Transforming the Global Enterprise -- A C-Level Perspective on Contract Management’s Impact to Bottom-Line Performance Across the Organization For more information, please visit: Emptoris website: http://www.emptoris.com/ Emptoris blog: http://emptorisinc.blogspot.com/ YouTube channel : http://www.youtube.com/emptoris

1. Emptoris, Inc.
www.emptoris.com SCWP-3/08
An Emptoris White Pap er
Transforming the Global Enterprise
A C-Level Perspective on Contract Management’s Impact
to Bottom-Line Performance Across the Organization

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Executive Overview: Contract Management and Its Impact
on the Global Organization...................................................................................................3
The CFOs Perspective.............................................................................................................5
How Contract Management Impacts Fiscal
Management and Revenue Recognition..............................................................................5
The Sales Perspective............................................................................................................9
How Contract Management Can Support and Speed the Sales Process..............................9
The Chief Counsel’s Perspective..........................................................................................11
How Contract Management Software Impacts Contract
Visibility, Analysis and Compliance ....................................................................................11
The Procurement Perspective.............................................................................................14
How Contract Management Furthers Global Sourcing
and Procurement Excellence..............................................................................................14
The Path to Enterprise Contract Management Excellence...............................................16
The Impact of Best-in-Class Contract Management
Global 2000 Usage of Contract Management Technology.................................................16
Nortel Networks Corporation – Global Contract
Management Implementation............................................................................................20
Conclusion............................................................................................................................24
About Emptoris....................................................................................................................24
Further Resources and Recommended Reports................................................................25
The CFOs PerspectiveThe CFOs PerspectiveThe Sales PerspectiveThe Sales PerspectiveThe Chief Counsel’s PerspectiveThe Chief Counsel’s PerspectiveThe Procurement Perspective:The Procurement Perspective:The Path to Enterprise Contract Management ExcellenceThe Path to Enterprise Contract Management ExcellenceTable of Contents

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Contract management software is one of the most important advances in business technology since
the introduction and popularization of enterprise resource planning systems in the early 1990s.
Contracts are the foundation of all good business relationships, from key supplier agreements, to
strategic outsourcing arrangements; from revenue-generating sales agreements and the protection
of intellectual property through licensing agreements; down to lease agreements and consultant and
employee agreements. Contracts and contract management play a key role
in helping companies define business-to-business relationships, operational
expectations and compliance standards – and many expect contract
management applications will become the central tool used for management
of internal business relationships and compliance at global companies.
Enterprise contract management (ECM) solutions – or contract lifecycle
management (CLM) solutions as they are sometimes called – automate and
optimize the contract management process from creation, negotiation and
execution through performance monitoring, analysis, and re-negotiation.
According to a study conducted by the Economist, just one in ten corporate
executives today have ready access to the information needed to make
important business assessments and decisions. More than 50% of corporate executives report regular
concerns about making business errors or poor decisions specifically because of a lack of real-time,
relevant information. Eight out of ten corporate executives rank improved information and data as
the most critical factor in improving business decisions and performance. Seven out of ten (67%) of
Global 2000 companies surveyed reported challenges or“struggles”in managing business risks in
their contracting process according to a survey by Inside Counsel and Emptoris, in a survey conducted
in September 2008. The majority of CEOs and CFOs recognize that one of their biggest business
challenges is the lack of visibility and ability to quickly analyze business data and information.
This perhaps explains the growing investment in contract management technologies. According to
Forrester Research, investments in contract management software by Global 2000 companies are
expanding at a rate in excess of 25% annually and companies inquiring about these technologies more
than any other business or spend management solution. According to the Gartner Group information
technology research firm, early adopters“have successfully proven the value of enterprise contract
management applications; as a result, demand for these tools have increased.” The firm notes that
growth in contract management adoption is coming in particular from companies expanding the
scope of their solutions within their organizations.
Executive Overview: Contract Management and
Its Impact on the Global Organization
Executive Overview: Contract Management and
Its Impact on the Global Organization
“Contract Lifecycle
Management could turn
out to be one of the most
important new business
applications of the
first decade of the 21st
century.”
Andrew Bartels,
Analyst,
Forrester Research

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Few processes and applications can span and impact the entire global organization like contracts and
contract management. From a CEO’s perspective, contracts and the contract management process
have significant impact on revenue generation and recognition, spend and procurement management
and savings; and risk mitigation and compliance enforcement. From the CFOs perspective contract
management processes and technologies impact the sales and revenue processes; capturing
and maximizing revenue; ensuring proper revenue recognition and compliance; and controlling
or reducing spend or costs. From the Chief Counsel or General Counsel
perspective, contract management software is instrumental to manage
the more than 40,000 active contracts of a typical Global 2000 company,
including managing, monitoring and analyzing the creation and execution
of contracts – and enforcing compliance and managing legal risks. From the
Chief Procurement Officer’s (CPOs) perspective, contract management plays a
critical role in negotiating and realizing savings from suppliers; in managing
overall supplier performance and reducing supply chain risks and disruptions.
For the entire organization, the globally networked economy has brought
with it increased complexity, a growing workload, and heightened pressure
to reduce costs, drive compliance, reduce cycle times and improve decision-
making. Contracts and enterprise contract management solutions can be
the focal point of reducing and managing these pressures, providing C-
level executives with increased visibility, improved control and enhanced
capabilities to enforce compliance.
Dozens of research and case studies reinforce these points and clearly
demonstrate the impact contract management can have on the organization.
One of the studies highlighted in this whitepaper, produced by the Aberdeen Group, provides detailed
data on how best in class organizations in terms of contract management“clearly outperform”
others with“a higher percentage of spend that is on-contract and a significantly higher percent
of transactions that are compliant with contracts. Improving the amount of transactions that are
compliant to contracts allows enterprises to capture a higher percentage of savings, savings that may
have been negotiated in a sourcing event. Also, Best in Class companies achieved higher performance
on the sell-side, having a higher percentage of sales orders and revenue recognition that is compliant
with a particular contract. Given the strict regulations around this area, it is clearly a key for any Finance
executive.”
“Contract lifecycle
management helps
companies improve the
performance of their
balance-sheet assets and
liabilities as well as their
intangible assets and
liabilities such as brands,
key customer and
supplier relationships,
and intellectual
property, which we at
Forrester believe is the
next frontier of software
for optimizing business
results.”
Forrester Research

