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Understanding Of SAP Contracts Management

Overview

This blog post is focused on comparison of SAP Contracts Management in SAP Ariba, SAP Contract Lifecycle Management and SAP S/4HANA for Enterprise Contract Management and how it will assist the reader to choose what suits them in the procurement space.

Going back to basics:

great procurement work can be undone by weak contract management

Contracts are assets; the most important part of managing contracts at any company is not what you know about them—it’s what you don’t know that can cost you. The risk is real. Without an enterprise approach to contract lifecycle management, organizations run the risk of taking a hit to the bottom line due to lost time, money or potentially damaged reputation.

Because of this simple fact that a company needs to optimize the process to maximize the value they represent, often question comes up with customers on what to choose when planning to automate and standardize their source-to-contract processes.

In this blog post, I would be primarily comparing SAP S/4HANA for Enterprise Contract Management which is both cloud and on – premise offering, SAP Ariba, the cloud-based offering and SAP Contract Lifecycle Management, the on – premise solution offering(which is no longer on the price list). The comparison would be based on criteria like – architecture, workflow, document versioning and signature, integration capabilities, extensibility, implementation guidelines, contract repository, configurations, design approach etc.

SAP Ariba Contract Management SAP S/4HANA for Enterprise Contract Management SAP Contract Lifecycle    Management
Your primary business case is procurement transformation.
SAP S/4HANA Enterprise Contract Management & Assembly is transforming the way contract documents are requested, created, managed & controlled. It offers a single repository for the lifecycle management of BUY-side, SELL-side and any other legal documents (contracts, NDAs, policies, patents etc.) in enterprises and offers full traceability of obligations, approvals, signatures, expiration and responsibilities internally and externally.
You want to extend your procurement portfolio with robust contract management functions.
Your focus is only procurement contracts, but you also want to manage sales and internal contracts without any customizations. Your focus is to embed legal process across the platform and all business processes. Your focus is only for procurement contracts, but you also want to manage sales contracts.
You want a highly intuitive user interface. You want to establish a central layer for all legal content within SAP S/4HANA completely searchable, adaptable and reusable providing a 360-degree view across the entire process. You want a customizable user interface and intuitive contract dashboard with powerful search functionality
You want to benefit from the strong integration capabilities across your SAP Ariba portfolio. You want to benefit from integration with SAP S/4HANA purchasing documents (Request for Quotation and Purchase Contracts), central procurement, sales contract documents and real estate lease contracts(currently very light integration, tight integration is still on the roadmap) You want tighter integration with the SAP ECC and SAP SRM systems.
Primary target persona is the strategic buyer. Primary personas are legal counsel, commercial/contract manager and CFO. Primary target persona is the strategic buyer.

Introduction

SAP Ariba Contract Management

SAP Ariba provides cloud-based procurement, spend management and supply chain services that enable suppliers and buyers to connect and do business globally. Ariba Contract Management is an end-to-end solution designed to eliminate the paper and ink from the creation, execution, and management of any type of contractual agreement. With Ariba Contract Management, companies can strengthen operational, contractual, and regulatory compliance.

(SAP Ariba n.d.)

SAP S/4HANA for Enterprise Contract management

Businesses today face complex issues when it comes to legal contract management. Ignoring this can lead to burning out key people along the process, increased error rates, and consequently increased costs, increased legal risk and the potential for reputational damage. The needs around the management of legal content have changed due to three main reasons – change pressure, roadblocks and risks of doing nothing. More and more companies are shifting their processes in order to solve the growing risk of legal and reputational damage in an exponentially changing and competitive market.

The larger the company and the more complex its divisional structure, the larger the value you’ll achieve from managing legal content. SAP S/4HANA for Enterprise Contract Management is an application designed for the management of legal content (contracts, NDAs, policies, patents etc.) in enterprises and as core component of SAP S/4HANA, it integrates seamlessly into core business processes and allows to store all legal content in one central online repository. The design and creation of SAP S/4HANA Enterprise Contract Management includes transformation and digitalization within Legal operations and therefore offers full traceability of obligations, approvals, signatures and responsibilities internally and externally. The application is designed to conduct legal operations in a smart contracting method which strives for anytime, anywhere, device agnostic, automated and paperless legal operations.

