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Allison Caggia

Contracts Unveiled: A Deep Dive into the Future of Contracting


Today, Mark Ross, Principal in Deloitte Tax LLP’s Legal Business Services practice, is joined by Allison Caggia, Content and Communication Strategist at Malbek, to explore the role of a CLM in an organization and how it helps business users manage the entire lifespan of a contract to create the most value. Mark begins by discussing why a CLM is necessary in today’s world. He explores how, since contracts go beyond legal and are the lifeblood of a business, technology is an enabler for all stakeholders. He shares how an organization can work to crumble the walls between stakeholders and his top three ingredients for a successful CLM implementation. Then, Mark shifts the conversation to how applying CLM technologies in the right way can help you manage your contracts post-signature. He ties it all together by looking into his metaphorical crystal ball and sharing where he thinks the CLM industry is headed next.  


So, grab a glass of wine, and let’s talk contracts! 


With your legal background, we could talk all day about contracts, but today, I’d love to pick your brain about the role of a CLM in an organization and how it helps business users manage the entire lifespan of a contract to create the most value. I’d like to ask you, why now? I think it’s safe to say we’ve all had a wild few years. We’ve changed the way we work, the way we collaborate, and the way we do business. Why do you feel a CLM is a good solution or a good investment in today’s world? 


I think you need to acknowledge that there are several, what I view as, overlapping and interrelated market forces and beyond market geopolitical forces at play here. We’re dealing with an ever-increasing burgeoning regulatory environment. We’ve seen over the last decade or so the rise of legal operations as a discipline and an increasingly mature discipline. Of course, the promise of CLM technology has been around for 15, perhaps even 20 years, but we’re now truly seeing the promise match up with reality, so there is increased sophistication, increased maturity, and increased functional capabilities of the leading contract lifecycle management technology providers. 

On top of all those interrelated market geopolitical forces, we’ve also witnessed approaching three years of the COVID-19 pandemic. Horrific in a multitude of ways, but if I can be glasses half full for a moment, it has acted as a catalyst for some much-needed change in the increasing digitization of organizations. So, you take that melting pot of interrelated and overlapping forces, add in a dash of COVID, and you get to the answer to the why now question. 


Absolutely. And I love what you said about the idea that this technology has really been around for a long time, but we’re just now seeing it mature in a way that we’re trusting CLM solutions to kind of guide our business practices. On that note, what do contracts really represent for each stakeholder in an organization? And why do you feel contracts are no longer solely being owned by legal teams? 


From my perspective, from the perspective of Deloitte Legal Business Services, and I believe our clients’ perspective, contracts are by no means, exclusively, legal documents. They represent, for lack of a better word, the lifeblood of the business. They are strategic business assets, but with a multitude of stakeholders, their life cycle is unquestionably complex. If you think about the array of stakeholders who have an interest in contracts, it’s executives, sales, legal, procurement, finance, IT, HR, compliance, supply chain, and operations, I could go on and on and on, contracts touch every facet of the organization. 

But what we see frequently is that these different groups of stakeholders can understandably have different priorities, and they can view the purpose of contracts very differently. Some view contracts as a vehicle for generating financial benefits. Others view contracts as tools for risk management. Others view contracts as frameworks for beneficial business outcomes, and of course, legal view contracts as a record of the legal rights, remedies, and obligations. So, while there’s no one singular magic solution, and I must say technology, while a tremendous enabler, is not a be-all and end-all. It is an enabler. 

So, while there is no one singular magic wand, I do believe that those organizations that focus on the assessment of their current contracting state and a pathway to the digitization of their contract portfolio, their contract analytics, and their contracting workflows, are the secret to a more successful contracting function. 


I love that answer. That’s wonderful. And I think you really did provide a great overview of how contracts really do sit at the heart of everything that we do in an organization, regardless of your role. I think a lot goes into the management of contracts pre-signature, but as we know, a signature is only one event in a contract’s lifespan. So how do you see technology really aiding in post-award contract management? Can you talk a little more about the importance of mitigating risk, tracking obligations, and everything else that happens post-signature? 


I think it’s important, first, to define what we even mean by post-award. I think the terminology can be, and often is, used interchangeably with the terminology post-signature. So, what are we talking about here? Quite simply, we’re referencing the contracts-related activities that can and should take place after a contracted site. And we view those activities as falling into one of two buckets really. The first would reference compliance with the legal components of contractual relationships like notices, renewals, change orders, and amendments. And the other bucket would include the commercial obligations. Invoicing discounts, performance management. That discipline even in and of itself is frequently referred to as commercial management of contracts. And you can tie both of those buckets together with the common thread that is management information reporting. 