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How Contract Management Impacts Fiscal Management and
Revenue Recognition
CFOs are faced with increasing pressures from compliance to cost controls to
revenue recognition.
Global 2000 companies are increasingly turning to ECM solutions for better
contract management and fiscal management.
ECM can mitigate financial risks, lead to more profitable contracts and speed
revenue recognition.
A fast-growing trend in fiscal management is the application of enterprise contract management
(ECM) technologies. These technologies have long been used to impact the bottom-line, but are
most commonly applied by Procurement organizations to help manage and reduce costs, or
by Legal organizations to efficiently and effectively manage contracts, processes and corporate
compliance. However, the increased regulatory requirements of Sarbanes-Oxley and accelerated
drive to control costs and better manage cash flow and revenue in the midst of economic uncertainty
has accelerated the usage of contract management technologies by Finance organizations.
Contract management plays a critical role in fiscal management: controlling spending, mitigating
financial risks, managing compliance and speeding revenue recognition.
1. Driving Compliance and Reducing Risks: From Sarbanes-Oxley, to SEC and FASB rules, the fiscal
management of a Global 2000 company carries with it significant compliance requirements, over
and above the demands of running a fiscally tight ship. Many companies are hand-cuffed in their
compliance efforts by a lack of visibility into Legal and Financial risks, and the inefficiency and
limitations of their contract preparation and approvals processes.
With the right technologies, companies can ensure and enforce compliance by (1) building in
proper contract review and approval procedures and (2) by providing greater and more timely
visibility into financial and legal exposures. In the study,“Contract Lifecycle Management and the
CFO,”published by the independent analyst firm, the Aberdeen Group, it was found that nearly
65% of enterprises using contract lifecycle management reported immediate benefits in their
visibility into and identification of financial and legal risks.
With a contract management solution, companies have a library of contract templates with
approved language, alternative and“fall back”clauses, to quickly produce stronger contracts in
compliance with governmental regulations and internal rules and controls. Contract creation
wizards can enable self-service contract creation by front-line personnel while ensuring
compliance and providing top-level management final approval over any notable modifications
or anomalies.
The CFOs PerspectiveThe CFOs Perspective

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A central repository, rules-based notifications and alerts help ensure
companies have broad and immediate visibility into the contracts at
the heart of their revenue generation – and further allow for analysis of
risks. Complete transparency across the full contract lifecycle enables
cross-functional cooperation and accountability, and a clear audit trail
makes any deviations from standard readily apparent.
2. Ensuring Proper Revenue Recognition: Contracts also play a central
role in revenue management, including (1) forecasting revenues;
(2) ensuring proper revenue recognition; (3) certifying that financial
statements are accurate and complete; and (4) generally managing
cash flow and the solvency of a business. Best-in-class contract
management software can help ensure proper accounting of revenues
(and spend) in terms of accounting rules and guidelines. In a worse-
case scenario, poorly written contracts can lead to revenue recognition
issues and necessitate revenue restatements.
With the complexity of today’s sales agreements and revenue
recognition rules, particularly in industries such as such as high-tech
and software with multi-element contracts, contract management
solutions can help ensure the appropriate accounting of revenue, including when and
how revenue is recognized, and regardless products, pricing or schedules. Using contract
management automation alone, or through integration with billing or accounting software,
companies gain direct visibility into and automatic alerts on schedules and milestones in
contracts that impact revenue.
ECM technologies also help identify which transactions are to be counted as revenue and at
what given time; tag specific goods and services procured to the proper accounting code or
method; and assign contracts and transactions meeting certain parameters to specific accounts
or to specific personnel for review.
By automating processes and improving visibility into contracts, companies create a strong
foundation of internal controls over revenue practices that leads to greater integrity and
accuracy of revenue data. Having a library of standard contract terms related to revenue
recognition business rules allows companies to ensure best practices in revenue recognition are
consistently applied. And an automated approval process allows for more efficient management
and ensures review of non-standard contract terms, specifically those that would impact revenue
recognition. Finally, contract management solutions offer a reliable, consistent and efficient
manner to review and report on revenue aspects of contracts, allowing for more rapid insight
into risks and faster resolution of potential problems.
3. Capturing and Maximizing Revenue: Another research study by Aberdeen Group among Global
2000 companies found that poor contract management in the sales-to-revenue cycle results in
revenue leakage, on average, between 5% and 9%. Thus, even under a conservative scenario, for a
company with just over $1 billion dollars in contracted sales, revenue leakage could run between
Core Challenges of Contract
Management at the Global
Organization
The lack of visibility and control
into contracts is at the heart of
a number of significant issues
within Global 2000 companies,
including:
Lack of visibility into Legal
and Financial risks
Un-auditable paper trails and
lack of compliance
Deficient or no proper approvals
of key documents or decisions
Difficulty managing variations
in language, law and financial
values globally
Lack of spending insight and
controls
Lost profits or revenue
opportunities