(Image Source: SAP Internal)

 

 

(Image Source: SAP Internal)

Contract Lifecycle Management

A basic Contract Lifecycle Management process includes various steps starting from drafting of contract, negotiation, storing and repository, compliance and administration, renewal and optimization of contract. An organization can increase financial and operational performance reducing risks by proactively managing creation, execution and analysis of contracts. With SAP Contract Lifecycle Management application, an organization can visualize, standardized and can streamline contract process.

This on-premise solution integrates with the other SAP systems and works together to help ensure process visibility and contract compliance, gain tighter control over strategic sourcing and contract management activities – and maximize savings.

(Image Source : STechies)

Evaluation

Each of the solutions stands best of breed, but here is a comparison table for the reader to choose what suits them. This exercise can be facilitated by using a decision matrix. Listed below are potentially relevant decision criteria. Also provided is an explanation/analysis of how well each scenario meets each criterion (based on the current knowledge of standard functionality and best practices).

Architecture

The below products fall into 2 different types of architecture: single tenant and multi-tenant.

Single Tenant – A single instance of the software and supporting infrastructure serve a single customer. With single tenancy, each customer has his or her own independent database and instance of the software. Essentially, there is no sharing happening with this option.

Multi-Tenant – Multi-tenancy means that a single instance of the software and its supporting infrastructure serves multiple customers. Each customer shares the software application and also shares a single database. Each tenant’s data is isolated and remains invisible to other tenants.

SAP Ariba SAP S/4HANA ECM SAP CLM

Supports multi-tenant architecture.

There are test and production realms/accounts and they can consist of Ariba Catalogs, Ariba Sourcing, Ariba Buying and other solutions. If there is a single sign on, they have one link to access. If not, there will be different links to each solution.

**Realm is an account.

Realm ID will always be there against a AN ID / buyer account

Comprises of two components: Content Assembly Engine and Enterprise Contract Management. ECM is offered as cloud and on – premise application and is part of the SAP S/4HANA digital core.

More details on the components is as below.

Enterprise CM (CE)

Enterprise CM (OP)

Enterprise CA

Supports multi-tenant architecture

 

 

Deployment Strategy

 

This could be a cloud solution where a customer doesn’t own the software or the hardware that the solution needs to run. The resources are hosted on the premises of the service provider, but enterprises are able to access those resources as much as they want at any given time.

Another option here is on-premise solution where resources are deployed in-house and within and enterprise’s IT infrastructure. So, the customer has ownership of the software and the hardware the solution runs on.

SAP Ariba SAP S/4HANA ECM SAP CLM
Available only on cloud

Cloud and on – premise deployment options

 

On-premise.

 

 

 

Release Cycle

 

Functional enhancements that are provided on a regular basis are called releases. We share detailed information about the planned timeline, envisioned new functionality, and impact beforehand, so customers are able to plan accordingly. A release is created when new features are added, or a set of bugs are fixed.
SAP Ariba SAP S/4HANA ECM SAP CLM
Cloud solutions from Ariba include applications and the Ariba Network deliver innovation to customers on a monthly basis. Each release communication details whether the planned release contains major new features, enhancements, or fixed defects. ECM Cloud solution from SAP follows a predefined quarterly release window in February, May, August, and November while the on-premise one is on annual basis. Planned release cycle 18-24 months(Development retired, Maintenance is supported until 2025)

 

Collaboration

 

The key for good communication between all the stakeholders is a good collaboration environment. Once you have agreed with a supplier you will negotiate a contract with them, you can provide a supplier specific view on the contract workspace. There the supplier can easily add its own documents and information, contract content and communicate directly with you. The supplier will have a significant role in your contract management process and the collaboration within the workspace makes sure you stay in control.

Another point to consider here is the fact that whether the system supports the collaboration of internal stakeholders.

SAP Ariba SAP S/4HANA ECM SAP CLM

Contract terms can be negotiated with the supplier from the system. Ariba network is used for supplier collaboration.

Internal collaboration amongst colleagues is also possible.

ECM only offers several options for internal collaboration.

1. Assign workflow tasks to system users by providing notifications/requests for action. They are pre-defined in so-called contexts. It is also possible to add more tasks within a legal transaction. There is also a possibility to create workflow templates and assign them to contexts/legal transactions.

2. Share information by sending a link to a specific object from within the solution. The receiver gets an email and can open the object with a link.

