Is your business keeping up with the rapidly expanding contract management technology market or are you falling behind?
If you’re thinking of investing in automation, be sure to do your homework first – or you could end up wasting more than just money. In this interview our expert Craig Conte explains how to get it right.
Have you seen any changes in companies’ appetite for change and take up of technology?
“Contract and commercial management is changing fast. Until recently very few were even thinking about ‘new era’ technology - and now it’s demanded. More than ever, there’s a real push for process, and desire to get into technology and try new things. Depending on market pressures there’s a real drive to get into digital contract management, and into ‘touchless procurement’ or automated contracting in hyper-competitive places. I’ve seen massive leaps over the last few years: collaborative online contracting, automation and cognitive computing with robots able to ‘read’ contracts are all being bought now.
Because things are moving so fast, you have a massive spectrum: some companies are only just discovering the power of contracts. Although some are doing well, many others are fully automated and digital and doing more than just well.”
Do people get it wrong when they try to implement the new technologies?
“Yes and it’s probably happening somewhere right now. If you don’t understand what you need and just throw technology at it you’ll not only get frustrated but could lose a whole implementation and purchase cycle or two.
People buy front end procurement tools believing they’ll help them manage vendor performance better. Or they may buy authoring tools, when what they need to do is manage obligations. Having seen the failure profile quite often it has to do with an over-belief in the technology and not enough understanding of the people or processes needed around it.
Buying a Watson license won’t help you if don’t know where your contracts are and have no standards around them. Technology still has to work within rules and if your organization is suffering because there are no rules, no discipline or vision on contracting, a nice toy won’t help.”
What impact does that have and what can they do about it?
“The great thing about the technology is that there is a tool for every problem, but without proper understanding of the problem you can end up losing a lot of valuable time and production – and the underlying problem never goes away.
The newest, greatest database management tool won’t solve the issue of getting correct data into the tool if your team isn’t trained or managed to use it. I joke about this last piece, because this is the part everyone forgets – you still need to get the data into the base, and your team needs to be incentivized and realize that they’ll become ‘data admins’ or ‘data scientists’ in some fashion for the system to work.
Sometimes it’s better to invest in tools or process or people to get the information more than the base tool itself. For example, SharePoint is a great, less expensive tool and can solve a lot of problems – so long as it has the information.“
What is driving companies’ take up of technology?
“Quite simply – money, it’s always money. Service providers realized they were leaving money on the table by not properly leveraging their contracts - and market efficiencies demanded innovation. Clients realized their business cases for entering into contracts were failing, and not just due to performance. There was huge effort going into procuring or creating contracts, but little into the ongoing management.
There were certainly tools for basic obligation management or reminder systems, but no one really seemed to know what to do with them. Nothing really focused on how to create, manipulate, automate or digitize anything in the process.
Since the financial crisis, there’s been a real drive towards visibility, control and efficiency, leading to a drive for process control, hence the rise of BPO and ‘waste management’ – meaning ‘let’s do things as efficiently as possible.’”
What barriers are they experiencing? Is there executive resistance?
“Change management. People who’ve done contracting for decades sometimes treat it as a mixture of art, magic and alchemy, and can be protective. And I don’t mean to be negative, because for decades there was a drive to get the ‘smartest negotiator/lawyer/person,’ and that drove a reward scheme for the individuals who fitted that model. Now we are seeing organizations that want the ‘smartest, most efficient system,’ and the person who builds that is often not the smartest lawyer/negotiator. So the scale of change needed to bring a true system, process approach to a group of people who were rewarded for being individual magicians cannot be underestimated.”
What arguments/actions sway thinking?
“I think people are smart and can understand basic logic. A contract specialist with 20+ years experience negotiating and managing a complex multi-year, multi-million dollar contract makes sense. That same person working on an NDA or $10,000 contract is a misuse of the resource.
You don’t want to use your super-brains to do data entry - get a robot for that. If you can show a company or executive that by embracing some technology or process you can use their super-brain resource more effectively, save costs and free up his or her time to do some strategic work, people will listen.”
