Over the last few months, Icertis has published several reports that look at the importance of technology within the legal and procurement professions. Enterprise Times spoke to Bernadette Bulacan, Chief Evangelist at Icertis to discuss some of the findings of these reports.
- The 2024 ProcureCon CPO report, sponsored by Icertis and published by WBR Insights. It looks at the importance of the Chief Procurement Officer in organisations today.
- “The Evolving Legal Service Delivery Model: Generative AI is Already Changing Expectations” report was written in collaboration with Deloitte by the Blickstein Group and is based on findings from the 2023 Law Department Operations (LDO) Survey.
- The Future of Generative AI: C-Suite Perspectives for 2024 and Beyond. An interactive microsite of seven web pages provided some interesting views on attitudes to AI in the CSuite.
I asked Bernadette what her role as an evangelist is. She replied, “I am an attorney by training. But during my practice, I also developed various legal technologies used mainly by in house legal counsel. I’ve had the great privilege of not only practising law, probably reviewing and negotiating thousands of contracts, and also understanding how lawyers who are not technologists adopt technology.
“I’ve worked with legal departments, trying to get them to understand the power of technology, how it can transform their practice, and think very strategically about technology. In the past decade, at the forefront has been Contract Lifecycle Management. I work with lawyers and procurement teams, thinking about technology and best practices as it pertains to CLM.”
Value Erosion
The first report talks about the risk of value erosion within the contracting process. What is that?
“Part of that is time wasted spent trying to find the right template. Maybe you’ve chosen a template that is not fit for purpose. There is value erosion because you don’t have enough data about a particular supplier or its performance. When you hand things over, whether it is from procurement to the attorney to the delivery teams, there was a lack of information between all of those parties that cause (value) erosion over time, which introduces risk into a contract.
You’re talking about the delta. The value of the contract is what it gives the business in terms of the relationship. What you’re saying is, because the information is lost between parties, you’re no longer leveraging the contract as well as one might be able to.
“Yes, it introduces a great deal of friction. Organisations are spending an unnecessary amount of time in the contract process, introducing risks that they could otherwise avoid. Because they either had communication, or data about how that contract came to be, or data about those particular contract parties.”
The impact of COVID
Value erosion jumped at the start of COVID. I would have thought it would have reduced because we digitised so much at the beginning of COVID. Why?
“Digitization, while many were hit immediately, adoption was still quite slow, especially contract transformation. People are still trained on manual contracting processes, not digitised. It requires a different level of skill set to digitise, notwithstanding the availability of technology. There was still an adoption curve.
“Most people, especially during COVID, were continuing to fight fires, quite frankly. It definitely planted a very large seed that the next time this happens, or if we are forever in this new normal that, we need to digitise. I think that the reason for the dip is probably you had people firefighting and trying to find an iota of time amidst this operational workload to adopt the technology.”
Agile contracts
The report also highlighted the emergence and growing importance of agile contracts. What are these?
“If you think about a traditional contract within the four corners, you have a fixed scope, fixed pricing, fixed requirements and fixed risk allocation. Agile, to me, is much more collaborative. What you actually define is the way you want to work together over the period. It is shared risk around the delivery, it is a great deal of flexibility, which means a higher level of collaboration and communication through the life of a contract.”
More framework than contract?
“Yes”
Why are agile contracts becoming more important, and why is intelligent contract management critical for them?
“I think that has to do with the fact that you have a great deal of data available around performance. You have this greater sense of trust entering into these agreements with an organisation. If trust is performance over time, I think you will see agile contracts with organisations that you have a great deal of trust with because they have a history of performance.
“The other reason is, you need good technology to do this, quite frankly, its because there’s a level of post-execution governance. Where each of these obligations, whether it’s communication or delivery, is managed throughout this agile project. Those two things, having access to data about the contracting parties and performance, and having the technology to help manage post-execution, allows this trust factor to continue through the life of the agreement.”
The importance of CLM
With the emergence and growth of highly flexible agile contracts, does that increase complexity? Where does intelligent contracting management play into that?
“It is very data-driven. That is why having integrated CLM systems is so important. Yes, the contract is these four corners. Still, different data from other enterprise systems, whether it is from your supplier relationship system, finance systems, or HR systems, can all go to feed this.
“It goes back to the complexity of contracting and the different people that own it across different portions of its lifecycle to the extent that we can map that and the data that is necessary at each of those points, where we’re going. That’s quite the ideal. It’s a very big lift, but it’s not impossible. We see several of our organisations that we work with on their journey there.”
The chicken and egg question about buying CLM
A modern CLM provides data to justify an investment. But without CLM, you don’t really have any data to justify it. How should leaders approach that causality dilemma?
“We see many organisations do this. Part of it is just the contract process is so painful, and it is so painful for so many different people in an organisation whether it is for the lawyers trying to assemble and draft the contract and negotiate. Whether it’s for the teams that are trying to deliver under those agreements. Everyone has a keen sense of how painful it is.
“The other piece is the risk factors involved right now. Organisations are spending a great deal of time and money surfacing these agreements that might be impacted by supply chain disruption, by geopolitical concerns by regulatory change, and their inability to do that quickly, and then create workflows around it is quite painful.”
So, do they need to identify the costs and time they’re spending in doing those processes. Then, use those costs to justify some automation, even if it’s just around a small part of their first iteration of CLM.
“Absolutely, and again, I want to just double-click on regulatory. There are penalties and fees associated with failure to conform with that. There is even the reputational harm that an organisation might have if they don’t have the right clauses, and that could be for anti-bribery, UK slavery act, CSRD. Yes, there are penalties and fees associated with some of these regulations. But I think very top of mine is also reputational harm that organisations might experience.”
Who owns the contract process?
The report highlighted that there is no consistent owner of the contracting process. Nearly every department deals with contracts, from procurement to legal, to IT, and HR. Who owns contracts? Is there a role for a Chief Contracts Officer?
“I do think at some point we’ll see that in the same way, you see a Chief Commercial Officer. In some of our most innovative companies, I’ve seen centres of excellence around contracting where they have both buy side and sell side, helping drive best practices across an enterprise.
“If you break down the contract process, pre-execution, post-execution, a great deal of complexity. The subsequent benchmark of these ancillary reports actually does a better job of looking at who owns contracts from the buy side to the sell side. Who gets legal support from the buy-side and sell-side? I haven’t seen the breakdowns yet for the industry, but I do think that some companies will have more centralised contracting.
“I think so many different companies are, whether it’s by industry or geography or all on very different trajectories. It is the best practice that’s in the benchmark report is actually mapping out processes to understand how this single object, the contract actually travels through an organisation.
“Then reaching back out to that ROI report, how a particular contract, whether it’s the complexity of a joint venture versus an NDA, how that also travels through an enterprise. Based on that mapping, an organisation will be in a better position to determine who should own it. We’ve seen legal own it, but they often don’t have the technology background to own an enterprise system. We’ve seen IT own it, but they don’t understand the actual object and contracts.”
