Key aspects to consider before procuring a contract management solution
In a previous post, we discussed the need for contract management processes and ended it with our suggestions of the important processes to implement. Having established the necessity for well-defined processes to manage your contract portfolio, in this post we will walk you through some the key aspects to consider and decide on before procuring or designing a software system.
- IT infrastructure – Cloud vs On-premise hosting
The central point to consider in infrastructure is whether to go for a cloud solution or a on-premises solution or a hybrid combination of the two. While the current trend is to opt for cloud hosting, certain types of businesses may prefer on-premise options for reasons of control and security. Below are some of the pros and cons of these two options.
|Cloud||· No additional infrastructure procurement costs
· No issues of compatibility
· No maintenance required
|· Lack of customization
· Lack of control over hosting & security
|On-premise||· Complete control over infrastructure
· Customizable to suit internal requirements
|· Hidden costs for setting up an in-house data center
· System hardware and software costs
· Additional IT maintenance personnel to be deployed
- Lifecycle stages – pre-signing or post-signing or both
Although a complete contract lifecycle management solution is the ideal tool for any company to manage its contract portfolio, depending on resources, bandwith and internal operations, different departments may require different stages of it. In our experience we have seen that in-house legal departments find the pre-signing module to be invaluable, whereas for other business departments (who are often the custodians) find more value in the post-signing module. Consequently, the company ends up requiring a tool to manage the entire lifecycle.
i. Contract pre-signing module
The pre-signing module will typically cover the workflow and requirements to manage the cycle of a contract from time of request till signing the final documents. Some of the important aspects to consider in this module are:
- Availability of templates & clause library
- Customisable contract hierarchies or folder structure
- Intelligent document reader
- Online, collaborative reviewing and editing options
- AI driven negotiation of drafts
- Customisable and cross-functional approval hierarchy
- Advanced search options
- Intra-user chat and messaging feature
- Affixing electronic signature and making documents binding
ii. Post-signing module
The post signing module will typically cover the lifecycle of the contract from the time it has been signed/executed. While there may not be the need for templates, drafts, negotiations or signatures at this stage, common requirements are alerts and reminders for expiry/termination tracking, ensuring compliance with obligations, ascertaining performance of counterparty obligations, reviewing and forecasting risk and cashflows. Some of the important aspects to consider in this module are:
- Track and monitor contract compliances
- Manage renewals
- Centralized repository
- Risk prediction and mitigation
- Predict cashflows
Some features will be required whether you opt for a pre-signing or post signing module. They range from:
- Role based access controls;
- AI powered intelligent clause abstraction and document review;
- Risk forecasting and suggestive mitigations;
- Voice based interface and controls;
- Detailed reports and analytics on portfolio and stakeholder performance.
Price becomes the next most important aspect to consider. The market is fragmented between players offering per contract model or per user model of pricing. In case the operations are handled by a small team, a user-based pricing may make sense and conversely for large volumes of contracts handled by multiple teams, a volume-cap based pricing model may make sense. In some situations, you may want to negotiate a hybrid model of pricing although that can lead to complicated invoices and surprise cost-escalations.
The payment milestones also need to be considered with several players offering low value subscriptions over lumpsum upfront payments with no ongoing payments.
- Vendor selection
In addition to the standard search on different search engines, review sites and directories such as like Capterra, Software Suggest, list out the available options along with their key features, benefits and comparisons. During the selection process, you need to ask for client references and testimonials that can be easily verified. Additionally support availability is a crucial factor: ideally email, chat and phone but always ensure someone will respond quickly. You need to negotiate the number of training sessions and ensure a smooth learning curve for your stakeholders.
Contracts are one of the basic foundations of every business. All corporations are gradually realizing the importance of transforming their incumbent manual/un-automated contract management processes to intelligent, automated solutions. However, the debate about features vs budget will continue. In a future blog post, we will dive into the specific CMS features. Stay tuned till then.
- Agnishwar Banerjee, AVP
- Sanjay Das, Manager