Where are companies using technology in new ways with their contract and commercial management?
“Companies are seeing new technology options for contract and commercial management (CCM) every day. There are ways now to negotiate a contract virtually by sending preferred terms back and forth between parties and allowing a ‘robot’ (I use that term loosely), to come up with suggestions. There is technology now that allows for automated invoice assurance for vendor management. I am still blown away when I see extraction tools being able to ‘read’ a contract as well as a graduate.”
What is the impact of greater data-driven information?
“I think we may finally see the end of the ‘well, in my experience’ argument. Don’t get me wrong – I love that one and still use it. But with real data and a process to ‘feed the machine’ you can get to more interesting conclusions.
For example, a company I saw believed their horrible days outstanding for cash was because their sales force was signing awful payment terms. The contracts had net 30-day payment terms on average, with an average net of 37 days across a spectrum of EUR 500m of revenue. But cash was coming in at 65 days. We ran a little experiment and quickly showed them it wasn’t the contracts that they tried to ‘blame,’ but rather the collections issues.
That may seem simple, but the power of real data can focus resources more quickly than some anecdotal belief which could lead to unwise uninvestment and wasted time. Knowing the true facts, based on the data, that CFO could go to the root of the problem, putting his efforts into collection activities and enforcing signed terms as opposed to fixing a problem in contracting that wasn’t there.
It’s like the difference between trying the find the proverbial needle in the haystack by trying to remember where you put it, as opposed to having radio-frequency identification (RFID) on the needle.
To give another example, a CIO we worked with became quite vexed with the performance of his vendors in a few key areas. He had invested in the latest and greatest of reporting tools- but his operations teams claimed performance was poor even though the RAG (red/amber/green) reports were good. Procurement was blamed, for some reason.
We quickly found that procurement had negotiated industry standard contracts and operations had good reporting tools - but the data between the two was broken. SLA levels of service could be achieved with minimal effort but, digging into the contract, what constituted ‘committed continuous improvement’ was not clear, nor was the calculation around those terms. That data never made its way to the reporting tool in a meaningful way. By simply understanding how data should be calculated and how it evolves, we were able to the make the connection and focus energy in the right place to find a business solution.”
How are these changes affecting the way the role is used or positioned in the company?
“I think the realization that money is at play and tangible examples of this are allowing the role to expand. Procurement has their target, legal has theirs and operations have their responsibility. But you need someone to bring it all together – with finance –to get the whole picture.
Same question in relation to businesses?
“Now you are hearing people ask for their ‘commercial director’ more than their lawyer. And that’s a good thing. No offense to lawyers, as I am one myself. But there was a joke in NY law firms that a lawyer had only one tool in his toolbox – a hammer. I think the nature of commercial relationship requires a bevy of tools.”
Is this supporting a more strategic CM role?
ABOUT THE AUTHOR
As Vice President and the Head of Contract Compliance & Optimization (CCO) services at Capgemini, Craig Conte focuses on running the operations and strategy for the CCO offering, a combination of contract and commercial management supported by legal process outsourcing capabilities. Craig spent several years as an outsourcing lawyer at Capgemini before dedicating to the CCO services. Craig also has over 10 years of experience in private law firms in New York, focused on negotiating outsourcing contracts on behalf of both clients and vendors, which in turn enables him to understand the needs on both sides.
A graduate of Rutgers College with a degree in philosophy in 1996 and from St. John’s School of Law in 2000, Craig was admitted to practice law, both State and Federal, in the states of New York and Connecticut.
Capgemini’s organizational mission involves applying innovation to competitiveness to accelerate the transformation of business processes and resulting business outcomes in Finance and Accounting, Supply Chain Management and Procurement, HR, Customer Service and Support, and Analytics and Research across multiple industry sectors. Capgemini leverages its industry-leading methodology, the Global Enterprise Model© (GEM), IP, platforms and a partner ecosystem to deliver tailored solutions. As part of its Rightshore® delivery network1, over 26,000 Business Services professionals provide services to more than 250 clients in 38 languages, 24/7. For more information visit: www.capgemini.com/business-services
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