Design and Build an Effective Contract Lifecycle Management Process

Mitigate risk and drive value through robust best practices for contract lifecycle management.

Our understanding of the problem

This Research Is Designed For:

• The CIO who depends on numerous key vendors for services
• The CIO or Project Manager who wants to maximize the value delivered by vendors
• The Director or Manager of an existing IT procurement or vendor management team
• The Contracts Manager or Legal Counsel whose IT department holds responsibility for contracts, negotiation, and administration

This Research Will Help You:

• Implement and streamline the contract management process, policies, and procedures
• Baseline and benchmark existing contract processes
• Understand the importance and value of contract lifecycle management (CLM)
• Minimize risk, save time, and maximize savings with vendor contracts

This Research Will Also Assist

• IT Service Managers
• IT Procurement
• Contract teams
• Finance and Legal departments
• Senior IT leadership

This Research Will Help Them

• Understand the required components of a CLM
• Establish the current CLM maturity level
• Implement a new CLM process
• Improve on an existing or disparate process

ANALYST PERSPECTIVE

"Contract lifecycle management (CLM) is a vital process for small and enterprise organizations alike. Research shows that all organizations can benefit from a contract management process, whether they have as few as 25 contracts or especially if they have contracts numbering in the hundreds.

A CLM system will:

• Save valuable time in the entire cycle of contract/agreement processes.
• Save the organization money, both hard and soft dollars.
• Mitigate risk to the organization.
• Avoid loss of revenue.

If you’re not managing your contracts, you aren’t capitalizing on your investment with your vendors and are potentially exposing your organization to contract and monetary risk."

- Ted Walker
Principal Research Advisor, Vendor Management Practice
Info-Tech Research Group

Executive Summary

Situation

• Most organizations have vendor overload and even worse, no defined process to manage the associated contracts and agreements. To manage contracts, some vendor management offices (VMOs) use a shared network drive to store the contracts and a spreadsheet to catalog and manage them. Yet other less-mature VMOs may just rely on a file cabinet in Procurement and a reminder in someone’s calendar about renewals. These disparate processes likely cost your organization time spent finding, managing, and renewing contracts, not to mention potential increases in vendor costs and risk and the inability to track contract obligations.

Complication

• Contract lifecycle management (CLM) is not an IT buzzword, and it’s rarely on the top-ten list of CIO concerns in most annual surveys. Until a VMO gets to a level of maturity that can fully develop a CLM and afford the time and costs of doing so, there can be several challenges to developing even the basic processes required to store, manage, and renew IT vendor contracts. As is always an issue in IT, budget is one of the biggest obstacles in implementing a standard CLM process. Until senior leadership realizes that a CLM process can save time, money, and risk, getting mindshare and funding commitment will remain a challenge.

Resolution

• Understand the immediate benefits of a CLM process – even a basic CLM implementation can provide significant cost savings to the organization; reduce time spent on creating, negotiating, and renewing contracts; and help identify and mitigate risks within your vendor contracts.
• Budgets don’t always need to be a barrier to a standard CLM process. However, a robust CLM system can provide significant savings to the organization.

Info-Tech Insight

• If you aren’t managing your contracts, you aren’t capitalizing on your investments.
• Even a basic CLM process with efficient procedures will provide savings and benefits.
• Not having a CLM process may be costing your organization money, time, and exposure to unmitigated risk.

What you can gain from this blueprint

Why Create a CLM

• Improved contract organization
• Centralized and manageable storage/archives
• Improved vendor compliance
• Risk mitigation
• Reduced potential loss of revenue

Knowledge Gained

• Understanding of the value and importance of a CLM
• How CLM can impact many departments within the organization
• Who should be involved in the CLM steps and processes
• Why a CLM is important to your organization
• How to save time and money by maximizing IT vendor contracts
• How basic CLM policies and procedures can be implemented without costly software expenditure

The Outcome

• A foundation for a CLM with best-practice processes
• Reduced exposure to potential risks within vendor contracts
• Maximized savings with primary vendors
• Vendor compliance and corporate governance
• Collaboration, transparency, and integration with business units

Contract management: A case study

CASE STUDY
Industry Finance and Banking
Source Apttus

FIS Global

The Challenge

FIS’ business groups were isolated across the organization and used different agreements, making contract creation a long, difficult, and manual process.

• Customers frustrated by slow and complicated contracting process
• Manual contract creation and approval processes
• Sensitive contract data that lacked secure storage
• Multiple agreements managed across divisions
• Lack of central repository for past contracts
• Inconsistent and inaccessible

The Solution: Automating and Streamlining the Contract Management Process

A robust CLM system solved FIS’ various contract management needs while also providing a solution that could expand into full quote-to cash in the future.

• Contract lifecycle management (CLM)
• Intelligent workflow approvals (IWA)
• X-Author for Excel

Customer Results

• 75% cycle time reduction
• $1M saved in admin costs per year
• 49% increase in sales proposal volume
• Automation on one standard platform and solution
• 55% stronger compliance management
• Easy maintenance for various templates
• Ability to quickly absorb new contracts and processes via FIS’s ongoing acquisitions

Track the impact of CLM with these metrics

The numbers are compelling

71%

of companies can’t locate up to 10% of their contracts.

