Contract Management Software

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APTTUS

White Paper

Contract Management

Software

Buyers Advice

Tips, hints and invaluable guidance

An invaluable guide for buyers of Contract

Management Software. Covering the entire

procurement cycle, this guide highlights key

considerations and pitfalls and provides advice as

how to manage your process to your best benefit.

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Contract Management Software Procurement

Background

Procuring enterprise software can be a difficult exercise. It is lengthy and fraught with pitfalls that unknowing buyers may fall into. Unfortunately, Contract Management Software is no exception. In fact, it may be even more challenging due to some key characteristics of the contract management process. Many of the comments in this document pertain to enterprise software generally even though we have focused on contract management software itself.

This guide was created by Apttus to aid the buyer of contract management software. Why would a supplier be providing such a document? The reason is simple: Apttus believes that the procurement and deployment of contract management software today is fundamentally flawed and is causing organizations to have costly failed implementations. Apttus has deep domain capabilities in contract management and its members have been in enterprise software for many years. We are very familiar with the limitations and pitfalls of enterprise software. Apttus offers a solution that is much more aligned to the interests of buyers and prospects. It is in our interests to expose the flaws that exist today.

We want you, our customers, to be successful. We want to make the software procurement and deployment process as transparent as possible.

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Executive Summary

There are many factors that a buyer needs to consider when procuring Contract Management Software. The 4 most important ones are summarized here:

Advice

Keep it simple

- start small

- get a quick win

Keep your project simple. Contract Management is a highly variable function – if you don’t keep your project simple, you will take months to evaluate, months to years to deploy, and it will be very expensive.

Make sure the tool is highly configurable - be able to make changes easily

Contract management is unique – its processes and variables change at a much higher frequency than traditional processes (negotiations, approvals, templates, clauses, etc.) – if the software you acquire is not highly configurable, you will end up with expensive implementation costs, need IT to make changes and have a system that you won’t use. That’s because the day you start to use the system, you will already want to make changes – it’s the nature of the contract management process.

Go for low cost - Look at the total cost of ownership, not just the price of the tool

Most systems can provide you with what you need. You do not need to pay large sums for licenses. As long as the system can deliver your requirements – go low cost! Also be aware of the total costs of ownership – software is usually 30% or less of your total cost of ownership. Make sure you look at all costs.

Don’t pay a perpetual license upfront

If you are buying a traditional perpetual license – don’t pay upfront. Pay a perpetual licesne only when you start to use the software. That way, if it doesn’t work, you are not out of pocket. Also, always include acceptance clauses. Subscription software usually starts at signing of the license agreement

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3. Contract Management Software Procurement Cycle

The buying of Contract Management Software may seem to be a simple process – but it’s not. Products will look similar, everything will appear to do what you need it to, the deployments will seem simple, and every type of agreement can be managed – right? Not quite.

Requirements

Deciding what your requirements actually are is difficult for contract management. Our experience has shown that if the requirement’s definition and selection process is not managed properly, you will probably not make a purchase at all, or you will end up with a completely sub-optimal system.

The process usually begins with a specific business function having a need – for example, sales may want to automate the contract process; procurement wants to track performance against terms; legal wants to ensure standard templates are being used; or you want to comply with Sarbanes Oxley. The initial group or business function defines their requirements and documents them.

Then, to benefit the company, other organizations, who also have the need for contract management automation, start to participate in the process and also contribute their requirements – the functional list now grows. At this point it starts to become difficult to discern what is an essential function, and what is simply a “nice to have” but unnecessary function that may not be of value to everyone.

And then, when you see product demonstrations you realize that there is so much more functionality that you can get, that you change your requirements and add these new features in too. And then another business function joins the evaluation and adds more requirements…

We call this the Supernova – a star that begins small, but through gravity and acceleration grows and begins to move at really high speed, eventually just blowing up and flaming out. In our experience, one in three evaluations ends up as a Supernova! Trying to manage to everyone’s requirements across the entire enterprise - within a budget and a timeframe, is very difficult – virtually impossible. People lose patience, products can’t map to all the requirements, the cost is too high, the project is not approved or it flames out.