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$50 million to $90 million. Capturing just half of that can add tens of
millions of dollars back into a company’s revenue stream. Obviously, in
today’s economic environment, revenue is especially critical. Capturing
that leakage is highly achievable. In the Aberdeen report, best-in-
class companies in terms of contract management had leakage just
a fraction of the average company, typically around one and a half
percent.
Revenue leakage can occur from a range of problems, including
sub-optimum or missed contract renewals; improper invoicing, or
regulatory fines or penalties. Contract management solutions allow
companies to capitalize on each renewal opportunity by identifying
upcoming renewal candidates, notifying internal and external parties
through dynamic workflow rules, automatically generating renewal
contracts, and initiating processes in other enterprise systems.
The result is higher renewal rates, higher revenue through stricter
enforcement of pricing terms, and lower contract renewal and
administration costs.
A contract management solution also allows companies to monitor
customer (and supplier) performance against commitments and
conduct timely audits, performance checks, and reviews so that the
value of contracts is maximized. [On the buy-side, as discussed later
in this whitepaper, companies capture more savings opportunities by
ensuring that they obtain the discounts and rebates they’ve earned.]
Finally, contract management solution allows companies to structure
more profitable deals by leveraging information from all historical
contracts and from other enterprise solutions to give an edge in
the negotiation of contracts.This also improves contract quality by
enabling professionals across functional areas to collaboratively
develop contracts, and giving senior management clear dashboard
visibility into key contracts and key terms.
4. Speeding Sales and Revenue Recognition: An additional benefit of
the application of contract management technologies is speeding the
sales and revenue recognition processes.
The process of managing deals from initial sales proposal through
contract creation, negotiation, and acceptance, typically involves
numerous resources across an organization. In most organizations, Sales Operations, Field Sales,
Finance, Legal, and Consulting are involved in the sales process. Coordinating the process across
all resources, while ensuring that deals contain only accurate and beneficial terms can be time
consuming and challenging.
Core Value Proposition for
Contract Management Software
Enterprise contract management (ECM)
solutions can play a significant role
in helping companies relieve these
pressures and more effectively manage,
as well as improve their visibility, control
and compliance across the organization:
Greater Visibility
Enterprise contract management
solutions help companies attain a
complete picture of all obligations
and commitments across the
company through the following:
• Centralized contracts company-
wide via controlled access to a
global contract repository
• Ability to search for contracts
across a variety of parameters
• Consolidated views of prevailing
language and terms, even as
contracts are amended
Better Management and Control
Enterprise contract management
solutions help companies gain greater
control over contracts and achieve
improved corporate governance and
cost control.
• Enforce corporate standards for
language, terms, and pricing
though business workflows and
approvals
• Ensure that any variations of
standard contract language are
routed to the appropriate person
or organization for approvals
 Improved Compliance Enforcement
Finally, ECM solutions link
strategic operations to tactical
systems furthering compliance:
• Drive day-to-day operations based
on commitments with suppliers,
customers, and partners
• Improve efficiency of audits,
and lower internal and external
audit costs

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According to one study, each day a contract is delayed in the sales cycle
at a Global 2000 company results in an estimated reduction in $88,000 to
the bottom line of the company through both time-costs and lost revenue.
Situations vary by industry and contract, but a delay of a week could cost
the business close to a half-million dollars.
“Companies using contract management solutions to enforce systematic
and efficient procedures for creating, executing, and managing corporate
contracts have been able to cut process cycles in half, reduce contract
administration costs, improve contract compliance 50% to 55%, diminish
risk, and increase revenues and profits,”said Aberdeen Group.
Bottom-line impact, and speeding that bottom line impact, is what the
application of technology to contract management is really all about.
One medical technology company with whom Emptoris worked saw a
reduction in time spent creating, negotiating, and approving contracts by
roughly 60%. The Aberdeen report found similar successes, with best-in-
class companies applying ECM technologies taking just 20 days to go from
contract creation and negotiation to approvals, compared to more than 30
days on average for Global 2000 companies in general.
A technology service company with whom Emptoris works shared that
they halved the time required to close contracts using enterprise contract
management technology, which they commented“enables us to accelerate
revenue each quarter.We could bring forward tens of millions next year,
and ever greater revenue numbers in future years.”
Whether it is speeding sales and revenue processes; capturing and maximizing revenue; or
ensuring proper revenue recognition and compliance to revenue recognition rules, enterprise
contract management technologies can play a significant role in driving both compliance and a
bottom-line impact.
“Getting better control
over contract production
and management is
becoming an imperative
in large enterprises. Our
research shows that early
adopters are getting
real benefits in three
key areas. First, they are
seeing real bottom-line
savings through better
compliance with contract
prices. Second, they are
seeing improvements in
productivity and quality in
the procurement and sales
administration teams. And
third, the management
teams feel much more in
control of their business
through controlled
workflow and access rules
on contract approval.”
– Andy Kyte,Vice
President of Research,
Gartner Group

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How Contract Management Can Support and Speed the Sales Process
By automating the sales contracting process, enabling both internal and external collaboration
and, creating a more structured approach to contracting, contract management solutions can help
companies accelerate the sales process, as well as negotiate and create stronger contracts. Because
sales contracts dictate virtually every aspect of a business relationship, including payment terms,
service levels, and pricing, they play a critical role not only in the sales process but across the broader
organization as well.
As any Sales Executive will attest, the process of managing deals from initial sales proposal through
contract creation, negotiation, and acceptance is complex and often involves input or approvals from
a host of departments, from Sales to Finance to Professional Services to Legal, among others. Some
typical challenges that Sales organizations can encounter during the process include (1) verifying
deals contain accurate and competitive product, pricing, and terms; (2) ensuring proper review and
approvals of sales agreements; and (3) coordinating the sales process across different departments
within the enterprise and externally.
A survey by Inside Counsel and Emptoris found that close to 80% of Global 2000 companies see a
need for significantly improving their sales contracting processes with 29% seeking to better define
processes and 28% looking to begin fully automating the sales contracting process. According to
the survey, the case for improving and automating sales contracting processes is clear, with close
to half (48%) of all Sales, Legal and Contracting professionals at Global 2000 companies seeing an
opportunity for significantly reducing contract processing cycle times with contract management
software and close to one-third (30%) seeing opportunity for mitigating sales contract risks.
“Sales staff negotiated contracts on a one-off basis and then forwarded them indiscriminately for
internal and external approval. Before long, multiple drafts with edits marked in page margins
were circulating. Our lawyers couldn’t even be sure that they were reviewing a current version.”By
lengthening cycle times and fostering uncertainty, these inefficient processes impeded the closing
of deals, increased costs, and reduced revenue.”– General Counsel for a Fortune 1000 technology
company.
Contract management can play a critical role in improving and speeding the sales process by:
1. Speeding the Sales Process: Delays in sales contracting often causes deals and revenue to slip.
There is“perpetual frustration”among Sales Executives with the perception that internal Legal and
Financial hurdles stand in the way of closing business. Effective sales contract management ensures
the legal strength and compliance of a contract – while empowering Sales professionals to close
deals quickly and easily. This is achieved not only through the efficiency that automation of the
process brings, but also via the collaboration that can take place in contracts automation. In the
current economic environment, the need to streamline and speed the sales contracting process is
evenmore imperative.
The Sales PerspectiveThe Sales Perspective

