Digital World Class® Contract Life-Cycle Management Matrix – Transcript

By Andy Warzecha, Chris Sawchuk, and Rick Gardner
December 3, 2024
Season 6, Episode 10

Chris Sawchuk:                 

Every one of these organizations – these customers – when they went in and made the evaluation in terms of selecting a solution provider, they had goals, they had objectives that they set. And one of the things that we wanted to understand is whether or not these customers achieved their goals as a result of the decision they made around that solution provider.

Announcer:                       

Welcome to The Hackett Group’s “Business Excelleration® Podcast.” Week after week, you’ll hear from top experts on how to achieve Digital World Class® performance.

Andy Warzecha:              

Welcome. I’m Andy Warzecha, a principal at The Hackett Group, responsible for the Market Intelligence program. Joining me today is Chris Sawchuk, another principal and Global Procurement practice lead, as well as Rick Gardner, a senior director in our Market Intelligence program responsible for our procurement area.

Today we’re going to delve into The Hackett Group’s Digital World Class® Matrix Study, specifically on contract life-cycle management and intelligence. We did this study based upon a lot of interest that we’ve had both from our customers and our prospects around this particular area. This has been a really interesting space that’s probably one of the more progressive areas around generative AI and seeing real impact in terms of the software that the providers are providing in this space.

But let’s kick it off. Chris, what’s unique about this study?

Chris Sawchuk:                 

It’s interesting, Andy, and I think I would actually break it down into two areas that I would highlight as being quite unique. One is we all know that we’re not the first ones to study the contract life-cycle management area. And so it was important when we actually went into the study, is that we took a different approach – a more unique approach – to that.

One is that we took a very broad look at contract life-cycle management. And when you look at the participants in the study – the solution providers that we looked at – we looked at CLM, our contract life-cycle management specialists, those that specifically only focus on this area as their solution to the market. But we also looked at some of the source-to-pay suites that have contract management as a part of their overall suite or platform that they bring to market. We also included legal information solution providers, as well as some providers that are more emanated out of the area of document automation.

But the second way that I believe that we’re quite unique in our approach here is that when we look at the capabilities, one of the things that we’re looking at is not just what these organizations have is capabilities within their solutions – the features, the functions, etc. – but also the value that they’re creating for their customers out there. And so we had the opportunity to interview a set of customers for each of the providers.

One of the things that we found is that we were getting information around not only their feedback on the value that they received as customers, but the speed by which the solution was actually implemented – the utilization. A lot of organizations are out there and are using solution providers, and they may have a lot of features, but it’s not necessarily embedded and utilized to a broad level within their environment.

The other thing that we really wanted to understand is the usability. If you’re going to have stakeholders engaging – and there’s a lot of different stakeholders that engage in these contract life-cycle management solutions – what is the usability of the solutions from the perspective of an end user?

And probably most importantly, every one of these organizations – these customers – when they went in and made the evaluation in terms of selecting a solution provider, they had goals, they had objectives that they set. And one of the things that we wanted to understand is whether or not these customers achieved their objectives – their goals – as a result of the decision they made around that solution provider.

So to me the approach and the way that we looked at the value realization, as well as the breadth of the different solution providers that we included in the study, were quite unique in terms of the study itself.

Andy Warzecha:              

Thanks, Chris. Let me turn this over to Rick. Rick did a lot of the heavy lifting on the study itself. Rick, can you talk about the rigor of the approach that we took on this?

Rick Gardner:                   

Yeah sure, Andy. Chris, I think did a nice job of talking about the strategy and our vision for the study. When you talk about the approach, we spent a good chunk of the second … third quarter this year working with a set of 21 different vendors. That included both a lot of external research we did of their public content, as well as gathering information through a request for information from the vendors. We did a series of strategy sessions or what we call briefings with the different vendors to hear from them directly on what their capabilities were – what their investments were – to see demonstrations of their solutions.

And then a big focus of effort was really getting the customer perspective. So we conducted over a hundred different customer interviews around their experience with these solutions post-implementation – the implementation process itself, the feedback that they’ve gotten from their users and the overall value they’ve gotten from the solutions.

So those inputs really led to our data analysis – the work that we did to summarize the content both individually about the vendors and across the vendors as a whole, and then working with the vendors to make sure the fact- checking occurred in development of the report and publication. So a lot of

effort from a lot of different voices within the Hackett organization came together to execute the approach.