3. Co-pilot: with this functionality users can have a live or off-line discussion to collaborate with another user e.g. ask a question or give information. It is also possible to link the object which takes the other user directly to the right screen. Feedback is shown immediately.

4. In both document objects and legal transactions, there is also provision of adding notes and replying to them for communication amongst internal stakeholders.

(External collaboration is also on the roadmap)

Contract terms can be negotiated with the supplier from the system, is using SAP Sourcing supplier portal for online contract negotiations.

Internal collaboration amongst users is also possible by adding them as collaborators.

 

 

Integration

 

Ability to Integrate with other SAP systems.
SAP Ariba SAP S/4HANA ECM SAP CLM
  • On project basis, standard integration with SAP ERP, MM/SD planned. SAP S/4HANA through direct connectivity, Process Integration, Cloud Integration Gateway as well.
  • Integration to SAP S/4HANA ECM: APIs to connect Ariba CM to automatically create Legal Transactions with the metadata from the workspace and upload the signed document.
  • Integrates with Fieldglass also.

More details of the integration can be found in the following link.

 

Integration Details

 

S4 E-CMA is open to be connected to any solution, no matter if it is SAP or a third party product.

The following integrations to S4 E-CMA are available:

  • OOB Light integration (linkage to Legal Transactions): Sales Contract, RFQ, Purchase Contract and Central Purchase Contract
  • Integration to S4 commercial transactions (in SD, MM, Projects, RE-FX) can be easily realized with the provided APIs (low effort).
  • OOB Integration to S4 Real Estate Lease contracts (RE-FX) is planned for 2021.
  • You can use APIs to connect business processes across your system landscape and integrate with external consumers of your services.
  • Enterprise Contract Assembly, which is on the SAP Cloud Platform integrates seamlessly into Enterprise Contract Management in S/4HANA

    for the creation of Contract Documents.

Integration Details

 

Standard Integration with SAP ERP and SAP SRM, S/4HANA integration with release 11

 

 

Document Line Items

 

In any Sales or Purchase order documents, line items refer to the list of products / services which needs to be processed. The details of the products / services such as quantity required, date etc. are specified in line items. Sales / Purchase order can contain any number of line items.
SAP Ariba SAP S/4HANA ECM SAP CLM
Line items as metadata exist

Configuration is provided to define document variables to fetch data from S/4HANA transactions(sales, purchase contracts or projects etc.) for the creation of contract documents.

Table as variable is on roadmap for E-CA for early 2021.

Line Items are supported as metadata on the master agreement with access to replicated ERP material master

 

 

Solution Extensibility

 

This denotes the ability to extend the solution with additional customizations or development activities which are inevitable in the process.
SAP Ariba SAP S/4HANA ECM SAP CLM
Possible but not as flexible as in on- premise Offers a flexible solution to build and the latest technology/open APIs and user-friendly user interface available. The open APIs enable to easily connect to any other systems. On-premise offering so more flexible to adjust and integrate the solution

 

 

Electronic Signature

 

Refers to data in electronic form, which is logically associated with other data in electronic form and which is used by the signatory to sign.
SAP Ariba SAP S/4HANA ECM SAP CLM

Eco Sign and SAP Signature Management by DocuSign

More details of the signature can be found in the following link.

Electronic Signature Details

SAP Signature Management by DocuSign. More details can be found in the following link.

A standard Out-of-the Box e-signature integration is offered to DocuSign. APIs to connect to any e-signature provider with minimal effort are also provided.

Electronic Signature Details

Eco sign. Release 10 and above, Docu-sign also.

 

 

 

Document Management

 

Refers to the capability of users to manage and saving versions of a contract or any other legal content in the single repository such as draft, reviewed, approved, negotiated, signed.
SAP Ariba SAP S/4HANA ECM SAP CLM

Possible. When a change version of contract is created, all the previous records in the history are also updated with the current version of the contract.

 

 

Different versions of legal content can be uploaded or created/managed with templates released in E-CA.

There is a version field, which is automatically numbered every time a new version is uploaded.

Per version of a document you can assign stamps which indicates an action that has been performed on a document, such as approved, or signed.

Stamps are configurable objects for versions of documents and can be defined by the company themselves.

Older versions of documents with the related stamps can be reviewed at any time.