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2. Improving Deal Quality: Before the sales contracting process even begins, contract management
solutions have the capability to improve sales opportunity quality by enabling professionals across
functional areas to collaboratively develop a comprehensive knowledge base from which Requests
for Information (RFI) and Proposal (RFP) templates are maintained and developed.The solution can
house templates that contain appropriate product, pricing, and value information that can be quickly
assembled and provided to prospective customers. The solutions can even set up internal process for
RFP input, reviews and approvals.
3. Managing Renewals and Revenue Opportunities: As contracts near
the end of their term, companies have an opportunity to ensure that their
customers remain customers. Contract management software provides the
business insight companies need to plan for upcoming renewals, negotiate
new business terms, and take advantage of additional selling opportunities.
Companies utilizing contract management technologies (best-in-class)
achieve close to 60% annual contract renewal rate versus just 32% on
average for the one-third of Global 2000 companies performing at the
bottom of the contract management spectrum.
4. Managing Customer Relationships: Dynamic business relationships
often result in countless contract amendments, which challenge
companies’ability to manage their constantly changing obligations
effectively.Throughout the customer lifecycle, a contract management
solution consolidates multiple amendments to each contract to provide a
single view of contractual relationships so that companies can understand
and meet their obligations to their customers.
In addition, proper visibility into contract deliverables and the ability to manage commitments
made to customers are a key to ensuring contract terms are enforced and customer satisfaction is
maintained. Contract management applications can link daily operations to companies’contracts,
and proactively notify professionals of upcoming commitments and related dates.
“Virtually all the
references checked for
this Gartner MarketScope
indicated that they
were pleased with their
investment in contract
management software ….
the overall impact and ROI
of these tools has been
good.”
– Gartner MarketScope
for Contract
Management Research
Report

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How Contract Management Software Impacts Contract Visibility,
Analysis and Compliance
The average Fortune 1000 company maintains between 20,000 to 40,000 active contracts according
to the Institute for Supply management, and the number and complexity of these contracts is
expanding everyday. According to a study by Emptoris and Inside Counsel, these contracts are
managed using manual processes or with very limited technologies.
As contracts are the foundation of a business, such a“file and forget”approach results in limited
control over and visibility into contracts, and:
Deficient contract approvals processes
Unauditable contract paper trails
Poor contract and exposure analysis
Risk of non-compliance, increased legal and financial risk
Lost savings, profit and revenue opportunities
Contract management software allows companies to gain greater control and visibility over their
contracting processes and contracts, resulting in reduced risks, stronger agreements and more
effective contracting and compliance. Best-in-class contract management solutions typically span
every stage of the contract lifecycle, from proposal and contract creation, negotiation, obligations
management, and compliance enforcement, through contract amendment, renewal, and ongoing
analysis.
A survey by Emptoris and Inside Counsel found that achieving greater spend visibility with
a central, electronic contract repository was the primary reason companies were investing in
contract management technologies, followed by a desire to gain greater control over contracts for
compliance reasons. Thus, from the perspective of the Chief Counsel and Legal department within
an organization, a few of the core reasons for implementing contract management technologies are
as follows:
1. Providing in-depth, instant contract visibility: Contract management solutions enable a company
to attain a complete view into all its obligations and commitments, as well as commitments to the
company, across the global organization. At the heart of this visibility is a contract repository which
provides a complete, current view of all contracts, as well as supporting documentation, amendments
and sub-agreements. Best-in-class solutions allow for a single view of prevailing language and
terms, even as contracts are amended over time. Contract templates and authoring tools, exception
notifications and automation of approvals processes allow for the creation of stronger agreements
and ensure compliance of agreements to both internal policies and external rules and regulations.
Technologies typically allow for a library of approved terms and conditions, alerts and approval
requirements for agreements modified from standard, and visibility into contract process bottlenecks.
The Chief Counsel’s PerspectiveThe Chief Counsel’s Perspective

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With enterprise contract management, companies can instantly access information about
contracts and contract terms, as well as analyze contracts across specific categories, departments
or enterprise-wide to determine trends, analyze exposures and risks, or gain insight into
opportunities for savings or to increase revenue.
2. Minimizing risks and ensuring compliance: From Sarbanes-Oxley, SEC and FASB rules to internal
policies and controls, managing compliance at a global corporation with it significant requirements
and significant challenges. The majority of companies are limited in their compliance efforts by a
significant lack of visibility into risks, and the inefficiency and limitations of their contract processes.
With the right technologies, companies can ensure and enforce compliance with (a) automation
of contract reviews and approvals procedures and (b) by providing more timely, detailed visibility
into exposures and risks.
Contract management solutions enable improved risk assessment and compliance by (a)
providing instant and more in-depth visibility to contracts and obligations; (b) by providing
tools to analyze contracts and identify risks; and (c) by linking contracts and the contract
management solution to strategic operational and tactical systems and actions. In addition,
contract management solutions strengthen a company’s audit capabilities and reduce audit and
compliance time and costs.
As many contracts are managed by exception, material events, such as delivery dates, contract
renewals, supplier obligations, commitment levels, and pricing revisions are not readily evident.
Best-in-class contract management technologies provide configurable event triggers based on
pre-defined parameters that are configurable for each contract. Predictive notification of when
key events are supposed to happen guarantees a contract is actively managed and essential
deadlines and deliverables are not missed.With tight integration to enterprise systems, such as
SAP®, contract management can ensure that financial systems are inline with contract terms and
conditions. Best-in-class enterprise contract management solutions typically offer integrations
to operational systems and solutions such as Oracle, PeopleSoft, Seibel, JD Edwards, Salesforce.
com and SAP. Supply and contract management solution suite providers, such as Emptoris, have
pre-built integrations with spend, sourcing, supplier performance management and compliance
solutions.
Contract management solutions also speed and ease the audit process, ensuring successful
audits the first time, every time. The solutions eliminate searching through mountains of paper
and file cabinets – and make contracts, amendments and associated documents instantly
presentable. Locating and analyzing a category of contracts could take weeks in a manual audit
process.The same task can take just minutes with automated contract management. Contract
management also adds a proof of controls in effect at a company.

