Supply uncertainty, capacity volatility, resource constraints, and a heightened need to assess and mitigate operational and trading partner risk have fundamentally changed the way companies organize and measure success. As the recovery progresses, one thing is becoming clear—this is no temporary shift in approach. Leading companies have realized that the organizational agility required to survive the downturn can act as a differentiator, enabling them to emerge more strongly positioned to compete and be successful.
This new state of normal places a laser focus on managing costs while better anticipating fluctuations in market conditions. Both buyers and sellers must place a renewed importance on building successful relationships. No longer can buyers bleed sellers for savings to the point of insolvency. In addition to cost savings attainment, more elegant methods of measuring success are necessary for procurement—including supplier satisfaction and innovation. Meanwhile, sellers are required to be more flexible with their customers, often agreeing to renegotiate terms and service levels.
The tools and processes that companies are employing to achieve success today are wide and varied. However, in terms of technology, a clear transformation has taken place. Faster time to value, lower total cost of ownership, more flexible pricing and usage models, and rapid innovation cycles have brought Software-as-a-Service (SaaS) and Cloud computing delivery models to the forefront—as has the fact that these models enable the CIO to focus on more strategic initiatives and manage information versus technology. Leveraging SaaS solutions, businesses can be up and running faster with minimal upfront investment. They also have the ability to dial up (or down) usage in order to meet the needs of the organization and pressures of the market. And while we will discuss a number of data and security considerations in this paper, the reality is that the security level provided by leading SaaS providers exceeds that of most enterprise companies.
The emergence and growing acceptance of these models has sparked a fundamental shift in the way that procurement, sales operations, IT, and finance go about achieving their objectives. Legal and contracting professionals must be at the forefront enabling this organizational transformation.
Where to Start?
Ask a legal or contracting professional what his or her largest pain point in negotiating contracts is, and you’ll likely hear that it is a lack of alignment between the buying group who sources a contract and those responsible for negotiating the actual agreement. Too often, thorough diligence in evaluating SaaS or Cloudbased solutions focuses on educating consumers on the benefits of technology to automate the contract process and allaying concerns about data availability, access, and security. Contract negotiators are not commonly included in these discussions and, as a result, their concerns—and ultimately, the real issues related to contract negotiations—are not captured and must be revisited after the fact.
The contract management group should consider creating a checklist that will enable the business functions to acquire the tools and benefits they seek. Meanwhile, it can be assured that the company as a whole is comfortable with the terms of the agreement in order to open the dialogue between functional areas of the business and legal/contract management.
|Best Practices: Contracts||An increasing number of companies are embracing SaaS and Cloud-based solutions to manage critical tasks across|
legal, procurement, IT, finance, AP/
treasury and sales and marketing. And
contract management is among these tasks.
Use the customizable dashboard functionality to further enhance visibility into procurement contracts. Dashboards can provide near or real time views into the status of impending renewals, compliance and utilization and overall spend against contracts.
Such visibility can be leveraged to make an organization more nimble and responsive to market changes or supply disruptions. Only 17% of Best-in-Class enterprises currently leverage dashboards (The Aberdeen Group).
Next post, on Trading Partner Contract Process, can be found by following the link below.
Contract Management in the "Cloud" Pt.2