Doing more with less advanced contract management strategies in a new economic era
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DOING MORE WITH LESS: ADVANCED CONTRACT MANAGEMENT STRATEGIES IN A NEW ECONOMIC ERA. John Corcoran Senior Director and General Counsel, Cisco-Linksys Susan Myers Senior Corporate Counsel, Kia Motors America Jean Schanberger Axiom Attorney (Current Client: AeroVironment )

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Doing more with less advanced contract management strategies in a new economic era

DOING MORE WITH LESS:ADVANCED CONTRACT MANAGEMENT STRATEGIES IN A NEW ECONOMIC ERA

John Corcoran

Senior Director and General Counsel, Cisco-Linksys

Susan Myers

Senior Corporate Counsel, Kia Motors America

Jean Schanberger

Axiom Attorney (Current Client: AeroVironment)

Moderator – Anne Jacoby

Head of Southern California Practice, Axiom

HOSTED BY:

November 11, 2009


Agenda
Agenda

  • Introduction (topic and panelists)

  • Goal: provide specific, practical initiatives on how to increase efficiency through contracts

    • Contract Management Systems

    • Contract Tools for Your Business Clients

    • Avoiding Litigation

  • Q&A Throughout Program



Introductions panelists
Introductions – Panelists

  • John Corcoran Senior Director and General CounselCisco-Linksys

  • Susan Myers Senior Corporate CounselKia Motors America

  • Jean Schanberger Axiom Attorney (Current Client: AeroVironment)


Contract management systems cms
Contract Management Systems (“CMS”)

  • CMS – what is it?

  • Value Proposition/Identifying Success Factors

  • Buy vs. Build decision

  • Vendor selection and due diligence

  • Things to remember!


Contract evolution
Contract Evolution

CONTRACT FULFILLMENT

CONTROL ENABLEMENT

CONTROL COMPLIANCE

LEGAL CONTROLS

RISK MANAGEMENT

CONTROL ENABLEMENT

CONTROL COMPLIANCE

LEGAL CONTROLS

RISK MANAGEMENT

CONTROL COMPLIANCE

LEGAL CONTROLS

RISK MANAGEMENT

LEGAL CONTROLS

RISK MANAGEMENT

RISK MANAGEMENT

Before

Beyond

CISCO CONFIDENTIAL


Eclm opportunity
ECLM Opportunity

The benefits of ECLM will be realized across the organization

Cisco Cross-Functional

  • Single searchable, self-service sell-side contracts repository

  • Simplified revenue control environment

  • Simplified field/partner contract engagement & transparency

  • Accurate identification of entitled customer/partner & affiliates

  • Secure & simple virtual restatement of contract for ease of integration

  • Vast majority of contracts with complete & accurate terms required for deal-order-contract linkage

  • Effective & efficient contract approval process

  • End-to-end solution for contract engagement with partners/ customers

  • Improved negotiator experience, productivity, workflow & business controls

DMS Transactional (inc. pricing service)

Legal

CISCO CONFIDENTIAL


What is cms at cisco

Enterprise Contract Lifecycle Management

Plan

Search

Create / Draft

Negotiate

Approve

Capture / Store

Audit / Comply

Transact

(QTC, P2R, I2R, M2O)

Modify / Terminate

Analyze

Administration

Enterprise Data Hierarchies

What is CMS at Cisco?

Enterprise Contract Lifecycle Management (ECLM) is the capability to manage multiple legal document types through each stage in the contract lifecycle and transact across Cisco operational processes.

  • Sales Contracts

  • Licensing / IP

  • Non-Disclosure Agreements

  • Other

Prior to ECLM Cisco had the legacy contract management system to perform many of these activities.

CISCO CONFIDENTIAL


Eclm value
ECLM Value

Est. Impact

Top Benefit Areas

  • 1M – 2M annual cost savings

  • Reduced time to find agreements and associated contract details

  • Reduced time supporting contract inquiries

  • Reduced time finding SOW information

Search for Contract Details

Increase Productivity

  • 1M – 2M annual cost savings

  • Reduced time re-entering contract details

  • Reduced time creating contracts due to integrated templates and T&Cs

  • Reduced time creating/drafting SOWs

Enhance Creation / Drafting

  • Reduced time for approvals when non-standard terms are integrated into the automated approval workflow