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3. Gaining greater control over contracts: Through proper oversight and control of contract
processes, companies can create stronger contracts that minimize risk and better enforce corporate
standards, specifically for contract approvals and contract language and terms.
With authoring and negotiation tools, best-in-class contract management solutions allow
professionals to work in Microsoft Word to create contracts from pre-approved clause and term
libraries, and enforce pre-determined templates, language, terms and approvals. Control over
primary and alternate clause usage reduces the opportunity for frontline field or other non-
contract management personnel to create rogue contracts that do not conform to company
business and legal standards. Deviations to approved templates and terms can be flagged
and contract approvals rerouted for appropriate legal or management review. With contract
management solutions, corporate and Legal Executives can establish defined, finite control over
who can create, modify and approve contractual agreements.
This control allows for creation of stronger contracts and reduction of risk associated with
undesirable terms and conditions. Legal can also accelerate its review and approval of
contracts without sacrificing quality, specifically by routing contracts for certain levels of Legal
review based on certain conditions or exceptions. One major biotech company uses such
technology to automatically receive and rout contract requests for less strategic matters to
paralegals, bypassing attorney involvement, thereby alleviating the demand on attorney time
by more than 25%.
4. Creating stronger contracts: Finally, contract management solutions allow for the creation of
stronger contracts, not only by enforcing compliance to approved policy, terms and language, but
also by leveraging the intelligence and analysis of contracts across the organization. The more a
company improves its ability to manage and optimize business terms, the more it can transform
contracting into a strategic competence. Leading contract management solutions provide
functionality, such as workflow, alerts and reporting, that help proactively review contracts; and
executive dashboards and custom reports can be created to generate operational information for
continuous improvement.
The solutions also allow for stronger contracting processes and negotiating. Having detailed
supplier, customer or partner performance information linked to contracts allows for more
advantageous negotiations when renewing a contract. With contract management solutions
analysis capabilities, Legal and Contracting Professionals can better measure cycle times and
evaluate productivity; assess contract risk levels across the organization and amend or eliminate
sub-optimal contracts.

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How Contract Management Furthers Global Sourcing and
Procurement Excellence
There are few processes that can more immediately and significantly impact a company’s
procurement and supply management operations than contract management. With contracts at
the heart of every strategic business-to-business relationship, they are critical to not only supply
management, but also supplier performance management. The efficiency and savings realized in
the application of purchasing automation and sourcing solutions can be enhanced with effective
contract management.
Procurement or supplier contract management plays a pivotal role in a company’s fiscal and
operational health, whether it’s enforcing negotiated pricing, realizing quantity discounts or ensuring
quality standards and associated penalties and discounts, or enforcing contract compliance. One of
the big areas of loss for companies is in supplier non-compliance to existing contracts. Standardizing
a company’s procurement contract operations becomes even more essential in a recessionary
environment.
Technology can play an important role in helping companies link contract terms to spending and
thus reduce leakage – and in linking contracts to supplier performance to track commitments versus
actual performance metrics.
Contract management impacts procurement operations through the following:
1. Realizing Sourced and Negotiated Savings: Companies have invested in sourcing solutions and
sourcing teams that work hard to source and negotiate favorable terms and pricing with suppliers,
yet too often those terms are not accurately recorded in contracts or maverick spending diminishes
the value of those savings. Contract management solutions enable companies to collaboratively
create, negotiate, and approve contracts, both internally and externally, resulting in stronger contracts
and higher realization of negotiated savings. Further, contract management software can integrate
sourcing data into a contract repository and provide powerful support for newly sourced deals.
Further, an Aberdeen study found that companies that employ contract management solutions (best-
in-class) achieve, on average, 68% of spend on-contract versus just 38% of on-contract spend for the
bottom third of Global 2000 companies.
2. Enforcing Supplier Compliance: Contract management solutions can enable Procurement
Professionals to gain proper visibility relative to the terms as executed in their supplier contracts.
Using pre-built integrations to leading solutions such as Oracle, PeopleSoft, JD Edwards, and SAP,
companies ensure better supplier compliance to those terms.
3. Supplier Relationship Management: Using contract management analysis tools or through
integration with supplier and spend management solutions, company’s gain added visibility into
supplier performance. With solutions, such as those offered by Emptoris, companies can see historical
supplier performance trends, receive supplier performance alerts, and analyze spending relative
to the contract all within the contract application. Companies increasingly need to quickly amend
The Procurement PerspectiveThe Procurement Perspective

15. - 15 - © 2001 - 2009 Emptoris, Inc.
contractual relationships because of regulatory pressures, changing business conditions, and strategic
decisions which impact many of their supplier contracts. All this provides companies greater agility in
managing their exiting external relationships and agreements.
4. Analyzing and Improving Supplier Contracts: Having detailed supplier performance information
linked to contracts allows for more advantageous supplier negotiations. With a contract
management solutions analysis capabilities, procurement professionals can better measure cycle
times and evaluate productivity; assess contract risk levels across the supplier base, and eliminate
sub-optimal contracts; as well as conduct contract audits, identify key business trends in spending
and purchasing operations.
5. Driving Operational Systems: Ensuring contract data, such as terms, pricing and supplier
information is consistent cross supply chain and e-procurement systems can be a considerable
challenge. Many companies experience data management problems and are unable to validate
purchase orders against contract terms. Contract management eliminates this problem by providing
purchasing systems with contract data that is always up to date, even as contract amendments take
place over time.
6. Managing Internal Obligations: With every executed contract comes a myriad of obligations, such
as payment schedules, due dates, performance-based contingencies, and follow up requirements
for missed obligations. Contract management tracks contract obligations and uses rule-based
notifications to enable purchasing professionals to proactively meet company commitments.