Automatic stamps to complete workflow tasks are also available.

More details on document management can be found in the following link.

On Prem :

Document Versioning

 

Possible. All documents available in ‘version history’ under contract document.

 

 

Approval Workflow

 

As approval process is an integral part of the procurement processes, setting up the approval process comprehensively is a key activity.
SAP Ariba SAP S/4HANA ECM SAP CLM

Workflow configuration can be performed by end user using simple interface.

More details on workflow overview can be found in the following link.

 

Approval Workflow Details

Possible to define workflows for processing and approving Legal Transactions.

There can be as many approvers as you need for a certain contract scenario.

You can review the approval status in the Legal Transaction at any point in time. Exception handling is possible in case a workflow task is rejected.

More details on Workflow can be found in the following link.

Flexible Workflow Details

Review and approval flow customization is restricted and requires technical know how for configuring workflows

 

 

Reporting

 

Refers to capability of the system to search for documents, prepackaged reports, reporting dashboards and custom report creation.
SAP Ariba SAP S/4HANA ECM SAP CLM

On the fly standard reporting functionality available with advanced analytic. For custom reporting, service request has to be raised.

Info on reporting tasks for all users can be found in the following link.

Reporting Details

Rich Meta data + Reporting. Context-dependent metadata/fields for reporting, so it is customized to customer’s needs to guarantee optimized output.

 

Users cannot build custom reports on the fly, requires technical know-how.

 

 

Contract Hierarchy

 

Contracts can be organized into a hierarchy where a master agreement is the parent to one or more sub agreements, and the sub agreement may be the parent to another sub agreement below it in the hierarchy. A standalone agreement is a contract that cannot be used within a contract hierarchy.
SAP Ariba SAP S/4HANA ECM SAP CLM

Ariba Contract Compliance lets users organize related contracts into hierarchies of individual agreements. At the top of each hierarchy is a master agreement.

When creating a contract, indicate whether it is part of a contract hierarchy by assigning it to one of three possible hierarchical types:

Standalone – This contract cannot be part of any contract hierarchy.

Master agreement – This contract is the top of its hierarchy. Accumulated amounts from its sub agreements can be rolled up to the master agreement if set up to do so.

Sub agreement – This contract is a child contract underneath a parent agreement in the contract hierarchy.

Contract relationships in contract hierarchy can be found in the link below.

Hierarchy Details

Within a Legal Transaction in ECM, a user can assign a legal transaction to another one.

Multiple assignment is possible.

Within a context it is also possible to pre-define a Legal Transaction to which all new Legal Transactions which are created based on that context will be automatically assigned.

 

Post CLM 9.0 customers have ability to structure their contracts in a logical hierarchy that can extend to more than two levels. There shall not be a definite limit in terms of the number of levels that can be formed within the hierarchy.

 

 

Contract Repository

 

A Repository to support the storing, tracking and management of documents, contracts, attachments and images securely.
SAP Ariba SAP S/4HANA ECM SAP CLM

Stores contracts in a single repository along with complete history, service terms, delivery, and all associated documents.

Allows authorized users to search, view, edit, renew, or cancel contracts as needed.

Provides full audit trails of contract changes and amendments.

Also notifies contract owners of pending expirations or when usage-based thresholds are crossed automatically.

Allows authorized users to search, view, and print contracts, including contract details, attachments, and all other supporting documents.

Info on working with clauses in the clause library can be found in the following link.

Contract Repository Details

A centralized repository for digitized, discoverable, reusable and adaptable content and offers the ability to execute high volumes of contracts. More information on sizing and data storage ECM on premise can be found in the following link.

 

Sizing & Data Storage

Supported;

Also offers capability to build restrictions on content storage.

 

 

Implementation

Timeline

 

How long does an implementation take for each of the solutions is an important factor to be considered here.
SAP Ariba SAP S/4HANA ECM SAP CLM

Depends on which all solutions all included.

Average 1 month

1 month for standard implementation 1 month for standard implementation

 

 

Business Transactions

 

Covers information on which solution allows an organization to manage which types of contracts.
SAP Ariba SAP S/4HANA ECM SAP CLM
Manage procurement and Indirect Spend. Single repository for all buy side, sell side contracts and any other legal documents, such as policies, intellectual properties, intercompany agreements, non-disclosure agreements etc. Procurement contracts in standard. Sales contracts can be managed with customizations.

