The In-House Experience: Choosing a Contracts Management System
Halebury’s Richard Dalby on choosing a contracts management system for your in-house legal team.
You know you want one….you know you should have one…but how do you make sure you’re not committing yourself, and your business, to a time consuming and expensive system that will quickly become outdated or, worse, one that is so complicated that it remains largely ignored and unused?
Managing your contracts efficiently and effectively is essential for any good business and, in most cases, is the responsibility of the legal team. Choosing and implementing the right contracts management system can lead to very substantial financial and qualitative benefits; streamlining of the contract drafting and negotiation process, ensuring key dates and renewals are not missed, aiding consistency and optimization of deal terms and allowing for search and retrieval at will of your key business assets.
However, making the decision to automate some or all of the contract lifecycle is a substantial one and careful planning is needed to ensure that you select a solution that works for your business, works for your team and is obtained at the right price.
In my view the 3 key steps to success are; establish a project team, identify clearly what it is you want the system to achieve and conduct a rigorous selection process.
The Project Team
The appropriate size and composition of the team will vary, of course, according to the scale and nature of the business concerned but in my view it is essential that it is formally established as a budgeted project with a dedicated team and adequate time and resource allocated to it. Too many people make the mistake that it can be done as part of their day job but it needs full time attention and, in most instances will benefit from an external dedicated resource who will be able to devote the time and apply the necessary objectivity to your current business practices to enable them to be systemized.
Input is also needed from the legal and finance teams, IT advisors, risk officers and key commercial stakeholders.
The project team needs to agree and achieve authorization for a proper project brief including the aims and expected benefits together with an agreed timeline and a budget. The project manager and the team need to be tasked with achievement of the plan and be empowered to meet that timeframe.
What do you want from a Contracts Management System?
Once the project team has been established, they need to decide very clearly, and in some exacting detail, just what it is the contracts management system is intended to do.
The key functions of a good contracts management system are:
- Contract repository
- Reporting and interrogation
- Contract generation and authoring
- Contract Integration
You may want all or some of these – or the ability to start with one or two elements and build in the others as you go. The important thing is to take time to dissect your own current practices and build up a model of how you want that replicated in the management system. You may think that you manage contracts in much the same way as everyone else but in fact every business will have developed its own unique route map for the contract lifecycle and approvals. This will become apparent as you document it.
This is also a good opportunity to recognise where problems exist and deal with them in the new process. If for example there is no consistency, or no sense, in your current approvals process or the documenting of it then this is a good chance to adopt a better one.
Most system providers will claim that they can produce a system to meet your needs and if you put out broad and generic requirements most, if not all, will claim that their system can deliver. However if you break down your own requirements into sufficient detail at this early stage it will soon become apparent that some will meet the brief better than others. This will also enable you to get more accurate price quotations at an earlier stage.
It is also vital to look at opportunities for integration within your business. Will the solution you choose at least have the capability to integrate with other systems already in use in other parts of your company, those of sales, procurement, IT, Finance and HR for example. Make sure your project team is aligned with any other existing systems, practices or with other projects in progress within the business.
A Rigorous Selection Process
There is a bewildering array of different options available in the contracts management space. It is important to speak to, and then select, companies whose products have the right fit for your own and this part of the process will, again, need substantial and time consuming work.
In selecting those vendors to be included in the process, look at those companies who are still going to be around in a few years time. You want ongoing support and adequate research and development funding for your product gong forward. Look at the company size and their strategy for the future as well as whether the product is well regarded in the market place.
However don’t only look at the big players, there may be more niche suppliers out there who are particularly good in your geographic or business area. Take note of personal recommendations, particularly from those in similar industries or businesses of similar size to your own. Be aware of your own business culture, its strengths and its weaknesses and take this into consideration in selecting systems that reflect your way of doing things. Some for example are high tech and sophisticated, others more user friendly and easy to use with the minimum of training. Think about what will really work for you.
Make sure you have a chance to look at and try the systems. Be aware that the generic sales demonstrations are designed to accentuate the strengths and, let’s say, minimise their shortcomings. If asked some vendors will be prepared to customise a demonstration, at least to a limited extent and this will give you a better sense of the look and feel of the product. Also ask them to perform a modification in your presence to get an idea of how easy this is to do and whether it’s something you could comfortably take in-house. A user-friendly interface is often important to the successful adoption of a new system.
Contact the vendors’ quoted referees and speak with them about their experience. It’s invaluable to hear from another customer abut their experience and be prepared to ask them specific questions about timing, cost and any unexpected surprises they encountered.
When measuring or marking the responses from vendors make sure you compare like with like and that you are being objective about the results. Create a grid and ascertain marks out of, say, 5 for different attributes. Then be guided by your own objective results and not just your gut feelings.
If you follow the above you can find a solution that will help your business to be more efficient and effective. You can save time, and cost and minimise risk and, what’s more you will always be able to put your hands on that urgent document!
Follow Richard on Twitter on @rdalby123
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