21 Sep Sarbox necessitating ECM software, but beware of `best practices'
CHICAGO — As more organizations look at what needs to be done in order to be compliant with SEC issues, an area that has come under the spotlight is enterprise contract management (ECM). Risk management and corporate governance issues have become issues even within the area of contracts and maintenance agreements.
The Sarbanes-Oxley Act (SOX) has become a reason to organize and establish better financial controls on an enterprise’s operations. Contracts really affect the business operations for a long time. The lifespan of systems or contracted services used within an enterprise are all based on the contracts that were negotiated to put them in place.
There are all types of durations when you talk about contracts: yearly contracts to five-year contracts, contracts with options to renew or evergreen clauses and contracts that specify certain performance standards within agreed-upon timeframes.
For example, you may be paying for a four-hour response time for service from a vendor. How do you know you’re getting that level of service? Are you paying for something extra that you’re not getting or are you getting that service level inconsistently? How many times did the repair person come to your site within four hours? What if they come after five hours?
There is software to structure and organize your contracts into something more manageable. Having the ability to have real-time access to contracts and their terms and conditions as well as their termination dates is something that most organizations hope for rather than realize that they must have. There are four major players in this area of software packages. They include:
1. UPSIDE in Canada
2. diCarta in San Carlos, Calif.
3. iMany in Edison, N.J.
4. Nextance in Redwood City, Calif.
These companies have packages that cover the various areas of contract optimization and collection phases. The industry doesn’t matter. These are automated tools that have a real purpose and a real return on investment.
Beware `best-in-class’ claims
If you have read my previous columns, you know that I don’t believe in phrases like “best practices” or “best in class.” From my perspective, best practices are a moving target. What you installed two years ago as a best practice is now obsolete. Claims of being best in class for any software tool or piece of hardware have to be carefully scrutinized before making any business or financial commitment.
What works well for someone else may not work well for you. There are so many critical success factors that may not overlap in different organizations. As for reasons to have this type of software, UPSIDE summarizes it fairly well on its website:
Failure to manage the creation and operation of contracts can expose organizations to risk, revenue loss and severe penalties under SOX.
The website for diCarta talks about how its software drives day-to-day business operations:
Through pre-built integrations to leading solutions, compliance management capabilities and sophisticated contract event and milestone notifications, diCarta contract management software enables contracts to drive day-to-day operations.
As a result, companies are better able to enforce suppliers’ compliance with contract terms, meet company obligations and obtain the discounts and rebates that companies have earned.
All the vendors have fairly informative Web sites. iMany even has a very extensive comparison table that went into the benefits of having contract management software. These include gaining control and visibility, implementing best practices, increasing opportunities and pricing strategies, accelerating the quote-to-cash cycle and achieving negotiated prices.
Almost all the vendors use best practices or best-in-class references. Again, the use of “best practice” turns on a red light for me. It’s beginning to sound like “user friendly.” No software package is sold without it being hyped as user friendly. We know better. Best practice is starting to reflect the same type of response.
While the use of this type of software tool can help your organization, be aware that the technology and software packages are only as good as the people administering it. If you do decide to get an ECM software package, insist on getting well trained on it.
In the past, there have been so many examples where packages were touted to be great cost-reduction tools for operations and they ended up being resource hogs. Get the proper training and have adequate resources to receive the full optimization out of these packages.
Carlinism: Automating procedures can cut down on human error and standardize approaches.
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