Why Modern Contract Management is a Must in Today’s ... · A WEBINAR FEATURING FORRESTER AND SIRIONLABS April 27, 2017 ... KPI Calculations Pricing Adjustments Regulatory Liability

© 2012-17 SirionLabs Pte. Ltd. The contents of this presentation are proprietary and confidential.

Why Modern Contract Management is a Must in Today’s Procurement World

A WEBINAR FEATURING FORRESTER AND SIRIONLABS

A p r i l 2 7 , 2 0 1 7

2© 2017 SirionLabs. The contents of this presentation are confidential.

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M E E T T H E S P E A K E R S

ANDREW BARTELS

VP and Principal Analyst

Forrester Inc.

[email protected]

A JAY AGRAWAL

CEO & Co-founder

SirionLabs

[email protected]


W H A T W I L L B E C O V E R E D T O D A Y

CONTEXT AND LANDSCAPE

Why CLM is crit ical for contract management?

INSIGHTS

How gaps in traditional CLM approach result in value leakage?

BEST PRACTICES

Leveraging modern CLM technology for effective contract management

SIRION OVERVIEW

How Sirion is transforming the way enterprises manage contracts

© 2017 FORRESTER. REPRODUCTION PROHIBITED.

Why Modern Contract Management is a Must in Today’s Procurement World

Andrew H. Bartels, Vice President and

Principal AnalystApril 27, 2017

6© 2017 FORRESTER. REPRODUCTION PROHIBITED.

Contracts play a central role in purchasing

A sourcing

event that

chooses a

supplier(s)

and sets a

price …

That gets

turned into

a contract

That gets

executed through

procurement and

paid off of an

invoice

Or an expiring

contract triggers a

sourcing event


Contracts have their own lifecycle, requiring a specialized solution

License

Revenues

2

1

3

4

5

6

Contract

optimization

Contract renewal

Contract

compliance

and

administration Contract

storing and

repository

Third-party

contract

importing

Contract

drafting and

negotiation Contract lifecycle

management

(CLM) software

handles the whole

lifecycle


CLM solutions can deliver five sources of value

1. All contracts in an electronic

repository(Cut costs of finding contracts, tracking

renewals)

2.Analysis and reports of contracts(Identify duplicates, conflicts,

obligations, and rights)

3. Automate contract creation(More efficient use of legal staff, faster cycle

times, acceleration of revenues or savings)

5. Improved contract optimization(Maximizing business value from contracts)

4. Integrate transaction systems to

contractual terms and conditions(More complete and effective compliance

with contractual benefits and commitments)


But most firms have not gotten beyond Stage 3


Until CLM products and CLM implementations move beyond contract creation, they will not deliver strategic value

Tactical and

Transactional

Driving success

in contractual

engagements

through

improved

business

outcomes –

savings and

revenue,

performance,

relationships,

risk

Reducing

effort and

cost in

creating

contracts

Finding all

contracts in

one location

Strategic and

Transformational


That shortfall is especially important when it comes to services spending

In most industries, firms spend more on services than on goods/commodities today

11%15%

20%20%

28%40%41%

58%63%64%65%

75%81%

85%97%

Retail trade

Wholesale trade

Manufacturing

Construction

Agriculture, forestry, fishing, and hunting

Utilities

Mining

All industries

Transportation and warehousing

Arts, entertainment, leisure

Government

Education, health care

Information

Professional and business services

Finance, insurance, real estate

Services as a percentage of purchased inputs, 2015

Source: US Bureau of Economic Analysis, US Gross Output By Industry

Yet the value of

services comes after

initial purchase,

making contract

management critical


Failure to tie the contract to each stage in the procurement process leads to problems

Define services to be provided

Choose vendor and scope, price and timing of

services to be provided

Engage with services provider to initiate work

Manage services provider’s performance

during engagement

Process invoice and pay vendor

Invoice doesn’t

agree with contract

Work performance

is poor

Work doesn’t agree

with contract

Massive impact on

bottom line

equivalent to 5% to

10% of the value

of the contract


In this changed procurement landscape, contract management must:

• go beyond the traditional pre-signature focus to cover the full lifecycle

• enable and secure intended business outcomes

• enable comprehensive risk management through the duration of the engagement

• cut across internal and external silos and facilitate collaboration and engagement

within the enterprise and with suppliers

• offer intelligent and dynamic technology with advanced analytics, workflows and

integration with other enterprise systems


What advanced contract management looks like

CLM value stage Advanced features

Contract repository Natural language processing and machine learning to extract and

categorize metadata

Reporting and

analytics

Analysis of actual performance against expected and audited

supplier invoices

Contract creation Artificial intelligence to help users choose the right contract terms

and conditions for a new contract incorporating performance data

from past contracts

Contract

compliance

In addition to integration with transaction systems, workflows to

facilitate completion of obligations and track current status

Contract

optimization

Analytics to identify risks or lost value from existing contracts and

identify necessary changes to contract language


Success factors for reporting and analysis

› A good portfolio of existing out-of-the-box reports

• Contracts by spend, geography, renewal date, etc.

• Contracting process and cycle-time analysis reports

• Compliance analysis reports

› Dashboards to monitor status of service levels, obligations, governance issues and

action items, etc.

› Tools for creating custom reports

• Wizards for business users to generate reports they need


Success factors for contract compliance

› Automated workflows to facilitate and track completion of service levels and performance obligations

› Automated performance and invoice validation

› Granular tracking of regulatory and policy compliance obligations

› Management and tracking of governance issues and action items

› Alerts and reminders for upcoming contract renewals and expirations

› Change management to keep the contract metadata and obligations updated


Success factors for contract optimization

› Make contract improvement a goal!

› Use the analytics of your CLM product to identify bottlenecks and weak controls.

› Compare the actual business results from your contracts with your expected

benefits.


Building the ROI for CLM solutions

› Hard Savings

• Reduction in supplier invoice amount due to correction of discrepancies/ errors

• Enforcement of service level credits by closely tracking supplier performance

› Business Outcomes

• Improved service delivery and performance

• Ability to close contracts more rapidly

› Risk Reduction

• Identification and management of contract risks and exposures

› Effort and Cost Reduction

• Reduction in cost of finding existing contracts

• Reduction in legal department’s cost to review contracts

• Reduction in number of unintentionally lapsed or renewed contracts

• Reduction in human effort for post-signature management of strategic contracts

© 2011 Forrester Research, Inc. Reproduction Prohibited


Recommendations

› CLM solutions have real, tangible benefits, but you need full implementation to realize the strategic benefits, and not just the tactical benefits

› Look for products with advanced features for contract compliance and contract optimization to capture this full strategic value of CLM

› Implement in stages, but get buy-in from all stakeholders for all the stages of value

› If you buy a CLM solution for buy-side contracts, get legal involved, and look to see if it can be used for sell-side contracts as well

• Focus legal on creating library of terms and conditions, and wizards, scripts and templates for creation of contracts, as well as approval workflow and controls

FORRESTER.COM

Thank you© 2017 FORRESTER. REPRODUCTION PROHIBITED.

Andrew Bartels

+1 516.869.0128

[email protected]


A B O U T U S

USA

INDIA

GERMANY

DENMARK

UK

SINGAPORE

F A C T :

$200-300 B OF VALUE IS LOST ANNUALLY DUE TO LACK OF EFFECTIVE GOVERNANCE OF SERVICES CONTRACTS

PORTFOLIO COMPANY UK Government G-Cloud Supplier

THE WORLD’S MOST INNOVATIVE COMPANIES

Sirion is transforming the way buyers and suppliers of complex services engage with each other

O U R A P P R O A C H

Algorithmically reconcile “what is supposed to

happen” from the contract to “what actually

happened” using live performance data

Use the signed contract as the source of truth

Eliminate human errors by rejecting and adjusting

invoices based on “what you need to pay”


S T R O N G E X P E R I E N C E A C R O S S I N D U S T R I E S

FORTUNE 500 AND GLOBAL2000 CLIENTS

Banking and Financial Services

Oil and Gas

Healthcare Wind Energy

Insurance Telecom

Information Technology

Aerospace andDefence

Airport Operations

Food & Beverage

COMPLEX SERVICES MANAGED

IT

BPO

Telecom

Facilities Management

Third Party Logistics

Complex Manufacturing

Construction Projects

Contingent Workforce

Healthcare Services


S I R I O N I M P A C T

$1B

TOTAL INVOICES PROCESSED

SAVINGS DELIVERED IN 2016

$68M (6.8%)

10,000+TOTAL CONTRACTS MANAGED

$3B+TCV UNDER MANAGEMENT

350,000+TOTAL OBLIGATIONS MANAGED


W H A T ’ S M I S S I N G I N C O N V E N T I O N A L C O N T R A C T M A N A G E M E N T ?