Andy Warzecha:              

Chris, what about the key takeaways?

Chris Sawchuk:                 

There’s a number of different key takeaways. But as we went through the study – and I think there was a lot of very interesting things that we learned – I think one that I would say is quite elevated with the focus that a lot of organizations have on AI and generative AI today is the broad utilization and embedding of generative AI in all of the solution providers that we evaluated.

Certainly there are differences in the solution providers. But when you look at the broad source-to-settle suite of products that are out there and applications and solution providers, I think one of the things that really stood out as the broad use and probably the highest utilization of artificial intelligence and generative AI in the entire CLM space across the solution providers.

I think the other thing that really stood out from an overall learning and key findings across is that when you look at it – and this has not always been the case when we’ve looked at other areas – is the broad satisfaction by the customers of CLM solutions. When we look at various areas and you ask organizations did it meet your objectives, one of the comments I mentioned earlier is that there’s a high degree of these … it’s something that we evaluated, but there’s a high degree of customers highlighting that what they implemented actually allowed them to meet the objectives that they set aside, and we don’t see that across other solution areas to this level of degree. Customer feedback on the value received – 89% of the organizations out there that we talked to highlighted they were very or extremely satisfied with the value being extracted from their CLM solution providers.

So when you look at it, and to me that’s a critical finding on this, is that the overall satisfaction – the overall objective that were achieved, the overall benchmarks and measures that we looked at, cycle times, etc. – really met and in some ways exceeded the expectations of the customers that were actually implementing these solutions.

Rick Gardner:                   

I agree with a lot of the comments that Chris made and certainly the satisfaction ratings are really good. I would say overall in terms of key takeaways of the 21 participants we had, we saw really overall strong business benefits results across the board. Chris mentioned the cycle times. They improved by about 35% on average. The automation rates of the processes – post-implementation – improved by about 63%. We saw other tangible benefits like improved process compliance, better data visibility, better data intelligence – so really a very favorable overall outcome that we saw in general post-implementation with a few exceptions that we can talk about where maybe some of the implementation designs and/or the business requirements weren’t necessarily the best fit for the specific client.

Andy Warzecha:              

So Rick, let’s follow that track a little bit. What were some of the ways the solution providers differentiated themselves?

Rick Gardner:                   

That’s a great question, Andy. A number of different ways that we could call out. One might be in terms of integration. So one of the things that we saw, most of these solutions were very effective integrating across the S2P suites or the ERP platforms or integrating in either of their own e-signature solution or that of a third party. We did see some of the leading CLMs went a step beyond that in terms of providing really strong integration into other tools like the CRM suites or the human capital management suites or embedded into office productivity tools or risk management financial services from a third party, so that we’ll call it extended integration beyond what you might traditionally think is the first step. The leading solutions did a great job of that.

Another area was platform flexibility. So we tended to see the leading solutions had the capability to be able to support multiple contract types or requirements – whether that was buy-side contracts or sell-side contracts, corporate contracts, employment contracts. So that flexibility tended to lead to broader adoption of the solution and wider overall acceptance of the solution, which is a big criteria for success.

AI and Gen AI, which you mentioned, a lot of the top-performing solutions provide the flexibility of not only … we’ll call it large-language model training data, but also the ability to incorporate internal client-specific, legal-approved content, so giving companies the best of both worlds if they want to leverage external data for content generation or keep that restricted to internal data or adjust that based upon the risk criteria related to the specific contract.

Quality and risk management was another area just in terms of the leading solutions tend to have multipoint risk capabilities. So looking at the clause level, at the contract level, at the supplier level, at the category level, and being able to intelligently generate remediation plans where they saw noncompliance in the contracts.

And then probably lastly, financials – obligation management – is another element that we saw some of the CLM solutions – the leading solutions – add additional content around the ability to track obligations, do compliance monitoring off that, do milestone tracking, do feeds into the budgets, and forecasts. So that really is just a nutshell of some of the differentiators.

Andy Warzecha:              

Thanks, Rick. And this AI topic is one that Hackett really views as critical. We believe generative AI is an organizational imperative, and I think we’re seeing a preview of what could be done in this set of vendors in other areas. I personally had experience with a corporate divestiture – a spin out of a division where I was dealing with state and federal contracts, things that were about 300 pages in length with addendums that had penalties associated with them. This whole set of tools and that ability to be able to summarize and identify those potential risks would’ve been extraordinarily handy to have available. Were there other

features and functions that you guys saw that would be of value coming out of these vendors or what’s in their road maps coming down the pipe? So Chris, Rick, what did you see there?