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The Impact of Best-in-Class Contract Management
Most contract management experts and companies seasoned in their implementation and use
of contract management technology, emphasize that people, process and technology all play an
important role in transforming contract management at a Global 2000 organization. Companies that
employ best-in-class contract management processes and technology can see a significant impact
on their agility, efficiency and bottom-line:
According to a survey of Global 2000 companies by the Aberdeen Group, best-in-class contract
management allows companies to capture a higher percentage of savings that have been
negotiated during a supplier negotiation or sourcing event. The study found that best-in-class
companies achieve, on average, 68% of spend on-contract versus just 47% for average companies,
and just 38% for the lower one-third of companies. The same study found best-in-class companies
had 88% percent of transactions that are compliant with contracts versus 48% for average
companies.
In terms of sales and revenue management, the study found that 75% of sales orders and revenue
recognition is compliant with a particular contract at best-in-class organizations versus just over
50% on average at Global 2000 companies in general. Best-in-class companies also had a close
to 60% annual contract renewal rate versus just 32% to 48% for average to poorly performing
companies on average.
Global 2000 Usage of Contract Management Technology
Estimates vary, but market research, in general, shows a significant expansion in the use of
contract management technologies by Global 2000 organizations. In a recent Aberdeen Group
study, close to 60% of companies reportedly had already advanced beyond manual processes or
homegrown, custom-built and other limited solutions – or were currently planning to adopt contract
management technologies.
A survey by Inside Counsel and Emptoris found that close to half (49%) of all Global 2000 companies
were currently planning for, or in the process of, automating the contract management process.
Twenty-three percent (23%) of companies reported that they had already automated their
contracting process or were close to completing an automation process. The survey was conducted
with a sample of 500+ legal and contracting professionals at Global 2000 companies and was
compiled in September 2008.
Illustrating the enterprise-wide adoption of the solutions, Gartner estimates that within the next
four years, 30% of Global 5000 companies will use a contract management enterprise application
for at least two or more departments within their global organizations.The report also uncovered
the delivery models currently in use or planned for use by Companies, with 61% of companies
employing contract management solutions having installed the solution on site at their enterprise.
The Path to Enterprise Contract Management ExcellenceThe Path to Enterprise Contract Management Excellence

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However, according to Emptoris, one of the leading providers of contract management technologies,
an increasing number of companies are choosing a Software-as-a-Service (SaaS) model for the
delivery of their contract management solutions.
The majority of companies, some 62% indicated that their primary focus in implementing a contract
management solution was to provide a centralized contract repository to provider better visibility
into their contracts. As discussed below, the establishment of a central
contract repository and its use for improving visibility and compliance, and
efforts to streamline contract reviews and approvals, is typically the first
step in a contract management transformation program. The Aberdeen
study found that approvals workflows and reporting and analytics were the
next most popular reasons for adopting a contract management solution.
Relatively few companies attempt to manage contracts with their existing
Enterprise Resource Planning (ERP) systems because of the very limited
capabilities of ERP-based contract functionality. According to one report,
ERP and procurement solutions,“do not automate contract creation and
approval workflows and cannot, on their own, ensure contract compliance
at the point of transaction. Further, they ignore the role of the Legal
department in the contracting process, resulting in cumbersome workflows
and poor adoption.While these strategies are tempting, especially given
the resources companies have devoted to their enterprise solutions, they fail because none of these
systems is focused on automating the full contract lifecycle.”
In terms of best-of-breed contract management solutions, Global 2000 companies have also opted
for solutions that can handle contracts across an enterprise, as opposed to“process-centric”or
industry-centric contract management solutions. Given the strategic nature of contracts, the CFO’s
and Chief Counsel’s office are often involved in the selection of such solutions, and thus tend to
prefer solutions that can be used by different departments across the organization. A Gartner
research report further states that“the enterprise contract management solution is, by virtue of
its architecture, typically suitable to support multiple contract types because the base solution
architecture requirements are the same for each type.”
The Path to Enterprise Contract Management Excellence
The path to contract management excellence involves a mix of people, process and technology, and
tends to be“more of a journey than a destination.” However, outlining a clear roadmap for contract
management improvement and automation will help companies ensure a smooth path of progress.
Experts and best-in-class practitioners advise companies to align the program objectives with
corporate and senior management objectives, and to develop benchmarks and evaluation criteria to
measure success.
“Enterprise-wide [contract
lifecycle management]
has won out, with the vast
majority of enterprises
opting for CLM products
that allow them to more
effectively create and
manage all contracts on a
single platform,”
– The Forrester Wave™:
Contract Life-Cycle
Management

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Laying a Foundation for Success: Central Repository to Gain Greater Visibility, Establishing
Automated Reviews and Approvals
Most companies begin their program of contract management automation and transformation,
driven by a desire for a centralized repository for contracts to ensure better visibility into those
agreements. The sheer magnitude of expired and active contracts and amendments scattered
across an organization makes providing a central location for these agreements an urgent priority.
In its most fundamental form, the contract management solution serves as a repository with search
and retrieval capabilities for accessing contracts and amendments. Leading solutions provide
sophisticated repository functionality that enables users to search for contracts by any parameter or
criteria, while preserving visibility and access privileges for the particular contracts.
Creating Stronger Contracts: Employing Template Contracts and Clauses
The next stage of sophistication in enterprise contract management typically involves actively
managing contract templates and clauses. Some companies engage in a process of template
rationalization where existing representative agreements are consolidated into a few select
templates for easier contract creation and maintenance. During this process, clauses are reviewed
for commonality and rationalized to minimize variations of a single clause. For instance, this
rationalization process helped one company reduce 85 versions of a sales contract into less than 20
sales contract templates. Leading ECM solutions deliver capabilities for more efficiently managing
templates and clauses.
A contract management solution can help professionals easily create contracts by pulling from a
library of legally-approved templates and clauses, and modify the contract with alternative, approved
clauses as appropriate. The company can further enhance control over contracts and mitigate risks
by using the solution to mandate the inclusion of certain clauses and flagging contracts that deviate
to be routed and approved by specific managers. In addition, contract management wizards can be
sued to present a series of questions to front-line employees, such as sales representatives, using the
answers to automatically create a first draft template contract that carries relevant and pre-approved
business terms.

