:

Companies are entering into sub-optimal relationships, stifling innovation, and leaving a lot of potential money on the table by spending too many of their contracting resources trying to shift risk to the other side, while focusing too few resources on how the parties could work together more effectively to create additional value from the relationship.

IACCM is unique in bringing together both buy-side (procurement) and sell-side contracting professionals, and IACCM Americas and IACCM EMEA may be one of the few times that happens outside of the contract negotiation context. In fact, judging from the comments of several people at the conference, it seems that even within many companies the buy-side and sell-side contracting people rarely talk with each other.

With contracting relationships seemingly becoming more confrontational all the time, it’s refreshing to see an organization addressing this issue and trying to make a difference.

Next Generation Contract Management Systems - more than software, more than LPO

Added May 14, 2008. Note: On April 16, 2008, I became general counsel of Pontus Global, Inc., one of the companies mentioned in this post.

David Munn

I’ve been following developments in legal technology for the past ten years or so.  During that time the slow pace of adoption of game-changing technology by the legal profession has been disappointing.

Yes, nearly everyone uses email now, and we all have at least a rudimentary understanding of Microsoft Word (massive overkill for most of what we do), but we’re still fundamentally doing things the same way lawyers have for years. Technology allows us to do certain things faster, but many of the fundamental processes we use haven’t changed much in the 25 years I’ve been practicing law. And instead of having secretaries we now get to do our typing ourselves. How much progress is that?

 So when something comes along that actually promises to fundamentally change the way we work I take notice. That’s the case with a new generation of contract management systems now coming on the scene.

Contract management systems (aka contract lifecycle management systems or enterprise contract management systems) have been getting more attention from legal departments recently. And rightly so. Most companies are terrible at managing their contracts. (See Contract Management Is More out of Control Than You Think.) Contract management is an area that’s crying out for process improvement and automation.

Contract management is something that’s almost entirely done in-house, so the skewed incentives of private practice don’t enter into the picture. In-house lawyers should have an incentive to adopt technology that will improve their processes and efficiency. Yet in spite of all the benefits promised by the providers of contract management systems, companies have been slow to adopt these kinds of systems. And according to anecdotal evidence, many companies’ contract management system implementations have fallen short of the promises or have been abandoned.

So what’s holding the legal profession (and particularly the in-house bar) back from adopting the kinds of technology that could make a real difference? According to Pontus Global, the problem is the fundamental model of expecting busy lawyers to adapt to technology that often causes the lawyers to feel that they have to do more work than they did without the technology.

A system that allows everything in the contract process to be tracked and reported on sounds great until you think about how the detailed information actually gets into the system. That’s where these systems often fall down. If you rely on busy lawyers to enter information into a system it’s almost bound to fail. In fact, that could be the primary reason there hasn’t yet been a true revolution in legal technology.

So the Pontus model goes beyond software. Pontus has a hosted contracts management platform, but they support it with a team of lawyers and technologists in India and processes designed specifically to take advantage of the technology and the offshore team.

The idea is that your in-house team doesn’t have to learn complex software and they don’t have to enter data. The Pontus team will do that for you. This model is very different from the pure software contract management systems that require your lawyers to do much of the data entry. And it’s different from the legal process outsourcers, (LPOs) that provide the labor, but not the integrated technology platform.

I’m familiar with Pontus because my company has been working with them over the past year or so to get our contracts under control. There’s at least one other company that I learned about recently (FirstDocs) that appears to have a similar approach. And I know that some of the big names in the legal industry are looking at this model as well.

Contract management is only one application where this model could work. Many companies are looking at outsourcing legal services or hiring their own offshore legal professionals, but neither of those approaches is ideal if you are still using outdated technology and inefficient processes. The convergence of technology, better processes, and offshore resources by new companies like Pontus and FirstDocs could finally be the key to getting the legal profession to truly take advantage of the promise of technology.

IACCM Americas Conference April 7-9

Last year I attended the IACCM Americas conference in New Orleans. I thought it was one of the best conferences I’d ever attended. Excellent speakers, thought-provoking discussions, and opportunities to network with people outside my normal sphere of corporate counsel made it an event I’d recommend to anyone involved in contracting.

This year I have the opportunity to participate as a discussion leader in the Academic Symposium that kicks off the conference. We’ll be exploring whether current approaches to academic training (both legal and procurement) result in more confrontational and less productive relationships.

Although the IACCM is not primarily an association for attorneys, Tim Cummins and the IACCM have recently been taking a leadership role in discussions about the legal profession. Tim recently wrote on his blog, Commitment Matters:

“I am observing a growing number of corporations - especially US-headquartered multi-nationals - where the Legal organization is gaining increased power. And they are exercizing that power with a renewed focus on standard terms and conditions that are blatantly unreasonable and confrontational. Some are doing this on the buy-side, others on the sell-side - and when these two perspectives meet in the market, the only people who are empowered to fix the problem are …. the lawyers.”

I’d like to think Tim is wrong about the role of lawyers in creating the problem, but I certainly agree with his observation about the increasing prevalence of unreasonable and confrontational contract terms. It will be interesting to hear the views of others involved in the contracting process.

Other programs will focus on issues of globalization, automation, negotiations, risk assessment, and the changing world of business and contracting.

If you can make it to Scottsdale in early April it promises to be another great conference.

IACCM Americas April 7-9

Contract Management Systems and Providers

In October 2007, Laura Williams of Safeco, Jim Marvin of FMC Technologies, and I gave a presesention on technology for corporate legal departments at the annual meeting of the Association of Corporate Counsel. One of the topics we covered was contract management. The material here (Contract Management Systems) includes  contains a description of contract management software and an extensive list of vendors.

My list of vendors is now up to 36. Although that number is a bit overwhelming, this might be a good place to start for anyone researching contract management systems.  

Updated 03-05-08