 

Drivers of Implementation

 

Design Approach

A unique software-as-a-service (SaaS) solution, SAP Ariba Contract Management delivers market leading technology in a fully hosted environment with data security standards that exceed those of any enterprise company. With SAP Ariba Contract Management, companies can connect directly with customers when creating, negotiating, executing, and managing the ongoing administration of contracts.
SAP Enterprise Contract Management for your customer projects comes as a scope item which needs to be activated. For more details visit https://rapid.sap.com/bp/#/scopeitems/1XV
Ensure a successful implementation and maximize your ROI with information resources that support the different phases of SAP Contract Lifecycle Management – from planning and installation to operation. For more details refer SAP CLM – product capabilities

Resource availability

SAP Ariba has a collection of analyst reports, webinars, white papers, case studies, datasheets, demos, and more. There is help available for onboarding, supplier enablement, change management etc. The Help Center is a one-stop shop for the support needed to engage with customers on Ariba Network. Direct links to portals and different support channels for customers are available. SAP Ariba has an ecosystem of partners who can help identify, buy, implement, support, and run the SAP Ariba solutions that best fit one’s needs.
SAP S/4HANA for Enterprise Contract Management is comparatively a new set of solution designed for the creation and management of legal content (legal documents) that can be integrated into all core business processes of an enterprise like Procurement, Sales, HR, Legal, etc. Hence the content and resources available are not in abundance.
SAP Contract Lifecycle Management is SAP’s established on premise offering which has been simplifying the lives of business users and IT staff for years. Connect with SAP experts – and get the latest news and views on SAP Contract Lifecycle Management implementations, upgrades, innovations, and best practices.

Implementation tools

All information pertaining to browsers and office productivity applications supported by SAP Ariba cloud solutions are readily available. It gives detailed info on the following

Supported browsers

Configuring your browser to access SAP Ariba cloud solutions

Topics about tracking browser use in SAP Ariba cloud solutions

Supported Microsoft Office applications

Enterprise Contract Management for your customer projects comes as a scope item which needs to be activated. For more details visit https://rapid.sap.com/bp/#/scopeitems/1XV

For SAP CLM system and software requirements vary according to specific customer scenarios – please refer to the SAP Sourcing and SAP Contract Lifecycle Management Master Guide for details. Also, please see the Product Availability Matrix for the latest information on updates and releases. Links are as below.

SAP Sourcing and SAP Contract Lifecycle Management Master Guide

Product Availability Matrix

Configuration guide

SAP Ariba solutions description guide is available which provides a high-level description of features and services in SAP Ariba cloud solutions. Each of the features in this guide is described in greater detail in the documentation that users can access from within the solution site support.ariba.com

Some feature described in this guide require SAP Ariba assistance to enable at an additional cost.

Basic configuration required to use Enterprise Contract Management apps and details to setup the system are described in the following link.

ECM Config Guide

Rich configuration and extensibility options with SAP CLM let you customize the solution to meet your unique business requirements.

Integration

The SAP Ariba Buying solutions integrated with SAP ERP and SAP S/4HANA and allows administrators to import master data and export transactional data from SAP ERP or SAP S/4HANA system to the SAP Ariba Buying solutions seamlessly. The SAP Ariba integration toolkit is a java-based tool that SAP Ariba provides to upload master data or download transactional data. This tool reads the csv files in SAP ERP or S/4HANA system, zips them, and sends them as MIME messages using the HTTP post to the SAP Ariba Buying solutions.

You can find integration design details for ECM in the following link.

Integration Details

In case of SAP CLM, tight integration with backend systems encourages compliance with negotiated contract terms and pricing. It also ensures that savings are realized when purchasing transactions are executed.

Key Take away

 As is known, a company’s success depends on a multitude of factors. You can’t hone in on a single one and expect to be successful. If you really want to influence procurement and contracting decisions, you need to look at the big picture and consider both functional and technical factors. When it comes to the latter, you’ll want to keep the above factors in mind.

All the three – SAP Contract Lifecycle Management, Ariba Contract Management and SAP S/4HANA for Enterprise Contract Management provide the functionality and capability to achieve the above incremental benefits. Hope this blog post helps you to decide what solution suits you best to fulfill your requirements.

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