IBM and IACCM: Emerging Contract Management Strategies

Growing into the Future: Emerging Contract Management Strategies

Presentation Materials

20/01/15 | Contract & Commercial Management | What Lies Ahead?

Dependency on supply networks – 70% of revenue From managing enterprise efficiency to managing market and relationship outcomes

The Environment

Relationships changing – attitudes to risk and collaboration “Honesty and integrity’ key as business attributes Quality of trading relationships – selection and management So what does this mean for ‘commercial management’?

What Lies Ahead?

Trends we are observing at IACCM

2015 and beyond

As Markets And Supply Networks Fragment And Diversify

From ‘rules and compliance’ to principles, capabilities and needs

Business enablement: right suppliers, right customers, right outcomes

Selection criteria will adjust to measure integrity, agility and to ensure greater cultural fit

Risk And Sustainability Continue To Evolve

Trading partners will become more integrated

Commercial Excellence & Contract Management

Commercial Excellence:

Understanding markets and segmentation; sources of value and differentiation; management information; revenue and profit impacts

Contract Management:

Management of change; oversee integrity and performance; deliver commercial outcomes

IACCM Conference Procurement Contracts Transformation and Technology March 5, 2015

Bob Murphy V.P., Supply Chain & Chief Procurement Officer

Agenda

§  IBM Strategy and Global Procurement

§  Global Procurement Transformation

§  Global Procurement Contracts Transformation

§  Technology Support

Global Procurement is an integral part of IBM’s Strategy

Deliver integration and innovation to clients

Focus on open technologies and high- value solutions

IBM Strategy

Data / Analytics

Engagement: Mobile Social

Security GLOBAL

PROCUREMENT

Agenda

Functional, Geographic “Silos”

IBM Global Procurement Transformation

Horizontal and Integrated

Broad and Deep T-Shape Skills

Common and Distributed

Global and Smarter

Generalists

Inconsistent and Fragmented

Tactical and Administrative

All tied together by a strong Governance Model!

ORGANIZATION

PEOPLE

BEFORE TODAY

PROCESS

TECHNOLOGY

IBM Global Procurement Profile

$52.1B Managed spend

17K Countries 100

$6.9B Annual Cost Savings Contribution

Global Procurement Operations centers 5

Suppliers

Agenda

Decentralized

Global Procurement Contracts Transformation

Centralized

Global Master Agreement with Supplier

Pre-approved Contract Templates

Shorter contracting cycle

Multiple Agreements with same Supplier

Extensive legal review required

Long contracting cycle

THEN NOW

Short-term Supplier relationships with multiple Suppliers

No central repository

Long-term evergreen Supplier relationships with fewer Suppliers

Contracts Management Tool

Established Contract Templates

Work Authorization

Participation Agreement

Statement of Work

Master/ Base

Partnered with Legal

Established Center of Excellence to Support Select Agreements

Routine Agmts CoE One Process - One Global Team

Centralized Support by Geo Centralized Legal Network

AM – AP - EMEA

Pre - CoE Many processes - Many Teams - Many Owners Ad hoc support of routine agreements by Sourcing

Teams, Hubs, Ops, and CSP

Center of Excellence One Process – One Global Team

Centralized Support

Pre – Center of Excellence Many processes – Many Teams – Many Owners

Managing Contract Risk throughout the Lifecycle

Contract Management Solutions

Contract Initiation and Assembly

Negotiation and

Approvals

Commitment and Obligation

Compliance

Contract Discovery

and Analytics

Audit-ability / Accountability

Manage Mitigate Monitor

Agenda

Technology Transformation

Leverage volume of annual spend

Global visibility to Supplier Contracts

Reporting & Search capabilities

Reduce Interaction with Legal

Reduce Contracting cycle time

Implementation of Contract Management Tool

Global Tool for a Global Organiza:on

Template Library

Global Owners

1000s of Records

IBM Procurement Contract Management Fact Sheet

Agreements Active

28K Countries deployed 100

200 Legal Templates

4K Users Internal

Attachments migrated 625K

Agreements / Amendments Executed 2014

Supplier records

40 Languages

100% utilization

Value Realized from Transformation

Data Analytics

Benefits Opportunities

Contract Management Tool

Leverage Spending

Continuous Transformation

Category Strategy

Strong Governance Model

Consistent Processes

Contract Templates GLOBAL

PROCUREMENT

DEFINE YOUR STRATEGY

DEFINE YOUR PROCESSES

CLARITY IN GOVERNANCE

LEGAL IS A KEY PARTNER

Lessons Learned

TECHNOLOGY

CONTINUOUS IMPROVEMENTS

Contracts becoming Social….

People

Talent ACrac:on

Innova:on

Technology

Compe::ve Advantage

Business Impact

Security of Supply

Reputa:onal Risk

Sustainable Cost Management

Regula:on & Audit

Where are we heading to?

