Here’s some blasphemy for you: in my opinion TCO is not a critical evaluation parameter when considering the benefits of contract management. Instead, I favor ROI.

What drove me to this conclusion is an experience I had about a year ago competing with a vendor claiming to sell a CLM solution that was as robust as the one I was trying to sell, but at a cost that was 90 percent less. To make a long story short, the prospect, instead of taking a long and reasonable view of their investment, went with the low-cost bidder. Their reason was clear: this choice appeared to carry a lower total cost of ownership.

But now that a year has passed and the solution is still not fully implemented (and the parts of it that are, do not work properly) the buyer is back looking for an alternative solution. The problem was that the buyer failed to recognize two things. First, when a price seems to be too good to be true it generally is. And second, the most important financial benefit of a solution is return on investment. The buyer’s lesson? An initially low TCO can quickly be transformed into a high one, if an original investment is abandoned in favor of a performing one.

To avoid this problem always check vendor references before plunking down any cash. But also remember that references are generally cherry picked by vendors. So what I’d like to propose is the creation of a CLM customer satisfaction warehouse, a customer-driven clearinghouse of information regarding the performance of individual solutions and the support individual vendors provide. Let me know if you’re interested and I’ll see what I can do to get something off the ground.

- Terry Nicholson

Call me sappy, but I’ve got this old fashioned notion that just as adults have responsibility for children, businesses should care for and protect their customers–and political leaders should do the same for the people they lead. Unfortunately, though, for whatever reason, these days the notion of self seems to have gotten in the way of these relationships. That is, business and political leaders alike have become more and more focused on their own desire to lead, their own power, their own “political capital,” and their own pocketbooks. All too often, they seem to forget that without their customers, shareholders, and constituents, they would not be leaders at all.

The result has been a breakdown of regulatory order. Just witness recent debacles in the Attorney General’s office, the moves to weaken Sarbanes-Oxley, and even the most recent decision by the Supreme Court to limit shareholder suits. While all of these things may seem favorable to business, the reality is that they probably are not. Let’s remember that the Attorney General is supposed to uphold the law, not bend it, that the Enron disaster occurred before SOX, and that often companies do try to shaft shareholders.

So what’s my point and how does all of this relate to contract management? Simply this: when we finally do get a new president, I hope it’s someone who takes a parental leadership role, not a self-serving, pugnacious one. The country desperately needs to regain its self-respect, and business needs to re-establish the rightful roles of the customer and shareholder. If these things can be achieved, the importance of contract-driven relationships will increase.

Robert Frost said that “good fences make good neighbors.” In a new political environment I think it will become increasingly clear that the “fences” in business are contracts, and that to be sure they drive good relationships, a robust contract management solution will be essential.

- Terry Nicholson

In the last post I mentioned that there are good reasons why general counsels (GCs) are increasingly getting involved with contract management. But the really interesting thing about this involvement is that it is actually resulting in a change in the GC role—and the transformation of contract management from a departmental solution to an enterprise service.

With the awareness that they need to keep a close eye on contracts, GCs are realizing that their offices should have corporate management responsibility for the documents and their attachments. With contract management under their control, the next step for GCs is to leverage the storehouse of information that resides in contracts to both improve risk profiles and enhance business strategies. In other words, with control over contracts, the GC is well on the way to becoming a business strategist.

From here it’s only a short hop, skip, and jump to having the GC office establish contract management as a centralized enterprise resource. After all, with the scalability and adaptability of contract management solutions, it only makes sense to have a single point of responsibility for the solution. GCs can then offer contract services to sales, procurement, HR etc., in the same way that PR and marketing services are offered across various departments in an enterprise.

- Terry Nicholson

Here’s a bit of irony that I think will soon become a bit of history: Despite the fact that the General Counsel’s office (GC) in most companies carries responsibility for legal documents, the GC is not always deeply involved with contract management processes. This situation probably evolved because contracts are viewed as satisfying business needs. But recent well-publicized regulations, events, and business failures have made it abundantly clear that contracts, though business-oriented in nature, are intimately associated with corporate risks. And responsibility for managing the corporate risk profile sits squarely in the lap of the GC.

Fortunately, GCs are increasingly asserting their authority in the contract management process as they begin to recognize the tight linkage between this process and their ability to mitigate legal and regulatory risks. Remember the old commercial for vegetable juice when the guy slaps himself on the head and says, “I could have had a V-8?” Well, more and more GC’s are now having an analogous epiphany with contract lifecycle management (CLM).

GC’s take a lot of heat when something pertaining to a legal document or an audit goes awry, so their vested interest in contract management is rapidly becoming crystal clear. What’s less obvious is the growing role in strategic business operations that will result from this involvement.

- Terry Nicholson

I’ve been accused quite often of overstating my case, or as my friends prefer to say, “beating a dead horse,” but I just can’t control myself. You’re about to discover that this especially holds true when it comes to software demos; I’m just not content to “let sleeping dogs lie” (I promise that this blog will have no more animal references). Please read on for my third—and final–installment of the demo rant.

As I’ve stated before, demos can be useful, but are not, in and of themselves, reason enough to make a final CLM selection. Always approach the demo with the realization that needs change over time, but that the demo is probably being targeted to current requirements. In any case, the demo will certainly focus on the solution’s benefits, leaving you unaware of possible pitfalls.

Another problem with basing decisions solely on a demo is the fact that the reality of a CLM purchase is that you’re buying the vendor, just as much as their product. This is because, in truth, differences between vendors are far greater than the differences between their products. And again, the demo is definitely not the best way to evaluate a vendor.

I know of one major financial institution, for example, that made their initial choice of a CLM solution because of an impressive demo which highlighted features they needed. The demo was delivered by a sales engineer who also promised that his company would meet a range of implementation-centric requirements. Unfortunately, the engineer was either ignorant, or hopelessly misrepresenting his bosses. In either case, a sale was made, a customer was made unhappy, and in short order, the vendor was, rightfully, booted out. Mind you, the problem was not a malfunctioning product, but rather an inability on the part of the vendor to live up to promises and expectations in so far as implementation services were concerned.

The lesson here is that in any CLM deal (or any software sale for that matter) where implementation is critical, the transaction is not only about the product. It’s also about the ability of the vendor selling the product to deliver implementation services that enable that product performance to be leveraged and optimized.

It comes down to this: when viewing a demo, look beyond the engineer delivering that demo, to the company standing behind that engineer. A CLM solution represents a commitment on your part to a new technology; make sure your vendor is fully able and willing to partner with you to make that commitment a successful endeavor.

- Terry Nicholson