Specialist: Marty Kelly
Brief Background: Marty Kelly, who has a background in engineering, is the solutions director of contract management for Emptoris, a contract construction company. He studies the process that contracts go through rather than the content inside them.
What is contract construction technology?
Contract construction technology is software that allows ordinary employees to create contracts using pre-approved clauses, alternative clauses, defined metadata and standardized templates. This, if desired, can remove legal from the contract request process and from standard contracts like non disclosure agreements, employment agreements and confidentiality agreements.
What are the benefits of using templates for contracts?
The benefits include greater standardization among contracts, improved contract cycle times and risk mitigation due to improved controls. Templates and contract construction technologies only require legal approval or revision if this language is modified, therefore speeding up the overall contract cycle time. There is a decreased likelihood of nonstandard, unapproved language going to the outside party, thereby reducing exposure to unnecessary risk.
Why is the contract process so often overlooked?
I would say that's because no one actually owns it. Many goups are affected by contracts but each in their own way. For example, sourcing may be responsible for requesting the contract, a contract negotiator may be responsible for negotiating the business terms, a lawyer may be responsible for negotiating the legal terms and finance may be responsible for entering the executed contract into a financial system. Few companies designate a group with overall responsibility for the contract.
Is it ideal for big or small companies?
It can really work for both. The technology is very flexible and isn't specific to any particular industry-- every company has contracts. We work with everything from relatively small Midwestern banks to divisions of the British government to global telecom companies.
What sort of costs should companies expect?
Like most software, the cost range is wide. It can be anywhere from tens of thousands to hundreds of thousands, or even millions, depending on the goals and objectives of the company, the scale of the initiative and the role the software will play with other technologies.
What is the sort of return can you expect on your investment?
It's really difficult to quantify the return on investment from contract technology because most of the value is seen over time instead of immediately. For example, one of contract technology's main advantages is simply mitigating risk, and it's nearly impossible to quantify risk unless a company has already failed at managing it. Productivity improvement, which is another value proposition, can't be properly measured until the software has been implemented. That's why, along with lack of ownership, I believe, contract management technology has taken more time to be adopted.
Say a company is looking to adopt this program. Should the technology or legal department should be in charge?
That's tough because each will look at it from a different perspective. Legal tends to examine how it will affect the legal department while the technology department views the affect on the overall business, both from a process perspective and from a technical fit perspective. The ideal situation would be both.
Why invest now, rather than waiting for the technology to improve?
Technology is always going to be improving while the problems won't be fixing themselves. Therefore, time spent waiting means that more will have to be corrected in the future. More contracts will go into the abyss of file cabinets or shared drives and deepen the hole time-strapped lawyers and contract negotiators fall into. Now is the time to bite the bullet and simply switch over, because in order to keep costs low and stay competitive, all companies will eventually need to modernize their contracting processes and databases. Storing old contracts in file cabinets is antiquated and won't work forever.