SharePoint is increasingly being deployed not just for simple collaborative tools, but as a robust platform for enterprise-wide requirements, for supporting numerous departments in mission-critical processes. 

A case in point is automated contract lifecycle management, which in our own experience, we are seeing a growing number of companies adopting, across multiple departments.

When we were designing our own contract lifecycle management system, because we were starting from scratch, we were able to evaluate all the potential technology options available to us.  We chose SharePoint as our basis, because it provides everything we and our customers need in one platform.  As Tim Wallis, CEO of Content and Code, one of the original pioneers of SharePoint solutions, says: “SharePoint is a platform that can do everything well. While some point solutions may do some things better, SharePoint is a good all-rounder.” 

Predicted by Forrester Research to be a market growing at 27% per annum as an IT market, contract lifecycle management (CLM) systems make a good marriage with SharePoint.  Indeed, SharePoint has proved to be a catalyst for the contract management, because it has exactly the right attributes required:  it can be enterprise-wide, it is flexible enough to inter-operate with a variety of systems and devices, and it is highly collaborative. 

You may be thinking to yourself “So contract lifecycle management systems and SharePoint go well together, but so what?  Why should I be interested in suggesting better contract management to my organization anyway?” 

Two main reasons:  contract lifecycle management can provide organizations with tangible cost and efficiency benefits; and second, it is an ideal example of how return-on-investment and advocacy of SharePoint can be spread beyond the boundaries of the IT department to other parts of the organization.

Starting with that first statement, let me describe the importance of contracts, why managing them is such a challenge and how introducing contract lifecycle management systems help. 
Contracts really are ‘mission critical’: around two thirds of all business transactions are governed by contracts or agreements of one kind or another and Gartner estimates that at any one time, a large organization will typically have 20,000-40,000 contracts. 

Despite their central role in an organization, few companies have managed to implement contract management, largely because it is so fragmented.  Contracts are generally created and stored at departmental-level – such as finance, procurement, sales, human resources -  typically using a variety of formats and systems, both electronic and in some cases, paper-based. 

The legal department usually only gets involved if it has to review a document, or if a problem arises.   Review of contract revisions is a pretty archaic process: often involving posting or faxing drafts between the negotiating parties, so it may be no surprise to hear that Forrester Research says a contract takes on average 3.4 weeks to create.

This lack of control is further exacerbated by the fact that after they are created, these contracts are then stored in a variety of different formats and locations, ranging from emails through to paper-based copies stashed away in forgotten filing cabinets.  This means that the vital data in these contracts may be not easily visible or accessible, and perhaps difficult to find again.  Indeed, Faulkner Institute estimates that approximately 10 per cent of all contracts created are lost.

When Contract Lifecycle Management Really Matters

Does this matter?  Yes, because failure to observe contractual milestones and obligations, or just a sheer inability to have a ‘total picture’ of contract liabilities, can cause problems such as wasted expenditure, inefficiency and increased exposure to business risk.  

Here are some anecdotal examples that we have come across in the past few years:

• Failure to observe automatic contract renewal clauses – One company was tied into a 15-year renewal on a property lease that it had intended to terminate, simply because no-one was aware of the impending automatic renewal date.
• Missing a chance to negotiate better terms with suppliers – lack of organization-wide visibility of the contracts may that one department may be enjoying better contract terms with a particular vendor than another.
• Missing opportunities for rebates – for example, contracts may include incentives for early repayments.
• Compliance and legislative issues – an inability to have full visibility of all contractual liabilities can cause lack of compliance with industry regulation or legislation.   Human resources contracts may contain terms that could lead to litigation from ex employees if not observed.
• Mergers and acquisitions – we know of one instance when an acquisition fell through because the company being purchased was unable to provide full disclosure of its contractual obligations

Contract Lifecycle Management Systems

Clearly, contract lifecycle management is an area ripe for improvement. Enter contract lifecycle management systems as the solution.

Tangible benefits include faster contract creation, reduced manual effort and less risk of missing contractual milestones and obligations, because the system can be set up to send out automatically generated alerts concerning these.  

Greater visibility of contractual obligations organization-wide means that the legal function can more effectively support colleagues in other departments, but at the same time, individual departments do not lose control or responsibility for creation contracts.

For example, creating contract templates means that non-legal professionals can have greater confidence that they are adhering to corporate guidelines, while the legal department does not have to spend hours dealing with problems that have arisen through poor contract processes. 

By providing organization or department-wide visibility, contract lifecycle management systems also reduce dependency on any one individual having full control over a particular contract.  Jim Callaghan is General Counsel for Etihad Airways, the world’s fastest growing airline, which has implemented a SharePoint-based contract lifecycle management system from Dolphin Software.  “The system has perfect transparency – we can see where a document is at any one time, and because the system is accessible to the whole department, if someone goes on leave, a colleague can pick it up.”

So what features can one expect to find in a contract lifecycle management system?  Different vendors (and there are quite a few now) offer different feature sets, but a comprehensive solution might include: A contract clause tracker; compliance monitoring & regulatory requirements; automated alerts; tracking of price rebates; reporting; contract negotiation workspaces; workflow and reporting tools; author workspaces; contract drafting and storage; tools that support collaboration on contract with external parties. 

The latest generation of contract lifecycle management systems also include  e-discovery of legacy contracts.  This is an important point, because while it is tempting to rush into implementing a contract lifecycle management system for all new contracts, unless existing contractual milestones and obligations are included, then an organization does not have the full picture. 

Our own research shows that around 80% of companies admit to not having full knowledge of all their legacy contracts, yet considering that contracts many last for many years, then it is reasonable to assume that a large organization will have thousands of legacy documents.  Indeed, we have just helped one media company ‘discover’ approximately 30,000 legacy contracts.

Organisation-Wide Appeal

Hopefully I’ve demonstrated the potential benefits of contract lifecycle management (CLM) systems to an organization, but they also have a benefit to proponents of SharePoint.  Since CLM systems can touch on so many parts of an organization, they are a classic example of SharePoint solutions that are not only ‘enterprise’ strength, but in many cases, their adoption is being spearheaded by legal, CFO or procurement functions. 

Of course, the IT department is still very much involved, but CLM systems are ambassadors for the SharePoint cause beyond the boundaries of the CIO’s remit.  Indeed, the content within CLM systems supports the argument that many SharePoint applications should not be managed by the IT function, but instead, by a records manager or someone with content expertise. 

This brings me back neatly to my opening claim that SharePoint has huge potential as an enterprise-strength solution and contract lifecycle management systems are one example of how SharePoint can generate a ‘fan base’ across the organization, provide tangible value.  I would argue that it is a win-win situation:  the business as a whole benefits, while the original internal champions of SharePoint  are vindicated and can look forward to increased return on its investment.