Hello Everyone! Thanks for tuning in again to This Week in Contract Management. As you may or may not be aware, we host a monthly webinar series where our CEO and President, Russ Edelman, analyzes c urrent industry issues and best practices, as well as the role contract management plays in allowing organizations to identify and address immediate operational inefficiencies. The focus of our most recent webinar, Contract Management | Buy-Side, Sell-Side & More, was the commonalities of Buy-Side, Sell-Side and other contract types and how they can harmoniously exist in a single managed repository.
In this session, we explored the crucial differences between Buy-Side, Sell-Side and other contract types with a specific focus on four key areas: contract information management, processes employed, people impacted and common integration touch points. After our sessions, we make all slides available to registrant; however, given the importance of this topic, we thought it prudent to discuss to topic in our weekly blog.
In setting the stage, did you know - according to a recent survey conducted by the IACCM, the International Association for Commercial and Contract Management, that only 40% of current IACCM members handle both Buy-Side and Sell-Side negotiations and contracts? Gartner also recently conducted a survey with Contract Lifecycle Management companies where they asked these companies to break down the contract types used by their customers. More than half of companies surveyed stated they only use their CLM system to manage their Buy-Side contracts. Only 21% stated that they use their CLM platform to manage both Buy-Side and Sell-Side contracts. Given the benefits and economies of scale which can be realized in managing both contract types in one system, these figures are troubling.
As we all know, Contract Lifecycle Management Software streamlines contract management with fully automated document generation, automated reporting, contract approvals, electronic signature integration and automated alerting of contract expirations, renewals, and pending obligations. A well-designed CLM system possesses the capabilities to manage Buy-Side, Sell-Side, and other contract types in a single repository. This saves a tremendous amount of time and expense, and provides full visibility into business relationships.
Before we delve deeper, let's baseline on the definitions of Buy-Side and Sell-Side contracts. Buy-Side contracts are agreements where a buyer agrees to acquire goods or services from a seller in exchange for a consideration. Within the world of contract management, the people most often managing your Buy-Side contracts are your Procurement teams - the people within your organization who drive both the RFP (Request for Proposal) and RFQ (Request for Quote) processes, as well as contract negotiations and contract spend. They require immediate access to contracts in order to negotiate the best possible price with vendors, re-negotiate price with current vendors, and manage the total spend for their respective organization. Their role is integral to identifying the lowest possible cost, in recognizing potential price discounts within their contracts, and ensuring that the goods and services procured are delivered in line with agreed contract terms.
Sell-Side contracts are agreements between a buyer and a seller for the sale and delivery of goods, services, securities and other personal property. Sales teams are most often involved with the negotiation of Sell-Side contracts as they look to close new or additional business for their organizations. They require immediate access to contract templates, approved language provisions, and existing contract information so that they can readily sell new or additional goods and services. Additional contract types which were discussed include distribution and partner contracts, employment, sponsor, real estate, and licensing contracts.
So, why house all of these contracts in a single application? Glad you asked! Contract Lifecycle Management Systems support your entire contract lifecycle. And, well-designed, flexible Contract Lifecycle Management Systems support numerous different contract types – from Buy Side to Sell Side to the employment, real estate and distribution agreements noted above. A well-designed Contract Lifecycle Management System should have the capability to house all of these contract types, as well as improving functionality in reporting, compliance and document retention. When contemplating how to best approach what we'll refer to as co-tenancy, it's important to consider the following key commonalities:
The information – or in the land of contracts, metadata – involved within each contract type is consistent throughout the entire contract lifecycle. Metadata that you will regularly find in these contracts include contract number, contract effective date, contract execution date, contract termination date and counterparty type. Supporting documents such as addenda and appendices are found in each contract, as well as supporting data such as contract obligations and provisions. Given that the metadata is the same within each contract type, doesn't it make sense to store all of your contracts within the same operating system?
Contract request processes are another consideration that is constant within each type of contract. Each contract requires business, legal, and financial approval. Are you going to negotiate and sign a contract without the review and approval of your organization's leadership team? Of course not. The proper legal review of your contracts ensures that your agreements comply with industry guidelines and regulations. Financial review is required in order to adhere to your company's authorization on contract spend. While spend thresholds and certain language provisions may require elevated approvals, the general review and approval processes for Buy-Side, Sell-Side and other contract types are consistent within any organization.
The people managing and facilitating the contract management process are also consistent for each contract. A global administration team is often front and center, as well as the legal department's review of contract templates, drafting, and negotiating contracts. Your organization's IT department will also be involved in supporting the application as their role is vital in installing, configuring, and supporting all technical features. If the same individuals are involved in managing each contract, doesn't it make sense to implement a system where all contracts are grouped within one repository?
Last, the systems which integrate into your contract management application – whether upstream or downstream – are likely consistent across contract types. For example, systems such as SAP may feed customer master data for your Sell-Side contracts as well as vendor master data for your Buy-Side contracts into your contract management system. Alternatively, your contract management system may initiate the creation of counter party records or invoice creation in a downstream system – again, for both contract types. This integration can be leveraged across all contract types for reduced overhead and administration.
As you contemplate your CLM system, we hope that this has been helpful. While each contract type is unique, their similarities and the economies of scale that can be realized by managing them within a single system suggests that the best course of action is to do just that – manage these within one single system.
As noted above, we do host these sessions monthly, and I would be remiss not to invite you to our next session: Planning a Contract Management Roadmap | A Safe and Successful Road Trip, on Wednesday, June 22, 2016, 11:00 am EDT. Please join us as we highlight the following:
- Client Readiness and Contract Maturity Goals
- Implementation Considerations
- Delivery Considerations
- Internal and External Participants and Responsibilities
- Ensuring the Success of your Constituents
- ROI Justification
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