There’s been an uptick of interest in contract lifecycle management (CLM) solutions for procurement teams. In fact, our own Mary O’Carroll just did an episode of her Pearls On, Gloves Off podcast dedicated to the art of procurement and the common threads between that field and legal ops. We also recently hosted one of the highest-attended roundtables on “bridging the gap between legal and procurement” at Procurecon Indirect West, where we attended as featured sponsors. But are procurement systems ready for the digital transformation that legal ops has been enjoying for the last couple years? Can CLM help procurement and Information Technology (IT) teams make life better for everyone in your business? We think yes. Let’s take a closer look.
IT and Procurement, Explained
IT and procurement systems both serve the needs of other departments in a business. Procurement teams are the magicians behind the scenes that work to get teams everything they need, from sales software licenses to video production vendors to Post-Its. IT then implements the new hardware and software procurement obtained into existing systems. As our friend Tom Mills put it, “Procurement are fundamentally there to ensure the business achieves the best value from its spend. We can categorize suppliers and give an overview of business risk. We’re also expert negotiators and through understanding the business opportunity, we can form the negotiation strategy.”
Modern businesses rely on IT for everything from internet access and software licensing to making sure everyone knows not to open that 7th email from a Nigerian prince asking for your social security number. IT departments typically have the technical know-how to select the right tools for their business needs, but if they don’t understand their company’s process, try to negotiate deals on their own, or submit purchase orders without going through procurement, they could be hurting the business in the long run, both operationally and financially.
Better Together
The solution, of course, is for IT and procurement systems to work together. Both teams play a part in vendor selection and supplier relationship management. IT has the expertise to correctly evaluate the tech people want to buy, make sure the proper software licenses are included, and vet suppliers for post-purchase service and support. On the other side of the table, procurement brings the negotiation skills to secure the best terms — not just price, but other elements like termination clauses, and renewal and upgrade provisos — for the deal.
When IT and procurement are on the same page, the entire business benefits. Adding legal ops and CLM to the mix only raises the value-add. Let’s explore how.
Supercharging IT & Procurement Systems with CLM
Contracts represent the connective tissue weaving throughout all critical business workflows, so it is natural to invest in contract management tools to streamline them in some key ways.
Operational Efficiency
Contract negotiation and renewal can be time-consuming and complex. For procurement, CLM software’s ability to create templates, track changes, and automate approvals saves teams valuable time, and reduces the risk of errors and miscommunications. On the IT side, a good CLM solution can help IT ensure they have the right software licenses and agreements in place to support the business and do so efficiently.
Risk Management
Beyond operational efficiency, compliance and risk management are also key priorities for IT and procurement teams. The search, risk assessment, and data extraction functionalities most CLMs have help procurement teams ensure that all contracts meet legal and regulatory requirements by identifying and mitigating potential risks, such as non-compliance, missed deadlines, and vendor disputes.
For IT teams, CLMs can help manage renewals, maintain compliance, keep eyes on various permission levels, and spot areas of inefficiency and potential cost savings. For example, if an organization has a contract in place that allocates 100 seats for Salesforce but only 50 are being frequently used, IT can easily surface a cost-saving next step to the procurement team–from directly within the CLM!–when renewals roll around.
Vendor Relationships
Effective communication with vendors is another key to successful procurement and IT management. With CLMs, IT and procurement teams have a centralized location for all vendor contracts and related documents. This makes it easier for them to track vendor performance, manage relationships, and communicate with other teams effectively. And with real-time access to contract data, automated notifications and approvals, and insights into past contract performance, procurement teams can leverage CLM to optimize contract terms and conditions while in conversations with vendors, reduce back and forth, and negotiate better deals.
Keeping Negotiation Leverage
Don’t let your business fall into the all too common pattern Tom Mills described in his article:
“I can’t tell you how often procurement teams are approached with the following scenario: ‘We need to sign the contract tomorrow, can you just take a look?'” Not only is that one of the most frustrating things to hear as a procurement individual, as all negotiation leverage will have gone, but it’s also a true sign that they do not understand the roles and responsibilities of the procurement and legal teams.”
Poor contracts can seriously hurt a business, costing hundreds of thousands of dollars due to poor termination provisions, inability to claim for breach, poorly defined commercial milestones, and other oversights. As Virginia-based phishing defense company Cofense demonstrates, when procurement and IT partner across the entire company — with tools like CLM in place to flag key contract data and notify teams ahead of key dates — the whole business wins.
To learn more about how Ironclad’s contract lifecycle management software can transform IT and procurement systems, request a demo today.
Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.
