January 5 by Prashant Dubey
Part 1: The Research Phase
“Mastering Contract Lifecycle Management” is a 15 part, bi-weekly series dedicated to expanding your mastery of Contract Lifecycle Management (CLM). The series is divided into 5 parts and encompasses the entire lifecycle of purchasing a CLM solution, including: the research phase, launching your CLM project, implementing the key building blocks, strategies for driving user adoption, and continuing down the road to success. Enjoy!
As we begin 2017, and aspirational resolutions abound, it felt appropriate to provide guidance around an aspirational process for selecting CLM software vendors.
Contract Lifecycle Management (CLM) software is a relatively nascent market. There may be some that would argue this point, saying that software to automate the process of contract creation, negotiation, approval, execution and post execution obligation management has been available for over a decade. Further, companies have been combining workflow, repository and business rules engines to build CLM solutions in-house for even longer. Yes, that is all true. However, the recognition of Contract Management as an enterprise business process is a relatively new phenomenon and this drives the need for a holistic evaluation framework for CLM software that was not as relevant in the past.
Many companies today utilize tactical and traditional methods (translation: single threaded procurement led RFP’s) for CLM vendor selection. This article is meant to inspire these companies to aspire to a more relevant and holistic model for selecting a CLM software business partner (note: dropped reference to vendor).
Defining Characteristic of an Enterprise CLM Business Process
One of the key characteristics of an enterprise business process is that there is a clear executive administrative owner of the business process. Until recently, the ownership of contract management in a company was federated (that’s a corporate euphemism for “all over the map.”).
Procurement owned buy side contracting and did what they felt was necessary to manage their contracting performance measures. Legal owned legal review. Marketing and Sales owned customer contracts. The R&D team or a licensing team owned licensing and IP related contracts. HR owned employment agreements and staffing/recruiting contracts. Everyone owned NDA’s – which meant no one owned NDA’s.
Of late however, General Counsels are stepping up as the predominant executive sponsors of an enterprise CLM business process. I outline the rationale behind this in a previous blog post.
5 Steps toward Selecting the Right Contract Management Software
Once an executive with the imprimatur of a General Counsel raises their hand to own a business process, some natural vendor selection criteria (and associated processes) emerge. These, in my view, form the foundation for how a company should approach the selection of a CLM system. Here are the criteria below:
Peer References: General Counsel are trained lawyers. Lawyers, more than most other disciplines, tend to rely on peer group references to select partners and providers. This applies to the selection of law firms, technology vendors, service providers and yes, even who to include in your golf foursome. Often a good starting point for selecting a CLM partner is to just ask…people you trust.
Overall business stability: This does not mean bigger is better. Since CLM is a relatively nascent industry, even a smaller company (of which there are many) can be a meaningful business partner for a large corporation. The key is to look at the business fundamentals of a CLM partner and make sure that they have a good source of funding, and that they have consistently been able to garner resources to deliver upon contractual commitments, and have shown steady growth over their existence.
A mature, professional sales process: Being sold to is never fun – but if a company makes it seem painless, efficient and value added, that bodes well for their ability to deliver on commitments with their core products. Sales is difficult – especially for companies in a nascent industry. If you find their process and their people professional, chance are that their solutions are also credible.
Access to executives: It does not matter how big or small a client is, or the size of a CLM business partner. There needs to be a very efficient way for a company to be able to access senior executives of a CLM business partner. If they are too busy to talk to you in the sales process, then they may be too frenzied after the sale is consummated.
Ability to demonstrate an understanding of needs beyond core CLM needs: A General Counsel managing an enterprise CLM business process will be consulting with her peers in other disciplines – finance, sales, marketing, compliance, IT, procurement etc. If a CLM business partner understands the interdependencies between these different groups, that’s a good sign. Note: on the product functionality front, ability for the CLM solution to integrate with systems/data in domains other than legal or contracts is not just a functional requirement but demonstrates a CLM business partners’ ability to understand that CLM is not a silo oriented domain.
Of course, there are the actual functional elements of the CLM solution itself. In a previous blog post, I outline the key “must-haves” in a CLM solution. These are, as they say, table stakes.
The above criteria, when combined with the functional “must-haves” of a CLM system represent the qualitative and quantitative factors that form the basis for how to evaluate a potential CLM software business partner.
Hopefully, after reading this, a CLM selection process doesn’t seem so aspirational.
Be sure to check back on January 19th for the next edition of “Mastering Contract Lifecycle Management” series to learn the keys to effectively launching a Contract Management Project.
To learn more about Contract Management, visit the previous post of the series – “The 10 Must-Haves in Your Contract Management Tool” – HERE.