  • Streamlined parallel and sequential approval hierarchies for SOWs

  • 400 – 800K annual cost savings

Streamline Approval Process

  • Improved data integrity between contract data and downstream systems

  • Improved tracking of contract changes

  • Improved version control and data integrity

Improve Contract Data Accuracy

Total ECLM Value Opportunities

Improve Quality & Controls

  • Greater use of standard terms

  • Improved consistency of contract terms

  • Improved use of standard terms

Improve Contract Performance

  • Improved integration between deal master and contract information

  • Improved visibility to contract discounts

  • Better visibility and integration of discount information

Enhance Order to Contract Linkage

Improve Margin Protection

  • Reduce FTE support for ongoing enhancements

  • Packaged software releases provide future enhancements

Reduce Cost of Ongoing Enhancements

  • ~400K annual cost savings

Decrease IT Maintenance & Support Costs

  • Cancellation of current CMS pipeline projects

  • ~750K one-time cost savings

Eliminate CMS Pipeline Project Costs

  • ~350K annual cost savings

  • Elimination of annual support and maintenance for CMS

Reduce Application Support Costs

CISCO CONFIDENTIAL


Eclm definition of success
ECLM Definition of Success

CISCO CONFIDENTIAL


Eclm buy vs build recommendation

Excellent

Poor

Average

ECLM Buy vs. Build Recommendation

  • The ECLM team recommends the Buy option.

  • Key Factors:

  • Nearly all needed base functionality offered out of the box

  • Faster time to availability

  • Enhancements and updates are continually released by vendor

  • Reduced IT maintenance and support costs

  • Controllable and known functionality release cycle from packaged software vendor

Fit and alignment with program objectives and value case:

CISCO CONFIDENTIAL


Eclm buy vs build estimates
ECLM Buy vs. Build Estimates

The main differentiators between the Build vs. Buy decision is the speed for implementation and the ability to support future enhancements in parity with industry and technological advancements.

CISCO CONFIDENTIAL



Eclm assessment buy vs build software evaluation process
ECLM AssessmentBuy vs. Build Software Evaluation Process

The software evaluation process followed a structured process to narrow the field of candidate vendors and reach a Buy recommendation:

Initial Packaged Software List*

Comparison of Legacy system upgrade options to packaged software

Final Vendor Selection

Packaged Software Short List

Vendor Demo Down-Select List

Assessment Phase Recommendation:

Buy Packaged SW

Software Vendor Short-List Process

Request for Information (RFI) and First-Round Vendor Demos

Second-Round Vendor Demos, Functional and Technical Assessment, and Reference Calls

Next Step: Proof-of-Concept (POC)

Activity:

*Based on Forrester industry rankings and packaged software vendors incumbent at Cisco

CISCO CONFIDENTIAL


Eclm assessment buy decision vendor recommendation

Excellent

Poor

Average

ECLM AssessmentBuy Decision – Vendor Recommendation

Investigate Ariba and Emptoris as solution options in the next phase (ID & Assess)

  • Ariba

  • Cisco owns license and currently uses Ariba for buy-side contracts

  • Ariba has a limited track record with sell-side contract management

  • Concerns about data architecture fit (ability to capture business variables at contract clause level)

  • Emptoris

  • Leading sell-side contract management tool in the industry

  • Strong sell-side functionality, including capability to handle business variables at the clause level

  • Higher license costs

Vendor Assessment Summary :

N/A

CISCO CONFIDENTIAL


Buy decision subjective vendor analysis
Buy Decision – Subjective Vendor Analysis

The subjective analysis enables a weighting for each vendor across a number of assessment areas that are relative to each other. SMEs were called upon to assess the vendors where needed.

CISCO CONFIDENTIAL


Eclm lessons learned
ECLM Lessons Learned

  • Start simple – don’t over-engineer

  • Be careful of over enthusiastic marketing claims – it’s all in the detail

  • Open up to Negotiators early for adoption and feedback

  • On-going training and support is a must

  • Focus on the functionality that’s important to you and not the vendor

  • Don’t be pushed into a rapid implementation

CISCO CONFIDENTIAL


Know your users
Know Your Users

Revenue Review Specialist Team*

Revenue Accounting Operations (RAO)*

Account Team

Initiates the contractual process

Follows established policies to assess contract for potential Rev Rec Implications

Contract Negotiators

Controller

Follow Rev Rec assessment to set up accounting treatment

Do the right thing for Cisco, customers and business

Responsible for the deal economics and contract approval

Channels*

ERP*

Uses contracts to structure programs

Uses contracts to set up discounts, other

* Specific to Legal Sales

CISCO CONFIDENTIAL



Contract tools for your business clients
Contract Tools For Your Business Clients

  • Talking about contracts to non-lawyers

    • Why do I need a contract?

    • What is a contract anyway?

