Contract Lifecycle Management—A True Horizontal Activity
Blog: Capgemini CTO Blog
Contract Lifecycle Management is not legal process outsourcing or procurement, and it’s much more than vendor management. The gains are broader, the change management is deeper and the market for it is much wider.
I thought I’d take a moment to answer a few questions that often come up when I speak at events, client meetings or trade associations. Consider this my FAQ. Here are some examples of how they come to me:
- “Contract Management Services—is that a legal service?”
- “Do you sell these services to general counsel and legal?”
- “Is it a part of procurement?”
- “Brad Pitt—is that really you?!”
The short answers are:
- Well, it’s part of it, but it’s really much broader than that.
- Sometimes, but CPOs, CFOs, CIOs and others need Contract Lifecycle Management.
- Not really, but it needs to work with procurement.
- Yes! Yes, it is!
Underlying most of these questions are suppositions about where “contracts” sit in an organization and who needs services to help them create, maintain and optimize the contracting process end to end.
Very few, if any, organization’s have a Chief Contracting Officer or CCO, so what happens is that Legal owns part of the contract creation and perhaps regulatory compliance, but procurement owns the business case around supplier selection. Supply chain owns the vendor management, with the CIO organization owning the strategic suppliers, but with the COO or CFO owning the budget around this. But if it’s a sell-side contract, Sales wants to own it, and so on and so on.
This classic silo approach can lead to all sorts of inefficiencies (which I often write about) such as:
- Process confusion—as the process of contract creation, signature, management, financial optimization, and renewal are broken up across siloed parts of the organization, you might only have one piece (typically procurement or legal) that you want to optimize, but can’t get the rest to optimize.
This is a bit like doing pushups with just your right arm. Sure, you’ll have a fantastically muscular right arm, but the rest of your upper body will still be weak, which means the value in the exercise is not completely gained.
- Inferior tooling—without a clear end-to-end owner, the processes and activities are usually supported by tools meant for other things, or someone tried to obtain an end-to-end ContractLifecycle Management (CLM) tool (and there are many good ones out there!), but couldn’t get adoption across stakeholders.
So, yes, your ERP, SRM or B2B procurement tool has a “contract management module,” but as the main purpose of those tools isn’t realized, it’s a bit like the flashlight on your smartphone. It’s fine for giving a bit of light, but it makes a really bad lamp for your living room.
- People and activity waste—I’ve been yelling about this for years, but it’s a plain fact that organizations very rarely look at their pyramid and match resources to the activity level. This results in people with over 20 years experience that can negotiate massive deals, actually working on $10,000 hosting deals.
Or even worse—don’t get me started on non-disclosure agreements (NDA). If anyone has had a real litigation on an NDA, please email me and I’ll blog about it. NDAs are essentially vampire insurance—protection against something that will never happen, and if it did, will a piece of paper really protect you?
The long story short is: CLM is not legal process outsourcing (LPO), it’s not procurement and it’s more than vendor management. All of these skills and many of the activities fall into CLM. But CLM works across an organization. The gains to an organization are broader, the change management is deeper and the market for it is much wider. Indeed, what are business functions without written contracts?
Adam Smith saw this a long time ago, so let’s get with the program.
To learn more about how Capgemini can help you choose the right contract management tools for your business and diet through the buzzwords and hype in 2018, contact: firstname.lastname@example.org
Click here to learn more about how Capgemini’s Contract Compliance & Optimization (CCO) solution provides a broader and deeper solution to your compliance, cost reduction and spend protection goals, from an often-overlooked area – the written contract.
About the author
Craig Conte helps organizations make the most of their contracting process by transforming the processes, technology and people performing these tasks across multiple towers. A lawyer by training, but a business process expert at heart, Craig and his team focus on business outcomes when it comes to legal, commercial and contracting activities. Craig is on the board of Directors of the International Association of Contract and Commercial Management.