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Welcome back to my 2nd blocks regarding contract management.  In my first blog, I discussed the customer pain points in contract management.

http://scn.sap.com/community/sourcing/blog/2012/12/10/contract-management-1-are-you-in-control-of-your-business

Today we will look into best practices to adopt a contract management solution and discuss some KPI’s regarding contract management.

I always recommend to my clients to consider a phased rollout of a contract management solution. The following three phases:

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Phase 1 is the starting point for the majority of companies. A central repository has to be established. This is achieved by uploading legacy contracts into the contract repository.

A good approach is to select 3-5 less complex contract types and 1-2 locations as a starting point – frequently NDA’s and  IT related contract types are selected – IT contracts to have the IT department onboard as one of the early adopters. Additional contract types might be dependent on the industry. As an example:  pharmaceutical companies might select clinical trial contracts. Another interesting contract type could be research agreements with universities, research facilities and independent researchers.

Overtime additional contract types and locations are added, which leads to a global repository and helps to provide global visibility into contracts and breaking down silos in organizations.

Best in class companies have up to 75% of supplier contracts stored in the central repository.

We already published a detailed blog on how to upload contracts into SAP CLM via contract mass upload. You can access the blogs and a presentation via the links below:

Mass upload blog:

http://scn.sap.com/community/sourcing/blog/2011/01/24/an-overview-of-the-clm-contract-load-tools

http://scn.sap.com/community/sourcing/blog/2011/04/18/building-a-clm-contract-repository-part-2-of-2

Mass upload presentation

http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/library/uuid/a06103c9-a075-2f10-b185-d53c1dbb9b3a?QuickLink=index&overridelayout=true&54417235904376

The central repository will provide the authorized user with visibility into the contracts they are authorized to see. Additionally, your company will understand the financial and legal commitments via the contract reports and gain control over the contracts and therefore control over the business. Furthermore, alerts will inform the contract owner / contract team when contracts going to expire and provide them with sufficient information if the contract provided value and the business partner delivered as promised in the contract which will help to decide if a contract should be terminated or renewed.

For example, one of our global Oil and Gas clients achieved with a central contract repository global visibility of multi-site agreements which enabled them to perform cost optimization.

A central contract repository is already achieved by 61.7 % of companies, whereby best in class companies with central contract repository in place is higher with 76.2 %. (Ardent Partners Report 2012)

Many companies have uploaded a few hundred to a few thousand contract documents before they started with phase 2 – contract authoring. 

Additionally, companies gain process efficiency by uploading contract documents into the contract management repository and routing the contract document through the different approval levels.

Based on a study from Aberdeen Group, best in class companies manage to get contracts reviewed and approved in less than 8 days compared to 47 days for laggard bottom of companies surveyed. Imagine, the best in class companies have a favorable contract 39 days earlier in place and can already take advantage of the new contract terms – lots of potential savings.

I hope I will see you again as a reader of my next blog, 2nd stage of the contract management rollout – contract authoring.

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