Webinar Q&A Session
Effective Sales Contracting: A Business Imperative and Differentiator

Watch the replay here!


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Q: How does one avoid one-off situations with contracts vs. trying to standardize, boilerplate Ts and Cs for various contract types?

 

A: An overwhelming majority of organizations have standards; it is obvious that both sides cannot achieve their standard. Either one side will 'win' or both will compromise. In general, the 'winner' will be the more powerful party. However, just because you may not often succeed in pushing your standards does not mean it is not worthwhile to have any. Standard contracts and terms are a reflection of your company's baselines - policies, practices, capabilities. They act therefore as a framework for understanding and evaluating change or variation. As such, their existence will reduce the risk of unwise commitments and speed cycle times for reaching decisions.

Answered by Tim Cummins, President and Founder, IACCM

 

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Q: How does one deal with situations where you have two negotiating parties, both trying to push "their paper" for the final contract terms?

A:
When dealing with the battle of the forms, you must be objective in asking; 1) how important is this deal; 2) are there better alternatives; and 3) who has power in this negotiation - and can I do things to shift the balance in my favor? If you need to do business with the other party and they have power, then focus on terms that really matter to you. Avoid long lists of changes. Make sure you can explain why these things matter and have a sensible alternative prepared. Make it simple for the other side to agree.

Today, the buyer is more likely to prevail. Around 80% of buyers think they achieve their standard 'all or most of the time', versus just 40% of sellers.

IACCM has a number of podcasts available on this topic. Go to www.iaccm.com to register if you are not already a member.

Answered by Tim Cummins, President and Founder, IACCM

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Q: The sales contracting process can be driven by regional and cultural differences and approaches.  It appears from an earlier slide that there were no participants in the study from South  America. Is this due to the design of the study, or are there challenges in increasing the participation of that geographic group in such studies?

A: Regional / cultural differences: it is true that regional and cultural variations in contracting are significant. This results from a range of factors, which include the extent of local versus regional or international business; the underlying legal system; the nature and duration of business relationships. However, we are observing growing harmonization as companies increasingly need to better understand and monitor their commitments.

This diversity reflects in studies where a) it is hard to identify contract specialists or teams in some regions and b) language skills may be a barrier to participation.

Answered by Tim Cummins, President and Founder, IACCM

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Q: Customers always seem to want to use their contract. How can we get them to use ours?

See response above


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Q: I’ve seen two page contracts and two hundred page contracts. Which is better?

 

A: This can be driven by many factors, some real, some illusory. For example, contract length is seen by some executives as key to ‘ease of doing business’ and this can lead to short contracts that are achieved by omitting key documents (by reference only) or reducing typeface. However, many long contracts are unnecessary. Contracts should ensure clarity of intent, obligations, success criteria and handling changes or disagreements. That can often be done in relatively short documents.

Answered by Tim Cummins, President and Founder, IACCM

 

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Q: Does Ariba offer a Private Cloud solution vs. a Public Cloud solution . . . due to contract-sensitivity issues?


A: Ariba offers flexibility in how our contract management solutions are delivered with both private and public cloud options though it should be noted that over 80% of our customers today leverage the public cloud (Ariba hosted) version due to faster time to value, lower total cost of ownership, improved security, and more frequent and rapid innovation.

Answered by Ken Miklos, Senior Manager, Ariba

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Q: Whilst evidence is overwhelming on benefit of Cm on contract renewal, how can it be sold in hard numbers (ROI/NPV etc) to an organisation for general new sales?


A: The problem for most organizations is the lack of any baseline to gauge improvement. It often takes determination by the contracts function to gain  investment. External benchmarks can help. But examples of hard savings are: increased sales commitment resulting from sales force efficiency; reduction in claims and disputes; increased revenue from improved change management.

Overall, IACCM has seen companies gaining 5 - 7% in bottom line performance relative to those that do not focus on contracting capabilities.

Answered by Tim Cummins, President and Founder, IACCM

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Q: How do you recommend that pricing be incorporated in a contract?  Do you have any best practices?


A: One of the biggest concerns is when pricing (and costing) is handled independently of the contract. Contracts are first and foremost economic instruments; and every term has a price (and cost). Therefore best practice is where contract teams have full access to cost data and where every decision is weighed for its potential cost / price impacts and benefits. The team must use financial assessment as a source of creativity and risk management. All decisions should be weighed for their economic impact - for example, rather than knee-jerk reactions to avoiding risks, asking 'what additional price could we obtain by accepting risks?'

Answered by Tim Cummins, President and Founder, IACCM

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Q: When asked for a contract, we typically send out a pdf version.  We are now being asked to send contract in an unprotected word version.  Do you believe that this sends the message that we are expecting markups back from the client?


A: No, not necessarily. Though you must be cautious on this point. The right technology can of course rapidly spot if something has been altered.

Answered by Tim Cummins, President and Founder, IACCM

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Q: Are there best practices for determining how much of your legacy data should be imported to a contract automation tool - ex; deal size, age of contract, % of customers/contracts?


A: It really depends on the requirements of your business. Ariba customers vary in their approach to legacy loading of contracts ranging from loading everything going back “x” months or years, to starting only with new contracts. A common middle-ground is loading only active contracts. Just be aware that there is a cost to loading legacy contracts and loading a contract isn’t always equal. By this, I mean it is very simple to load a contract with minimal indexing and only a few header level fields loaded properly. The value received from this contract, however, will likely be minimal given no terms, key dates, etc. are “readable” by the system.


This is certainly an oft-asked question. I’ve created a discussion post on Ariba Exchange for the views of others. We encourage you to view and provide your inputs: http://exchange.ariba.com/thread/1834


Answered by Ken Miklos, Senior Manager, Ariba

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Q: What about "customizing" of your product for a given customer's needs?    How do you deal with customers whose perception is that they have "unique requirements?"   How does Ariba support this need, or does your company support this?


A: To some degree, the needs of all organizations are unique. There is significant configurability available to templates, questionnaires, process design, and even metadata provided flexibility to address the diverse needs and requirements. Before writing off moving to the cloud, take another look…the technology has come a long way.

Answered by Ken Miklos, Senior Manager, Ariba