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Driving Contract Excellence: The more a company improves its ability
to manage and optimize business terms while ensuring compliance,
the more it can transform contracting into a strategic competence.
Leading contract management solutions provide functionality,
such as workflow, alerts and reporting, that help proactively review
evergreen contracts and renew contracts facing expiration. Executive
dashboards and custom reports provide operational information for
continuous improvement. Most importantly, these applications allow
business terms to integrate with other mission-critical systems, such
as supply management, enterprise resource planning (ERP) sales
force automation, and contract administration. Leveraging imbedded
analysis functionality or integrating with analytics applications enables
companies to predict market behavior based on past performance and
identify business terms that deliver distinct advantages.
Checklist for Enterprise Contract
Management Solutions
Searchable and access-controlled
central repository for all contracts
Library of contract templates and
clauses with alternates and usage
guidelines
Dynamic workflow processes for
contract creation and approvals
 Tight Microsoft Word integration
for on- and off-line contract
creation and red-lining
Pre-built adaptors and GUI
integration tools for linking to
existing enterprise systems
Contract analytics and company
performance metrics
 Proactive obligation notification
and renewal management
Contract compliance management
that seamlessly links to enterprise
systems

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Nortel Networks Corporation, commonly known simply as Nortel, is a multinational
telecommunications and network equipment manufacturer, with $10.9 billion in annual
revenues and operations in more than 100 markets globally.
In early 2006, the company set out on a path to improve its global sourcing operations through
the application of e-sourcing software and to streamline and transform its contracting globally
through the application of contract management software.
Challenges in the Contracting Process
Implementing a contract management solution was more than a tech upgrade for Nortel; it
represented a transformation in the contract management process. The contracting process
“really stalled up business,”said one Nortel executive. Processes and approvals were not always
clearly defined or well-known across a department. The company got external feedback, through
a corporate audit, which strongly recommended level-set contract controls across the global
organization. “The audit was definitely an impetus for changes,”said the executive. With the added
necessity to comply with Sarbanes-Oxley, and the demands for a clear and auditable record trail
for significant transactions and relationships, the case for automating the contract process was
bolstered.
“We had some workforce issues as well,”said Eric Olson, Manager, Data Management Process
Systems, Global Procurement at Nortel. “The shear amount of manual force we needed to deal with
the legal and contracting aspect of our supplier relationships was a significant workforce burden.”
Every single contract produced within the procurement organization needed to be reviewed
and approved.
Nortel – Driving Value with Contract Management
Implementing a contract management solution wasn’t all about addressing challenges, Nortel saw
potential for significant value in the effort as well, from making staff and processes more efficient, to
ensuring cost savings and revenue are effectively captured.
One key area of value was in gaining visibility into and consolidating multiple contracts with an
individual supplier or vendor to maximize volume discounts and gain leverage in negotiating
savings. “This will certainly have an impact on our cash particularly over time,”said Olson.
Nortel executives also saw value in using contract management in connection with their sourcing
activities and solution, particularly in terms of assessing the financial stability of its suppliers.
Accessing Financial Strength of Key Suppliers
Given the hundreds of key suppliers the company uses to supply components and services in the
development and manufacturing of its products, Nortel must asses the stability and viability of its
suppliers to ensure there are no disruptions in its supply chain.
Nortel Networks Corporation – Global
Contract Management Implementation
Nortel Networks Corporation – Global
Contract Management Implementation

21. - 21 - © 2001 - 2009 Emptoris, Inc.
Due to the critical nature of these suppliers, Nortel has a business continuity policy in place to ensure
the review the financial stability of its suppliers. This program has two major tracks, which call for (1)
regular annual supplier self-assessments of financial health, and (2) proactive financial assessments
by Nortel when a supplier meets a certain spend threshold. The first criteria requires Nortel to
have time-based notifications or alerts to request the financial assessments from suppliers, and the
second criteria required triggers to alert Nortel when a supplier was hitting a certain level of spend.
The contract management solution enabled both these alerts. Nortel has implemented a level of
integration between its contract management solution and its financial evaluation and business
continuity systems to ensure tighter compliance in this area.
Nortel Required a Global, Enterprise-wide Solution
Nortel kicked off its contract management implementation in early 2006, after a thorough review of
the contract management solutions available in the market. The company chose a solution, Emptoris
Contract Management, which could be used globally and enterprise-wide across the company’s
Procurement, Sales, Financial and Legal departments.
Nortel employs its contract management solution globally, both on the buy-side and the sales-side
of the company. Nortel’s global procurement operations include significant operations in Ottawa,
Boston, London, Mexico City and Delhi, India, as well as compliance offices in China, India and
countries in Southeast Asia and South America.
“Nortel definitely has a dispersed, global personnel involved in its procurement operations,”
noted Olson.
The solution is also accessed and used for strategic to functional purposes across the global
company’s internal organizations, primarily in Procurement, Sales, Compliance, and Legal, and
on occasion by Finance and even Engineering. Finance uses the solution to look at technical
accounting exposures, to mitigate those inherent risks.
“From Weeks to Fifteen Minutes”
“Previously, you would have to ask each individual on a team for contracts to assess their risks,
and we often had to scramble quickly to fulfill these requests, now that is all centralized,”
said one Nortel executive.
Similar information requests and visibility tasks use to take days or weeks to fulfill before the
contract management solution implementation turned those requests into“fifteen minutes tasks.”
“The CFO or Chief Procurement Officer would regularly want to know our spend at a given period
with a certain supplier or on a certain category. That type of task would take anywhere from hours,
to days to a week, depending on the request, now its almost as simple as conducting a Google
search,”said Olson.