Chris Sawchuk:                 

The first thing, to your point, Andy, is I think there’s always that question is why do we see a lot of, in this particular area of contract management, why are we seeing this being really the forefront – the tip of the spear in terms of where we’re seeing the embedding of generative AI to the highest degree across all of the various areas in the source-to-settle set of processes within supply management?

And I think one of it is just the data that’s involved in all the unstructured data, as you mentioned, the experience that you had to that 300-page contract. These are massive documents. As you look at these features that are out there and you look at the embedding, one of the first things in what you see – and it’s pretty common across all of them – it’s just the ability to summarize a contract and what are the key points out of that. So that’s something that’s very well out there as you look at that.

But some have taken it a bit further in terms of categorizing contracts, as well as to the types based on the structure of the contract, the types of clauses that are in those contracts, etc.

They go even further and you start looking at the creation and authoring of the contracts. One of the things that we had the opportunity to do in this particular study and assessment is just look at all of the various processes and activities that occur in the entire contract life-cycle management process and for every one of those aligned to it. But I don’t think there was any process that did not have AI embedded into it and in some very unique ways as you look across all of the various activities.

Rick Gardner:                    

Yeah, I completely agree with Chris. There’s multiple steps in the process.

There’s a ton of data. Chris mentioned a number of them. I’d add even at the front end being able to take that 300-page contract and do metadata extraction of key elements out of that contract – the ability to take volumes of contracts and being able to intelligently categorize it so it can be reported on and spend analytics capabilities.

Chris mentioned the contract creation. There’s also a ton of capabilities around contract interactions and interrogations, so asking the contract which of your contracts have certain clauses or which contracts were created have certain expiration dates or any type of natural language-based question that you can ask a contract to kick back a response.

Recommendations of what red lines really should be focused on, so improving the efficiency of the legal teams or reviewing teams. Some of the solutions are providing what you might call negotiation intelligence, so providing suggestions

on how to better negotiate an approved contract. Andy mentioned the contract summarization and I mentioned obligation management earlier. So a lot of steps in the process and a lot of opportunities to leverage this advanced technology.

Chris Sawchuk:                 

Rick, and one of the other things that I thought was quite interesting was when you look at some of these contracts, the ability to actually integrate coming right out of a sourcing process or even the purchase-to-pay into contract creation, and more specifically out of a sourcing event as a result of what was agreed to during the negotiation, during that sourcing actually create a start of a contract that a category manager can then start to review going forward.

Rick Gardner:                    

Yeah, that’s a great addition, Chris. I agree.

Andy Warzecha:              

So we’re coming to the end of our time, and I’d be remiss in not telling you where to find the report. And there’s actually two styles of report. For those that are non-Hackett clients, you can go out to www.thehackettgroup.com and if you go off the main page there and go into Market Intelligence, you’ll actually find the Digital World Class® reports available there, and obviously you want to search for the contract life-cycle management and intelligence report here.

There is a landing page that will request some information from you, but that will allow you to download an abridged version of the report. The abridged version of the report does not have all of the detailed metrics – nor does it have the detailed vendor profiles.

The full version of the report is available for all of our Advisory clients at The Hackett Group. That does have additional information. And in addition for our clients, we actually have an interactive version of the tool that we can run.

And the reason that becomes important is you have different use cases here – the legal use case, the nonlegal use case for the contracts and the like. We can set the weights for the criteria based upon what the client wants to look at, and we’ll certainly have a dialogue around which vendors are most appropriate by industry, geography and company size, in addition to what’s already been written up on the report.

So, again, two ways to get this. Nonclients go out to www.thehackettgroup.com – get the abridged report through the landing page there. For customers, you can go to Hackett Connect or we can set up an interactive Advisory call with you.

So final question, Rick, what actions should our listeners take?

Rick Gardner:                   

In terms of key actions, what I’d say is please take a look at the report – either the abridged or the full report. Take a look at the capabilities that are being offered through these solutions and what the art of the possible is. And specifically for Hackett clients, talk to your Hackett advisor about where you’re at in your current maturity of contract life-cycle management. What are your specific needs – how the research can help educate and inform your path forward. So our teams and myself are happy to discuss the findings and really help make it personalized for you – whether that’s using some of our additional tools or just through discussions and Advisory interaction.

Announcer:                       

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