So why the increased focus on post signature and why now again? I think that this is all very natural. If you think about it this way, companies have disproportionally invested time, effort, and cost in the pre-signature phase. Why? It’s incredibly simple. It is the must-have versus nice-to-have conundrum. Organizations must have contractual agreements in place to enable the business. It is nice for them to have an effective and efficient post-signature contract and commercial management process in place. But it’s that nice to have a bucket of activities where you can drive significant value gain or alternatively, being glasses half empty for a moment, you can find significant annual contract value being lost through ineffective post-signature contract and commercial management. 

If you just think through the incredibly broad range of post-signature issues that can come into play that directly impact commercial value, and again, while this may seem incredibly obvious, think about it this way, unless you’re a startup organization, it is an absolute certainty that you will have many, many more contracts already executed than you’ll be in the drafting phase for, that you’ll be entering into in a given year. 

And so based purely on the volumes of contracts at play, it stands to reason that it’s in the post-award phase that value could be won and lost. So where do CLM technology and the increased maturation of functionalities come into play in post-award? I think one of the key components is that the CLM technology platforms, certainly the leading ones in the market, are increasingly treating contracts not as static documents, but data points that can be leveraged at various points and in various places throughout the organization. 

So leveraging AI, as an example, to automate obligations management, to automatically extract milestones, commercial obligations, and legal obligations from the four corners of the contractual document, leveraging intelligent workflow to route tasks to the appropriate and responsible parties, tracking performance, and of course, providing insightful dashboards and metrics, linking data once again that is contained from the four corners of the contractual document to data that are contained within the organization’s ERP and financial and HR systems. That’s where I think some of the most incredible advances in CLM technology functionality are providing true economic benefit to the organization. 


I love what you said about contracts really being the lifeblood of an organization. And the business really does revolve around contracts in so many ways. It touches so many different teams. At Malbek, we kind of say that AI really puts the L in CLM. It is really the lifeblood of contract management platforms. Why do you think it’s so challenging to incorporate post-award contract management and AI into your business practices?  


Well, I think one of the challenges is that there is a difference between the need to have versus nice to have. Let’s focus on that for a moment. Why else does post-signature not get perhaps the attention it merits based on the amount of value that it can drive for the organization? And I think the answer at least partially lies in how organizations deal with these buckets of activities today, where those individuals sit, and how the costs are dispersed across the organization. 

If you think about it through that lens, many, if not all the operational costs associated with post-signature contracts and commercial management, are dispersed across the organization and may in fact not even be particularly visible or able to be determined without significant scrutiny. For example, the resources responsible for interpreting and implementing. All those activities are spread out in different groups across the organization that may well use different systems to capture and analyze all the impacting data. Sales, project management, procurement finance, and of course, CLM. 

So if CLM technology leveraging, whether it’s AI functionality or intelligent workflow, can help link enterprise data to the data contained in the four corners of the contract, linking financial HR, and procurement CRM systems with the data that resides in contracts, if you’re able to quickly and intuitively locate that contractual data, if you are able leveraging technology to analyze that data, align contractual terms with invoiced amounts, then you can more readily identify and quantify instances, for example, of revenue leakage. 

If you can achieve that then the impact, and this may sound somewhat utopian, but I genuinely believe in this, that the walls between those who create contracts and those who live with them, that those walls start to crumble down and you achieve meaningful, longer term, impactful, value-driven business outcomes. 


I agree. I think the challenge for a lot of organizations is that they have the data at their fingertips. They store the data. Most organizations have a contract repository, but what they’re not often able to do is access that data at the right time and act upon it when it matters most. We’ve seen a huge shift recently. Legal teams, obviously, need more time to focus on those strategic, big-picture initiatives, and sales, finance, and procurement teams, like you mentioned; they want to have more ownership in the contract management process. How do you kind of see that evolving in the coming years? 


I do think that there is a growing realization that transformation of the contracting function is necessary. This is not a legal problem. It is not a procurement problem. It is not a supply chain problem. It is a quest that requires multidisciplinary talent to achieve it. And that includes knowledge engineers, technologists, process analysts, procurements, supply chain specialists, the commercial arm of an organization, and of course, legally trained professionals. 

It also needs a more comprehensive cross-functional approach. What do I mean by that? An approach that marries process standardization, automation, a global delivery model, alternative resourcing models, and continuous improvement, and without that investment in people, process, content, and technology that exists both within legal and beyond legal, then at best, you’ll achieve a bandaid solution, but you will not be on a pathway to transformation. 

If organizations can crumble down the walls that exist between legal and procurement, or legal and commercial, and legal and IT, if you can link the data that exists within the four corners of the contract with data in the broader financial ERP CRM systems, then the opportunities that CLM and CLM technology affords the organization are much, much greater. 