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Contract Management Software Procurement The ultimate irony - the original group that had the important basic needs in the first

place, ends up losing out, as they don’t get their requirements met. The Flaws

Don’t try to assemble a requirements list that maps to every conceivable scenario. Decide what’s most important and check to ensure the product you choose has these features. You don’t know what you don’t know – there are too many variations of contracts and processes that you cannot possibly define all of them. Also when you start to use the system, you begin to realize what you truly need and what you don’t. Everything else is an academic exercise. Make sure the system is highly configurable so you can make changes easily later.

Advice

Avoid the “Supernova”

Decide your most important requirements and keep the project simple. Most products can perform what you need. Add other groups later. But make sure the selected system is can be configured for future success.

Get a quick win Start small and go live fast – a quick win will build

momentum and satisfy stakeholders – scale fast after this.

Make sure the software is configurable

The most important key to contract management automation is to make sure the system is highly configurable – the contract process is highly variable – if the systems are not easily configurable, you will incur a large implementation fee and you will be stuck because you can’t make quick,

necessary changes later.

Vendor evaluations

The right way to select contract management software is to pit the software vendors against each other. This way, you can cut through the vendor hype. However, make sure

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Contract Management Software Procurement you do so in an optimum way. Taking months to evaluate the software and determine the

correct vendor is unnecessary. There are simpler ways to do it. The Flaws

 Taking months and months to evaluate vendors is not necessary – if so, your requirements are not fully understood or you have the wrong vendors! Contract Management is a clearly understood function and when you see the product managing to your contract and process, it should be obvious.

 Buying for tomorrow. Contract management is a clearly understood function and most products can do everything you need. But don’t try to build everything right now. Make sure the product is adaptable. If the product cannot be configured to what you need, you have the wrong product.

Advice

Start small Always start small, get a quick win and scale fast. Many

contract management deployments take months and years to deploy and then you don’t know if you will really get what you thought.

References References are key – don’t always be given the same

references – ask for a list of all clients and pick out the references you want – always ask a reference if they would select the system again or what the most important pitfalls were.

Proprietary technology

Many products can do everything you need today – there is no need for any proprietary technology – that simply means higher cost to you, more IT complexities and difficult upgrades.

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Software Demonstrations

The purpose of software demonstrations is to provide the buyer with a visual example of the product. This is to establish functional fit to your specific requirements. Product demonstrations are probably the most flawed part of the buying process, and are frequently described by analysts as “smoke and mirror” events.

The Flaws

 What you see is not what you get – words and slides can create an illusion as to what the product can do – you may walk away thinking you saw something when in fact you didn’t.

 Product demonstrations are designed to flow smoothly and completely cover up the limitations of the product.

 Demonstrations usually show the same scenario

 Demonstrations are usually using generic content with generic fields

Advice

Go “anywhere” Demonstrations are designed to go as smoothly as possible

and usually follow a script – make sure you go anywhere you want. Imagine you are using the system and ask the

presenter to follow what you would do – take them off-track to see how easy the product really is to use.

Use your contract See the demonstration with your contract, fields and terms – don’t accept a “no” on this or the system may not be

configurable.

Add, change and delete fields

During the demonstration, ask the presenter to add, change or delete fields – if they cannot do this easily, then the system may not be easily configurable and therefore cost a lot to implement and you could be “stuck” – not able to make necessary changes later.

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Drill down to specific areas

Don’t just watch a demo – keep drilling until you reach a limitation. For example, when viewing a report, ask to drill to the content of the report, to a specific vendor or customer and to a specific transaction – don’t just view the report.

Do a Hands-On Session

A hands-on session means you use the system for a few hours with guidance from the vendor – it is not a scripted process that you follow over a weekend – a scripted process will not allow you to see the system managing to your type of requirements.

Negotiations and the Deal

Negotiating with software companies can be tricky. There are many terms that need to be negotiated to ensure you are not exposed. Some suggested recommendations are listed below:

Advice

Everything is negotiable

Nothing is non-negotiable – decide what is most important to you, and get it. Don’t try to negotiate every line in the contract, but instead focus on the most important items for your business.

