The Confluence of AI, Good Data, and a Mature CLM Vision
Thanks for joining me for the first part of my blog series- now let's move on to the second. In this edition, I want to tell the story of how I became involved with Exari and why good data is important. A little while back, I met with Bill Hewitt, Exari's CEO, and we started talking about contract management. Our discussion centered around two areas, what most contract lifecycle management companies were doing well and was somewhat commoditized, and what they weren’t doing very well.
First off, many of the big CLM players out there are good at establishing a searchable contract repository of agreements going forward from a point in time. Most vendors also have some sort of workflow (authoring, negotiation, approvals, signature processes) and reporting. In my experience, each vendor has their own strengths and weaknesses regarding both their searchable repository and the workflow used to drive contracts to completion within their system.
From that conversation, we moved on to what other CLM vendors were not doing well and where there were areas for improvement. If you notice in my sentence above, I stated that most vendors were good at “establishing a searchable contract repository of agreements going forward from a point in time”. What I mean by this is that most vendors don’t focus enough on some of the most important assets of the system's implementation, the legacy agreements. In some cases, they don’t focus on them at all, which is a big mistake. A contract repository without legacy contracts as the foundation, the capacity to address ongoing 3rd Party Paper, and agreements generated within said CLM of choice is not a complete repository. That type of limited visibility will eventually lead users to distrust the system because they don’t have access to all contracts, only a portion of them, in which case adoption will suffer.
Continuing the adoption theme; another area where CLM’s traditionally fall down is in the ability to not only gain the trust and endorsement of a core set of users, but to scale out beyond the core shareholder team that made the original selection. This lack of adoption is most often based upon the way the contract authors and negotiators create or request contracts. When moving into any new contract management system, there is some serious change management involved, especially if you involve sales folks, who really just want to get things done quickly and easily. Sellers are in many cases mavericks, and that is what makes them great at what they do. However, maverick contracting introduces risk in a few ways; authoring an agreement outside of the shiny new CLM system based off of older templates ( an old agreement on the hard drive for example) and then passing it to legal to load into the system or not even entering agreements into it at all. The sales mavericks and other users, like procurement, or any contract requestors, resist the new system in the end because it does not have an intuitive way to request contracts. The inability to persuade these types of users to get into the contract management system and grow it enterprise-wide ultimately kills adoption and leaves customer looking for the next shiny new tool that promises ease of use and “self-service contracting”.
The last area for improvement we discussed was the need for a comprehensive and scalable contract data model. One that allowed customers actionable insight into their contracts’ parties, relationships, term, risk, and performance information as it changes over time. To set the stage, you have a number of legacy contracts, including a Non-Disclosure Agreement (NDA) with a Supplier, a Master Services Agreement (MSA), then a Statement of Work (SOW) with that same supplier, which contains most of the terms. All of these agreements should be loaded into the repository to lay the foundation for the next transaction to take place, say an amendment to the SOW, authored in your CLM, which changes the payment terms from 45 days to 30 days. Without these legacy agreements and the relationships established between each supplier contract and a flexible, transaction based model that highlights how contract terms change over time, how can you ever be certain what your prevailing language is? This fundamental flaw, presented in every contract management or AI system that I had ever worked with, was yet another reason CLM projects to go south.
Bill perked up during this conversation and had me talk to co-founder Jamie Wodetzki, who was the visionary behind the Universal Contract Model™ (UCM). I was of course was very skeptical about some magic data model, since no one to date had ever solved this problem of efficiently relating contracts and serving up prevailing language. However, I met with Jamie and he showed me the UCM in a simple, yet powerful diagram. Immediately, it was as if a fog had been lifted, the lights went off and a huge smile spread across my face.
Jamie explained how he’d spent nearly a decade refining the UCM and that it was a robust model for translating legal words into actionable data. Further, he went on to talk about how the UCM breaks down every contract into a consistent set of components, allowing you to turn formless documents into structured data and easily analyze every contract in your portfolio. Giddy at this point (I know I’m a contracts nerd) I said tell me more and tell me how in the world do you handle legacy agreements and 3rd party paper, surely this UCM just applies to contracts authored in your system. Well, with Exari’s UCM I found out that you can:
And with that, I was sold and joined Exari shortly after. In my next post, I will talk about how excited I am to be a part of what I feel is the only Enterprise Contract Lifecycle Management (ECLM) company in today’s marketplace.