Source: TechnologyAdvice, 2019

9.2%

of companies’ annual revenue is lost because of poor contract management practices.

Source: IACCM, 2019

60%

still track contracts in shared drives or email folders.

Source: “State of Contract Management,” SpringCM, 2018

CLM blueprint objectives

• To provide a best-practice process for managing IT vendor contract lifecycles through a framework that organizes from the core, analyzes each step in the cycle, has collaboration and governance attached to each step, and integrates with established vendor management practices within your organization.
• CLM doesn’t have to be an expensive managed database system in the cloud with fancy dashboards. As long as you have a defined process that has the framework steps and is followed by the organization, this will provide basic CLM and save the organization time and money over a short period of time.
• This blueprint will not delve into the many vendors or providers of CLM solutions and their methodologies. However, we will discuss briefly how to use our framework and contract stages in evaluating a potential solution that you may be considering.

Info-Tech offers various levels of support to best suit your needs

DIY Toolkit

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful.”

Guided Implementation

“Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track."

Workshop

"We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place."

Consulting

"Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

Diagnostics and consistent frameworks used throughout all four options

Design and Build an Effective CLM Process – project overview

Workshop overview

Contact your account representative or email Workshops@InfoTech.com for more information.

PHASE 1

Master the Operational Framework of Contract Lifecycle Management

Design and Build an Effective CLM Process

Phase 1: Master the Operational Framework of Contract Lifecycle Management

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of
2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

What Is Contract Lifecycle Management?

• Every contract has a lifecycle, from creation to time and usage to expiration. Organizations using a legacy or manual contract management process usually ask, “What is contract lifecycle management and how will it benefit my business?”
• Contract lifecycle management (CLM) creates a process that manages each contract or agreement. CLM eases the challenges of managing hundreds or even thousands of important business and IT contracts that affect the day-to-day business and could expose the organization to vendor risk.
• Managing a few contracts is quite easy, but as the number of contracts grows, managing each step for each contract becomes increasingly difficult. Ultimately, it will get to a point where managing contracts properly becomes very difficult or seemingly impossible.

That’s where contract lifecycle management (CLM) comes in.

CLM can save money and improve revenue by:

• Improving accuracy and decreasing errors through standardized contract templates and approved terms and conditions that will reduce repetitive tasks.
• Securing contracts and processes through centralized software storage, minimizing risk of lost or misplaced contracts due to changes in physical assets like hard drives, network shares, and file cabinets.
• Using policies and procedures that standardize, organize, track, and optimize IT contracts, eliminating time spent on creation, approvals, errors, and vendor compliance.
• Reducing the organization’s exposure to risks and liability.
• Having contracts renewed on time without penalties and with the most favorable terms for the business.

The Operational Framework of Contract Lifecycle Management

Four Components of the Operational Framework

1. Organization
2. Analysis
3. Collaboration and Governance
4. Integration/Vendor Management

• By organizing at the core of the process and then analyzing each stage, you will maximize each step of the CLM process and ensure long-term contract management for the organization.
• Collaboration and governance as overarching policies for the system will provide accountability to stakeholders and business units.
• Integration and vendor management are encompassing features in a well-developed CLM that add visibility, additional value, and savings to the entire organization.

Info-Tech Best Practice

Putting a contract manager in place to manage the CLM project will accelerate the improvements and provide faster returns to the organizations. Reference Info-Tech’s Contract Manager Job Description template as needed.

The operational framework is key to the success, return on investment (ROI), cost savings, and customer satisfaction of a CLM process.

1. Organization

• Every enterprise needs to organize its contract documents and data in a central repository so that everyone knows where to find the golden source of contractual truth.
• This includes:
• A repository for storing and organizing contract documents.
• A data dictionary for describing the terms and conditions in a consistent, normalized way.
• A database for persistent data storage.
• An object model that tracks changes to the contract and its prevailing terms over time.

Info-Tech Insight

Paper is still alive and doing very well at slowing down the many stages of the contract process.

2. Analysis

Most organizations analyze their contracts in two ways:

• First, they use reporting, search, and analytics to reveal risky and toxic terms so that appropriate operational strategies can be implemented to eliminate, mitigate, or transfer the risk.
• Second, they use process analytics to reveal bottlenecks and points of friction as contracts are created, approved, and negotiated.

3. Collaboration

• Throughout the contract lifecycle, teams must collaborate on tasks both pre-execution and post-execution.
• This includes document collaboration among several different departments across an enterprise.
• The challenge is to make the collaboration smooth and transparent to avoid costly mistakes.
• For some contracting tasks, especially in regulated industries, a high degree of control is required.
• In these scenarios, the organization must implement controlled systems that restrict access to certain types of data and processes backed up with robust audit trails.

4. Integration

• For complete visibility into operational responsibilities, relationships, and risk, an organization must integrate its golden contract data with other systems of record.
• An enterprise contracts platform must therefore provide a rich set of APIs and connectors so that information can be pushed into or pulled from systems for enterprise resource planning (ERP), customer relationship management (CRM), supplier relationship management (SRM), document management, etc.

This is the ultimate goal of a robust contract management system!