At times of growth or expansion, or when you face turbulent and fast-changing market conditions, it is easy to lose track of your contracts. Here is a case study that illustrates the problem – and the solution.
On the surface, your company is thriving - with business partners worldwide, clients in every corner of the globe, and plans to build warehousing facilities in Asia and South America. Although things are getting more complex and dynamic, business is booming. You have a great feeling about how things are going until you enter the conference room to see your Chief Procurement Officer (CPO) and legal professionals staring at you to discuss an urgent issue. They have lost track of the end date for your logistics contracts, and some of those contracts expired. Your primary shipping partner wants to change the contract terms substantially, and it will cost tens of thousands of dollars to get back on track. Your thriving company has hit an unexpected hurdle.
Your first response is to review the changes and develop a plan to get this relationship back on track. But you also wonder whether this might be the tip of the iceberg; if we lost sight of this agreement, are there more surprises lurking under the surface? So, you commission a thorough review of your contracting and contract obligation tracking process.
You soon discover you have left substantial money on the table due to untracked and unmet vendor obligations. Furthermore, you have been relying on the terms of several expired agreements that neither party has brought forward for renewal. You have even found several contracts signed in a foreign language that do not include translations for some key provisions.
Amid the chaos, the questions of the hour are:
- How does your company's positive and dynamic growth company overwhelm your operational capability to track and manage contracts?
- How can you streamline the contracting process?
Of course, one option would be to hire more people, but without supporting systems, that is still likely to leave your organization missing key dates and obligations. In a fast-moving business environment, you must have proactive alerts and instant access to management information.
Technology can help avoid surprises, streamline operations, and save money
Scaling contract management processes within rapid global growth can be a challenge. Thankfully, contracting platforms and innovative technologies are game changers that help you negotiate, organize, and supervise contracts. These platforms help to ensure uniformity of contracts across an enterprise and eliminate variations and gaps among different business units. Savvy companies use improved tracking capabilities to leverage these contract management (CM) platforms to enhance their outreach and take advantage of the CM platforms' ease of use and ability to measure accountability.
Ground-breaking new technologies - such as electronic signature programs, data storage in the cloud, artificial intelligence (AI)-assisted negotiation programs, and automated obligation tracking - have dramatically improved the methods and speed of contracting performance. These platforms have become a “must-have” as companies mature and grow. The challenge is assessing and satisfying organizational CM requirements for a robust system that can grow and change as business needs change.
Over the last decade, technology has altered the way CM is handled. While human expertise is still required to draft and negotiate contracts, computing systems have overtaken much activity surrounding the human element. From the moment you identify a contractual need and manage it to where you document its final obligation, your computing systems, when leveraged accurately, should allow you to house all the relevant documents and processes together on an easy-to-use, centralized system accessible to all relevant stakeholders.
With minimal effort, company leaders can then maximize this to create a substantially better agreement and tracking system. Specifically, you can free your staff to focus on higher-value work by creating and implementing standard templates, playbooks that non-legal experts can use to resolve most negotiation issues, and cloud-based platforms to track and manage contract obligations. Contract Management Services (CMS) consultants can introduce available technologies, demonstrate best practices, and help to license and build online systems that will address current and future needs.
Unifying the international contracting process
Contracting has also become increasingly international in scope due to a growing global integration of both online and traditional businesses. This has resulted in a more complex legal environment with competing obligations on privacy, data protection, and environmental and safety requirements. The increasing complexity and uncertainty have underscored the need for businesses to unify their contracting process onto transparent platforms to better track variations in jurisdictions and their numerous obligations across the globe.
Therefore, the classic model of relying on an internal paper and ink legal office is no longer viable in a modern, global business environment. Closely tied to this growing need for technology is an understanding that legal expertise does not need to be limited by geography.
With the growing use of global service centers for everything from customer support to IT expertise, right sourcing, or outsourcing,
the CM process is becoming an increasingly important way for companies to enhance the performance of their business operations. A proven strategy is to leverage technology while engaging with global service centers to improve legal and administrative staff functions at a fraction of the cost of hiring domestic experts. In some cases, accessing global service centers for contracting can halve a company's legal staffing costs. When combined with the efficiencies of technology platforms and Standard Operating Procedures (SOPs), the results are impactful, economically attractive, and revolutionary.
Global service centers have proliferated over the past decade as companies have increasingly realized the value of geographic service diversification. Not only can these centers help to save money through labor arbitrage, but they can also broaden a company's access to global talent. This will allow you to diversify your business risk.
Today, global service centers are not just low-cost hedging units against risk and uncertainty but have become knowledge centers that drive innovation and continuous improvement as they work with diverse Fortune 500 companies and small and medium-sized entities.
No need to do it alone
- What challenges do businesses face in this increasingly fast-paced global agreement environment?
- How can companies best leverage new technologies and practices to improve their bottom line?
- When is the right time to consider redesigning an organization's contract management, and how much will it cost?
Working with an experienced business consulting company can be your easy button because it has likely worked with CM technology and set up business process management systems for both Fortune 500 companies and emerging enterprises. Engaging with third-party consulting expertise allows organizations to benefit from unbiased knowledge of available CM platforms and higher awareness of the bolt-on technologies that deliver customized solutions.
Our story above about your company assuming its business is profitable teaches us to remember:
- Hindering your enterprise's growth by using a legacy contracting process is a bad idea. Instead, use your contract management system to ignite and support expansion.
- Developing a CM system will save you time and money if you maximize your financial benefits from existing contracts, streamline the contracting process, and unify your legal, procurement, and compliance systems.
- Hiring a global service company can help to ensure swift, around-the-clock expert assistance worldwide, giving you greater agility and bolstering your competitive advantages.
A global contract management platform supported by outside expertise is a terrific strategic asset so that your contracts don't manage you!
- Evolution of Contract Management Technology - Past, Present and Future, Spotdraft article, Aug 27, 2020
- The Benefits of Contract Management Software, PLANERGY article
ABOUT THE AUTHORS
Kirk Samson is the Senior Director, Contract Management Services at Nexdigm (https://www.linkedin.com/company/nexdigm/ ). He plays a key role in nurturing client relationships, improving service delivery and business development in the US, as well as the transition, transformation, and automation of processes for Nexdigm. He has over two decades of overseas experience effectively negotiating and advocating with foreign governments, multinational companies, and international organizations. His expertise lies in varied areas such as project management, customer service, risk analysis, and business strategy.
Marc Lessem is the Senior Executive Director at Nexdigm (https://www.linkedin.com/company/nexdigm/ ). He specializes in developing and executing market share growth strategies while cultivating high-performing teams. Marc is an accomplished business executive with more than three decades of experience. He has held senior management roles in General Management, Operations, Marketing, Sales, and Finance. His primary areas of expertise include project management, commercial strategy development, contract negotiation, and client relationship management. He is a "connector" and welcomes hearing from you at firstname.lastname@example.org.
Nexdigm is an employee-owned, privately held, independent global organization providing Business Services and Professional Services that help businesses navigate challenges across all stages of their life cycle. Through their direct operations in the USA, Poland, UAE, and India, they serve a diverse range of clients. Their global Contract Management team balances legal and commercial interests, working with client stakeholders to balance risk. Nexdigm is accredited by the Everest Group in its Global "PEAK Matrix® for Procurement Outsourcing 2022" report. They have been recognized for their end-to-end solutions through managed services, transformation projects, and resource augmentation.