NegotiationContract Drafting

SignatureContract

RepositoryContract Admin

Contract Performance

Relationship Management

CONVENTIONAL CONTRACT MANAGEMENT VIEWS THE CONTRACT AS THE END PRODUCT OF PROCUREMENT, OFFERS L IT TLE POST -SIGNATURE CAPABILITY

Post-signature (36-60 months)Pre-signature (6-12 months)

(Not designed to support frequent updates to the

contract)

Renewal and Termination


P O S T - S I G N A T U R E C O N T R A C T M A N A G E M E N T | T H E B O T T O M L I N E I M P A C T

SIGNS OF DEFICIENT POST-SIGNATURE CONTRACT MANAGEMENT

• Outdated contract documents in the repository

• Deliverables and obligations tracked on spreadsheets

• Invoice payments made based on supplier data

• Governance issues and action items tracked on emails

Pre-signature(procurement)

Post-signature(supplier governance)

Time

What is delivered “Value Realized”

The business case “Value Expected”Value captured

during procurement “Value Promised”

Val

ue

20%

8% Soft

Leakage

12% Hard

Leakage


S I R I O N ’ S E N D - T O - E N D C O N T R A C T M A N A G E M E N T A P P R O A C H

Service Level ManagementObligation ComplianceSOW/WO/PO ManagementCredits & Earnbacks

Regulatory CompliancePolicy Compliance

Supplier Audits

Governance ForumsIssue/Action Item Management

Governance Process HealthSurvey Management

Invoice AuditingSpend Pool Management

Financial Analysis and PlanningValue Assurance

Clause LibraryTemplate Library

Authoring Workflowe‐Signature

Document RepositoryObligation CaptureDocument Change ManagementContract Interpretations


B R I N GIN G C O N TR AC TS T O L I F E - 1

Computational Objects

Key Risks

• Hierarchical storage

• Advanced search capabilities

• Change management

Contract Repository

Expected Outcomes

Base Charges

Rate Cards

SL Credits

Earn Backs

KPI Calculations

Pricing Adjustments

Regulatory

Liability

Indemnity

Insurance

Obligations

Milestones

Service Levels

Deliverables

Contract Authoring


S M A R T C O N T R A C T R E P O S I T O R Y


B R I N GIN G C O N TR AC TS T O L I F E - 2

COMPUTATIONAL OBJECTS

KEY RISKS

Algorithms

EXPECTED OUTCOMES

DATA FROM ENTERPRISE SYSTEMS

Workflows

Workflows

PERFORMANCE

INVOICECONTRACT

Reports and analytics


U N I F I E D C O N T R O L O V E R O U T C O M E S A N D P A Y M E N T S


U N P R E C E D E N T E D I N T E L L I G E N C E A N D I N S I G H T S


W H A T C U S T O M E R S S A Y A B O U T S I R I O N

We recovered our investment in Sirion within the first few months as it enabled us to identify discrepancies in our supplier

invoices which would otherwise go unnoticed.

Although Sirion has only recently gone live we have identified increased revenue and/or cost avoidance which if applied across the Trust’s portfolio of commercial agreements, will deliver a projected saving/revenue increase of circa £20m within the next few years.

“

“

Sir Robert Naylor | Former Chief Executive

Henrik Krarup Stefansen | Senior Director, Global IT Sourcing


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Documents

Why Modern Contract Management is a Must in Today’s ... · A WEBINAR FEATURING FORRESTER AND SIRIONLABS April 27, 2017 ... KPI Calculations Pricing Adjustments Regulatory Liability