SOCIAL CONTRACTING: 7 Reasons to Move to ECLM in 2015

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7 Reasons to Move to ECLM in 2015

Written by Constantine Limberaki
In the earlier blog we noted that CLM in the past was based on the inability to completely address the needs of
an enterprise due to siloed approaches so how do we look forward?
Contracts are the lifeblood of all business relationships. Today, organizations need the ability to be govern
contracts and contract data holistically from a common solution framework to get the best understanding of the
obligations that financially bind the entire enterprise. As such, siloed approaches for looking at CLM are officially
out of touch.
We can no longer look at CLM as a Procurement, HR, or Sales problem. CLM is clearly an enterprise issue that
needs to fit the wider risks that are being managed by the leaders of the organization involved with contract
management. But what explains the increased interest in contract management?
Answer: The nature of business
Today consumer strength is growing. Suppliers are more integral to the organization. Both buy and sell side
contracts are demonstrating more frequent negotiations, increased complexity related to post-award claims,
and an overall higher focus on compliance and regulatory requirements. In fact following are key areas that
demonstrate the increased complexities of the modern business framework, and top drivers for taking an
enterprise approach to CLM.
1. Larger numbers of contract stakeholders Today, employees, customers, suppliers, and the community,
shareholders, and other investors are all involved in the contract process. The top challenge is that everyone
involved is looking at different parts of a contract that are essential for their signoff, but continue to struggle by
not having one common platform to manage them all. In many instances, the contract reviewer doesn't have
the time or ability to analyze and understand the wider commercial context and the associated risks with
contracts that can be attributed to the lack of an enterprise CLM process.
2. A wider variety of contract types and terms governing the business From an NDA to MSA to SLA, the
clauses and terms going into a contract can be a complex array of requirements. At times, requirements may
need to be altered due to changes in the business or conditions that call for those changes from a variety of
different stakeholders in the organization, but may not have access to the CLM system. Some of these changes
may be pervasive to all contracts such as a change in a legal name of a business. Other changes may only impact
specific due to new regulations for a specific industry or region and that impact only certain suppliers or
customers. Without a centralized list approach, how can you know which contract type is best?

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3. Legal requirements from different jurisdictions The increasingly global nature of business makes knowing
what jurisdiction a contract falls under, from state, national, supranational (EU) to international (UN), critical.
Having this information and the ability to centralize the creation and management of the contract provides a
basis for understanding the context of the contract and its potential impact on the business, such as contract
language that may be different between common law versus civil law jurisdictions. Understanding these
different legal structures forms the basis for how legal proceedings are interpreted and how contracts should be
written.
4. Corporate events driving the need for more GC oversight The overlap of CLM features need to be
harmonized for more efficient management and use of the GC's time and effort for managing / assisting in the
management of clause libraries and templates. This is particularly true in times of corporate change that require
mass changes to contracts. In fact a recent WSJ article points to the fact that 2014-2015 as being one of the
most active merger and acquisitions market in years. While this may a positive for stock market, managing
change from a contractual standpoint increases the need to have a centralized or center-led approach to
managing contracts with GCs having to ability to control oversight with nuances and changes in legal language.
5. Increase of regulatory requirements Almost everywhere you turn, compliance and regulations
management is a topic of the day. Trying to manage regulatory changes that impact contracts require a
centralized view and oversight combined the need for flexibility. Growing complexity in the administration of
contracts for organizations that are heavily regulated or have worldwide affiliates need to be managed in a
dynamic way. Moreover, changes in regulatory requirements are often impacted by jurisdiction, where laws
specific to those jurisdictions can greatly shape how business is conducted. These changes force organizations to
take a closer look at how they draft language and the frequency for incorporating those changes into their
contracts based on the ongoing changes in regulation.
6. Analytics as a driver The need to improve insights into contracts is expanding. In concert with the
development of "Big Data", information created or collected around contracts demands a centralized process
for being able to understand trends and nuances of all the contracts across the organization. Analytics within
contract structures are also demanding CLM platforms to demonstrate the contract nuances such as analytics
based on:
Types of contracts, clause velocity, clause usage.

Total cost optimization through clause driven optimization (indemnification, SLA, audit)

Contract clauses, clause disputes or analytics for obligations management

Contract scope & goals tracking / remediation

Predictive analytics related trends on clauses, suppliers, approval cycles

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7. Increased adoption of SaaS While SaaS wasn't for everyone several years ago, not many technology
concepts have made their way into the popular lexicon as quickly as the "cloud." SaaS or cloud was confined to
B2C and concerns over security were rampant. However the ability to more easily scale and improve distribution
and increased security measures such as SOC 1-SSAE 16 or ISAE 3402, makes SaaS today a more viable option for
those looking to implement CLM. Growth in cloud approaches to contract management in comparison to hard
copy or installed instances of CLM may be more resilient ways to avoid risk. Moreover, from a technology
standpoint, there are several benefits that users obtain from technology providers focused on SaaS due
considerations such as: better time to benefit, reduced impact of upgrades, managed security, tighter
integration, and improved scalability.
Consider these 7 drivers outlined above. Are there more you've experienced? How would ECLM fit in your
organization today or into 2015?
Watch our on-demand webinar with guest speaker Andrew Bartels from Forrester Research Inc.: Creating
Strategic Value from Contract Management