Questions?

State of Flux Presentation Contract Management

Agenda

§ About State of Flux

§ 2014 global SRM research – contract and performance management results

§ Contract lifecycle management (CLM) overview

§ State of Flux CLM diagnostic tool

State of Flux is a global procurement and supply chain consultancy

Headquartered in London, UK, State of Flux works closely with its multinational clients to help upgrade their procurement and supply chain capabilities, drive best practice and deliver superior business performance. Our service offerings include:

§ Supplier management

§ Category management and strategic sourcing

§ Contract lifecycle management

We have an extensive list of multinational clients, including Unilever, Barclays and McLaren Automotive. As well as our consulting services, we offer training and an award-winning Supplier Management Platform.

Six years of research into supplier relationship management (SRM)

2014 GLOBAL SRM RESEARCH REPORT

(Publication November 2014)

Increasing number of survey respondents over the years

314 companies

224 companies

2013 505 companies

Still room for improvement in performance and contract management

For what proportion of your key supplier group would you consider you have robust performance management in place?

For what proportion of your key supplier group would you consider you have robust contract management in place?

0% 5% 10% 15% 20% 25% 30% 35%

Don’t know

0 - 25%

26% - 50%

51% - 75%

76% - 100%

0% 5% 10% 15% 20% 25% 30%

Don’t know

0 - 25%

26% - 50%

51% - 75%

76% - 100%

Very similar figures to 2013

Contract and performance management – most widely used areas in SRM technology

For which areas do you currently have an IT system / software application?

58% 41%

36% 29%

28% 27%

23% 22%

20% 15%

0% 10% 20% 30% 40% 50% 60% 70%

Contract management Performance management

Forecasting and planning Project management

Risk management Benefits capture and reporting

Quality management Category management

Relationship management and collaboration CSR / sustainability management

Product lifecycle management (PLM) Other (please specify)

Innovation management

What is contract lifecycle management?

The proactive management of external supplier contracts throughout their life, from initiation to execution, administration and analysis.

There are five stages to the State of Flux contract lifecycle

What does ‘best practice’ CLM look like?

Processes

Creation

Sign off

Physical design

Uploading

Updating

SPM / SRM

TOM People Design + build Process

3 weeks

Data model

Reporting Fields to be tracked

6-8 weeks

Technology Discovery collection (30,000)

Segmentation Cleanse

12,500

WATSON WATSON

People

Job Design Description

Training

Process

§ Complete process – covers entire contract lifecycle, from creation to renewal and analysis.

§ Clear communication – defined by clear flow charts and communicated to all impacted stakeholders.

§ Effective engagement – involves representatives from all appropriate functions.

§ Continuous improvement – regular process compliance audits fed into ongoing improvement programme.

§ Clear exception process – deviations from standard clauses and contract language are captured, reviewed and approved by appropriate personnel.

People

§ Clear roles and responsibilities – clearly defined roles communicated to all of those involved in the process.

§ Effective training – adequate, timely and up-to-date training for all impacted individuals on roles, policy, tools and systems.

§ Clear motive – all impacted individuals informed of why the process is important and valuable to their role and the wider business.

§ Suitable competencies – appropriate resources obtained for various roles within the process.

§ Compliance management – clear process owner accountable for reporting on process and policy compliance.

Contract Lifecycle

Business Insights

User Experience

Security & Configurability

Post Contract

Pre Contract

External Party Qualification

Contract Creation to Execution

Obligations Management

Relationship Management

Contract Lifecycle Management – Enabling Technologies

Compliance Management

Administration

Renewal Management IBM CONFIDENTIAL

Emptoris – UX Redesign §  Leveraging IBM Design Thinking team, developing simplified use cases, personas, and

“hills” for focused UX improvement [Who, What, WOW!]

§  Working closely with sponsored users in driving the new design

Before After

IBM CONFIDENTIAL

Contract Management Dashboard and Editor Screen

42 IBM CONFIDENTIAL

Search and Preview

43 IBM CONFIDENTIAL

Responsive Design – identifies and formats based upon device type

Tablet Mobile

IBM CONFIDENTIAL

Problem Impact Solution

Missed Dates - Higher contracting costs - Penalties incurred Milestone Dates

Late Payments - Missed discounts - Discount never received altogether

Discount/Payment Schedule

SLA’s Not Met - Delayed projects - Operational impact

Deliverables & Commitments

Late Renewals Added fees & penalties Expiration & Renewals

Lack of Visibility Poor compliance to contracted terms Business Reviews

Certifications Expire Increased risk and exposure Supplier Management

Contract Obligation Management

IBM CONFIDENTIAL

Contract Obligation Management

Alerts

Action: Review

Action: Create/Update

Author

Review

Approve

Negotiate Execute

Manage

IBM CONFIDENTIAL

IBM and IACCM: Emerging Contract Management Strategies

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