Data really is the bridge between each of those teams within an organization and keeping them connected. That’s powerful, and it sounds like you’ve had quite a bit of experience yourself with carrying out a successful CLM implementation. So, if you had to provide one best practice or secret ingredient for a successful adoption where all of these teams really are empowered to harness that data and use it, what would it be? 


Tremendous question. And I’m only allowed to give you one, Allison? 


Well, okay, top three secret ingredients, because I feel like you have quite a bit of experience to pull from, so we’re going to change the rule to three. 


Thank you! So first of all, you need to know where you are before you know where you are going. What do I mean by that and how do organizations proactively take that recommendation? What I’m talking about is phase zero. Readiness, discovery, engagements, whatever you want to label that type of endeavor. Before diving into any CLM technology implementation, organizations should be taking stock of exactly where they are. They should be thinking through their pain points, their current technology infrastructure, and the amount and type of systems that any CLM platform will need to integrate into their existing legacy contract portfolio. What proportions of that portfolio need to be migrated into the platform in a subsequent implementation? Analyzing and assessing their range of contract template types, and whether this happens prior to any implementation or in conjunction with any implementation, there needs to be some form of template optimization and harmonization initiative. 

All those ingredients fall within what we and Deloitte Legal Business Services would refer to as either a phase zero, a discovery engagement, or a readiness assessment. Too often, organizations will identify a CLM technology partner that they want to work with and send out an RFP scope without being privy to all of the inputs and data points essential to set yourself up for future implementation success. So, we frequently recommend to our clients an initial phase zero discovery CLM technology readiness assessment. That above anything else then sets up our clients for a more successful subsequent implementation and rollout of the system. 

Secondly, I cannot stress enough the importance of change management. I do think that this is something that is frequently brushed under the carpet for want of a better term, and the level of effort in this realm is frequently underestimated. I say that because we are frequently dealing with an endeavor, an initiative, and a system that will drive benefit but is utilized cross-functionally. Whenever you are dealing with a cross-functional software implementation, there are undoubtedly walls and biases that exist within the organization that differ from one function to another. Different functions will have different pain points and different things that they’re looking to realize from the successful CLM implementation. 

And then, and I say this with love, lawyers in-house are incredibly busy and are used to doing things in a very traditional and historic manner. I do not buy in, by the way, on the premise that lawyers are somehow or other anti-change, averse to change. I just think that we are dealing predominantly with a group of individuals who have historically, up until now, not had to change. And if you’ve not had to change many times throughout your career, it is something that is somewhat alien to you. It is not a criticism; it is simply an observation and based on fact. So, a focus on change management based on dealing with many cross-functional groups, and one of those key constituent groups being the legal department, I think is incredibly important. 

My third key component to a successful implementation is to be realistic. Be realistic about what is achievable from a timeline perspective. Be realistic regarding what is achievable and desirable from a functionality rollout perspective. Be realistic as you are collating nice to haves versus must-haves in terms of functionality requirements from the organization and ensure that you have executive sponsorship that can turn around and look at all of those wonderful and well-thought-out requests from the intra-organizational functional groups and constituent groups, and say, “No, we don’t really need this right now. That’s nice to have. It’s not a must-have.” 

Wow, those are wonderful recommendations. Your comment about legal not being change-averse, but just never having had to change really until now is powerful because we hear that same thing all the time, right? We hear that lawyers are just not willing to adapt. They’re not forward-looking. They’re not strategic. They’re only concerned with risk. And I agree with you that it’s just that their whole job is to mitigate risk and they haven’t really had to change until now. And it’s important that we empower them with the right tools and the right practices so that they can. This is a huge shift that they’re making and it’s an important one. 

Now that you’ve shared with us why CLMs are so important, what teams need to be involved in, and what they really need to be focused on in terms of the nice-to-have and the must-haves side of their implementation, I would love if you would stare into your hypothetical crystal ball and close out by telling us where you see the CLM industry headed next. 


Well, let’s just get the crystal ball out, give it a polish, and gaze into it, I genuinely believe and hope that the culmination of all our collective efforts is a change in perception. I mean that the perception that contracts and the contracting process itself, rather than being viewed as exclusively legal documents, as an approach that is a source of frustration, confrontation, and delays, both, by the way, by internal and external stakeholders, that is the perception, that together, we can change it. Contracts can increasingly become viewed as strategic business assets, and the contracting process itself becomes a calling card for the overall business. A calling card that is demonstrative of collaboration, again, both internally and externally. 

And what does that drive? It drives enhanced relationships with internal clients, external vendors, partners, and customers. And if that doesn’t drive value to the organization, I do not know what will. Perhaps it is a somewhat naively optimistic perspective, but I genuinely feel that working together we can get there. 


That’s a wonderful outlook. Thank you so much. It was great speaking with you, and I hope we speak again soon. 


I look forward to it, Allison. Thank you so much for having me.