22. - 22 - © 2001 - 2009 Emptoris, Inc.
“Good Contracts Help Minimize Risks”
“Risk mitigation is what contract management is all about. If you draft good contracts, you help
ensure you minimize or avoid certain risks. When contracts take months to draft and approve,
it tends to diminish your confidence that you are full covering the issues and risks you want to
address,”said Olson.
“If a contract expires, you open the organization up to potential risks and problems. If you are not
keeping track of business continuity or financial evaluations you expose yourself. Without a system
in place it’s tough to address these issues and know if you are being successful,”continued Olson.
In a global organization, documents are often produced in various languages and currencies, a
contract management solution allows for a view of those contracts in the company’s preferred
language and currency, which improves visibility into risks and furthers compliance.
Usability: Other People’s Paper and Contract Wizards
Nortel executives also emphasized the usability benefits of contract management solutions. On
the sales-side, Nortel uses the Emptoris Contract management‘Wizard”to allow Sales Professionals
and front-line Contract Managers to create sales contracts by utilizing a user-friendly online
questionnaire, similar to a Turbo-Tax application. That questionnaire drives creation of a template
sales contract that meets Management and Legal’s pre-approved standards, and meets the
parameters of the sales team as well.
Also on the sales side, Nortel utilizes contract management functionality to capture“Other People’s
Paper”or contracts written by customers. The function allows for the scanning of outside contracts
and the conversion of the text into an active, intelligent contract document in the contract
management system. This allows Nortel Sales to work within the customer’s terms, while still gaining
the visibility and legal and compliance controls, available in the contract management system. This
also allows for quicker internal review and edits to external agreements.
Lessons Learned
Nortel cautions that companies should conduct due diligence in terms of identifying the legacy
contracts to be loaded into the contract management solution in advance of implementation, if
possible, noting this was an area that required the most investment of time in getting the contract
management solution up and running. Nortel executives noted that it was easier and took less
time to create templates and load legacy contracts on the sales side of the business, than on the
procurement side of the business.
“If we had to give advice to another company implementing contract management, we would advise
to focus on having a strong implementation plan, focus on training and adoption, and give yourself
and the organization time to transition,”said Olson.

23. - 23 - © 2001 - 2009 Emptoris, Inc.
In terms of driving adoption, Nortel developed an internal“contract council”which included
representation from upper management, to ensure smooth implementation and adoption of the
contract management transformation and solution. “Putting together a cross-functional team was
critically important, and you want to have a few people with some horse-power as a sounding board.
Building a consensus and keeping people on that consensus, and on plan is a key component of a
successful implementation,”advised Olson.
“I recommend having real tangible benchmarks and goals for the program. For us, conducting
and passing an internal audit of our contracting processes was a key goal, and one we recently
completed,”continued Olson.
“We are far from done in our full usage of contract management software; however, it’s really more of
a journey than a destination. There is more value, more adoption to be realized,”concluded Olson.
Emptoris Contract Mangement System
Who Benefits?
SRMs PST Lead GP/Compliance
Central repository for contracts worldwide-Easy Searching X X X
Framework for single Global Contracting Process X X X
Store important documents directly with the contract X X
Tracking of contract status for individual or PST X X
Notification of contract expiry X X
Manage Contract Lifecycle including reassigning ownership X X
Electronic routing and approval X X
Contract templates - latest revisions always available
in the tool
X X
Close SOX audit exposure X
Track and mitigate potential Technical Accounting Issues X

24. - 24 - © 2001 - 2009 Emptoris, Inc.
Contracts represent the foundation of all business relationships between customers and trading
partners. Advanced contract management processes allow businesses to streamline their contract
processes and ensure that the value negotiated in a contract is the value received. Across the global
enterprise, contract management impacts not only Legal, but also impacts Finance, Sales, and
Procurement. The most successful businesses collaborate across departmental lines to create contract
processes and procedures that ensure the best business for the global organization. Automation
standardizes these processes to be repeatable and scalable as the business grows.
ConclusionConclusion
Emptoris is a world leader in innovative supply and contract management software solutions that
empower enterprises to realize best value and accelerate profitable growth. Emptoris solutions are
used by successful Global 2000 companies in every industry. Emptoris sourcing spend analysis and
contract management solutions are consistently recognized by leading independent analyst firms as
the market’s leading solutions. Most recently, Emptoris was positioned as in the“leaders quadrant”in
the Gartner research report,“Magic Quadrant for Sourcing Application Suites, 2008”- and received the
highest score for“Current Product Offering”in“The Forrester Wave: Contract Life-Cycle Management,
2008.” Emptoris customers include American Express, Boeing, ConocoPhillips, GlaxoSmithKline, Kraft,
Motorola, Owens Corning, Syngenta, and Vodafone.
About Emptoris

25. - 25 - © 2001 - 2009 Emptoris, Inc.
“The Forrester Wave: Contract Life-Cycle Management”
This 17-page research report from Forrester Research, an acclaimed independent research firm,
reviews 13 contract management software providers and evaluates them on 110 criteria, including
current product offering, strategy and market presence.
“Gartner MarketScope for Contract Management Software”
This research report from Gartner, based on interviews with companies that have implemented
contract management solutions, reviews nine contract solutions and rates the solutions fourteen
criteria including: customer experience, business model, market understanding, innovation, and
product functionality.
“Contract Lifecycle Management and the CFO: Optimizing Revenues, Capturing Savings”
Benchmark study of contract management implementations by The Aberdeen Group.
“Bringing Contract Management into the 21st Century: 5 Principles Every Procurement
Executive Should Know.”
Online seminar featuring the Global Purchasing Manager at Syngenta AG, a Financial Times Global
500 company; and Andrew Bartels,Vice President Research Analyst at Forrester Research. In
the seminar, the experts share their experiences and insights into best practices in contract
management.
“Taking SAP to the Next Level: Using Contract Management to Gain Greater Value from SAP”
Whitepaper from Emptoris examining how to maximize an investment in SAP through the addition
of advanced contract management capabilities.
“Contract Management Automation - Delivering Compliance and Bottom Line Results”
In this podcast,Tim Cummins, the Executive Director of the International Association of Contract
and Commercial Management (IACCM) discusses the importance of contract management
to global companies – and how improved contracting processes and technologies can help
companies improve compliance and bottom line results.
Further Resources and Recommended ReportsFurther Resources and Recommended Reports

26. - 26 - © 2001 - 2009 Emptoris, Inc.
NotesNotes

27. - 27 - © 2001 - 2009 Emptoris, Inc.
NotesNotes

28. For more information
about Emptoris, visit:
www.emptoris.com,
call 1.781.993.9212, or
email sales@emptoris.com.
Emptoris, Inc.
200 Wheeler Road, Burlington, MA 01803
tel 781-993-9212 • fax 781-993-9213 • www.emptoris.com
© 2001 - 2009 Emptoris, Inc.