contract management software procurement buyers advice 2013

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.

2013

APTTUS Contract Management Software Procurement

Apttus Confidential Information

Table of Contents 1. Background

2. Executive Summary

3. Enterprise software procurement cycle

a. Requirements

b. Vendor Evaluations

c. Software Demonstrations

d. Negotiations and the Deal

4. Implementation

5. Return on investment

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.

Our goal is 100% customer satisfaction. This begins with the procurement process.



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



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.



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



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.



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.



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.



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.



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



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.

Apttus │1400 Fashion Island Blvd Suite 200 │ San Mateo, CA 94404│USA│www.apttus.com│

US: (650) 539-2052 │ EMEA: +44 (0) 20 8099 5942│ [email protected]

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