  • Key Legal Terms

    • Indemnification

    • Confidentiality

    • Integration clause

    • Ownership of IP created or disclosed during contract performance


Contract tools for your business clients1
Contract Tools For Your Business Clients

  • Traps

    • Limitation of liability

    • Battle of forms

    • Automatic renewals

    • Termination for convenience/penalty



Current state of contract litigation
Current State of Contract Litigation

  • 28% of companies report increase in contract litigation from last year due to recession

  • 53% of all companies spend $1M or more on litigation

    • 13% of small companies

    • 38% of midsized companies

  • Highest litigation bills are in health care, insurance, energy and tech/communications industries

  • 43% of companies expect the number of legal disputes faced to increase in 2010 due to global economic conditions (53% stay the same)

    • 52% of large companies

    • 30% of small companies (up dramatically from 5% in 2007, 22% in 2008)

Source: Fulbright & Jaworski 6th Annual Litigation Trends Survey Report

published October 2009 (survey of 408 General Counsel in U.S. and UK)


Current state of contract litigation1
Current State of Contract Litigation

  • Main corporate litigation types pending in 2009:

    • Contracts (45%)

    • Labor/employment (45%)

    • Personal injury (13%)

  • Companies turning away from arbitration in domestic disputes

    • 55% prefer litigation; 32% prefer arbitration

    • Reasons to favor LIT: ARB is splitting the baby, not faster or less expensive, no right of appeal/too limiting

    • Reasons to favor ARB: Typical venues subject to jurisdiction not favorable to judge or jury trials; specialized nature warrants experienced decision makers

Source: Fulbright & Jaworski 6th Annual Litigation Trends Survey Report

published October 2009 (survey of 408 General Counsel in U.S. and UK)


Avoiding litigation minimizing disputes
Avoiding Litigation: Minimizing Disputes

  • The Business Side

    • Clarity of business terms

    • Ensure everyone understands deal (business & legal)

    • MOUs and LOIs

    • Anticipate/plan for end game at beginning – what can go wrong?

    • ID most likely issues? Worst Issues?

  • The Legal Side

    • Contract milestone admin process

      • Avoid “Death in the Drawer”

      • Leverage technology

      • Gov’t contracts approach

    • UCC Provisions for sale of goods

    • Attorneys’ Fees Provisions

    • Integration clauses

    • Choice of applicable law

    • Choice of forum

    • Acceptance of jurisdiction

    • Language throughout contracts


To litigate or not to litigate that is the question
To Litigate Or Not To Litigate… That Is The Question

  • Subject matter of potential contract dispute affects dispute resolution approach

    • Failure to perform

    • Intellectual Property misuse/NDA Violation/IP Ownership

    • Collections 

  • Potentially problematic contract provisions

    • Limitation of liability provisions (parties; third party)

    • Insurance coverage/duty to defend/control of defense

    • Indemnification clauses

    • Limitation of warranties (tech services or delivery of product)


Dispute resolution mechanisms escalation mix n match
Dispute Resolution Mechanisms: Escalation Mix n’ Match

  • Between the companies (choose 1 or more levels)

    • Unspecified participants

    • Participants who are not directly involved with the contract

    • Senior management

    • Process

  • Mediation

    • Identify organization – JAMS? AAA? INTA? ICC? WIPO?

    • Location

    • Mediation selection process

    • Good faith participation requirement

    • Costs

    • Confidentiality/non-admissibility of proceedings, negotiations


Dispute resolution mechanisms escalation mix n match1
Dispute Resolution Mechanisms: Escalation Mix n’ Match

  • Arbitration

    • Identify organization

    • Location

    • Arbitrator selection process

    • Enforceability/binding nature of arbitrator’s award

    • Costs

  • International Dispute Special Considerations

    • Governing laws (to each his own?)

    • Forum selection (when in Rome…)

    • Mutual inconvenience of location

    • Language


Lessons learned
Lessons Learned

  • Hat sharing

    • Lawyers need business knowledge and involvement

    • Clients need some exposure to legal risks and implications

  • Plan for a rainy day

    • Potential disputes and resolution process

    • Litigation scenarios

    • Exit strategy

  • The old adages apply…

    • A stitch in time saves nine… An ounce of prevention is worth a pound of cure

    • Well worth front end investment in business and legal issues plus dispute resolution process to avoid litigation



Thanks for joining us

Thanks for joining us!

Axiom is a firm of experienced lawyers liberated from the unnecessary overhead and inefficiency of Big Law. Clients turn to us to reduce their dependence on outside counsel, achieve greater flexibility, and expand their in-house team’s capacity. Attorneys come to us for a challenging, yet more satisfying practice that offers variety and self-determination. We are the first real alternative to the traditional law firm for complex legal work. We call it Law 2.0.

Check us out at www.axiomlaw.com.


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