Watch out for the excuse of revenue recognition

“I can’t reduce my PS rates because of revenue recognition” This is a very common response to price negotiations. You can get whatever you want on price – if it’s a revenue recognition problem, then it’s their revenue recognition problem. There are many contract management packages available that are economical - you don’t have to talk about “revenue recognition” problems.

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Always use

acceptance clauses

You never know what you get with software. Always put acceptance clauses in your contract. This means you only pay when you have “accepted” the software – you will have defined what the right acceptance is upfront. This way you won’t end up paying for software that doesn’t work or perform according to your requirements.

Only pay upon delivery

Never pay perpetual licenses upfront. It’s very difficult to get your money back – pay on delivery and according to you having accepted the software. Subscriptions usually start at the signing of an agreement because of the provisioning of the infrastructure.

4. Implementation

Implementation is often referred to as the “necessary evil” of every enterprise software process.

Flaws

 Implementations should not take long – if they do it means the software is immature or not designed properly – there are contract management software products available today that are installed and configured rapidly.

 Implementations should not be expensive – if they are, you are over-paying. There are contract management products that can be implemented very rapidly and at low cost. If you are customizing the software, it means the product does not have the functionality you require.

 Customization – if you customize software, you will later incur very expensive upgrade costs.

 Your requirements are so unique that it will be expensive for you to implement – there is no such thing as “unique requirements” – if the vendor is domain deep and the software is highly configurable, which it should be if it’s mature, then your requirements should be met easily and economically.

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Advice

Start simple The key is to start simple and get a quick win. The software

needs to be highly configurable in order to add other

functionality later – if you have a long implementation time, it may indicate configuration is an issue.

See a custom demo with your

requirements

See a demo with your contract terms and fields – this will give an indication of how long it will take to implement

Experienced consultants

Always look at the resumes of the consultants on your project – they must have at least two years of contract management implementation experience. If not, they are learning on your dime.

Milestone based payments

Only pay for professional services as they are delivered – again, use acceptance as a way of qualifying delivery of the software.

5. Return on Investment

Return on investment is an interesting concept for enterprise software. Usually, automating the contract management process is not about reducing headcount or making savings. It’s about improving processes, eliminating bottlenecks and ensuring standardization, thereby reducing risks. There are very large returns available if you ultimately execute transaction compliance, but this is advanced contract management and very few organizations today have achieved this.

 Measuring ROI is difficult, but with the right business case, can easily be done. A better measure is Total Cost of Ownership (TCO). You need the

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Contract Management Software Procurement contract system for reasons that go beyond ROI. Make sure you achieve the

lowest TCO – speak to Apttus about TCO models for contract management software comparing Software as a Service (SaaS) versus on premise software. We have detailed models that will help you compare your total cost of ownership between different solutions, using your assumptions.

Advice

Examine the full total cost of ownership

The total cost of the system is not the software itself – in fact, the software is usually the smallest cost of the overall

system. Other costs include: database licenses, application server licenses, a database administrator, a system

administrator, upgrades of the software at future dates and support and maintenance costs.

Transaction compliance

The ultimate value of contract management is ensuring that you are achieving the terms that you have negotiated – transaction compliance. This is very high ROI and is

essentially “free”. The practical deployment of this however, is usually a distant phase for most projects and few

organizations have actually implemented this to date.

SaaS versus on premise

Always consider Software as a Service (SaaS) – it is usually significantly cheaper on ROI. The majority of software sold today is Software as a Service.

Don’t try to reduce headcount

Automating the software process is not about reducing

headcount – usually the contract function is bottle necked and needs to be more efficient. Software allows the legal group to be more productive.

Payments Do not pay large upfront perpetual licenses and then be

forced into annual support and maintenance costs. Pay a subscription for use. Subscriptions usually begin upon signing of contracts – this is needed in order to provision software.

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Contract Management Software

APTTUS

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