Managing your contracts effectively is essential for business success, but it can be tough to stay on top of expiration dates and approval processes, especially when half your time seems to be spent just trying to find contracts that have been lost in the shuffle.
The right contract management solution can help immensely by keeping all of your contracts at your fingertips, automatically alerting you to upcoming renewal opportunities, and streamlining your approval process. But with so many contract management solutions out there, how do you choose the one that is right for you?
Every vendor will claim to have everything you need and promise a fast implementation. But if you have quirky contracts or a complex approval process, how do you know if the product can truly be customized to suit your exact needs? And even if it can, how long will it take, and how can you be sure the costs won’t balloon way beyond your budget?
The stakes are high – when it comes to managing your contracts, the success of your business is on the line. But there is a way to guarantee that the solution you choose will be a winner. It will take some time and effort, but it is certainly worth it to avoid a pricey product that ultimately doesn’t work for you or, worse yet, an expensive, abandoned implementation.
Follow these seven tips and you’ll be on your way to implementing a successful contract management system that fully satisfies your requirements at a reasonable price.
Tip #1: Make Sure Your Vendor Will be Around Next Year
Sounds obvious, right? But the allure of shiny new startups can sometimes be strong enough to make you accidentally overlook their potential volatility.
You want your software provider to be around for a long time so they can continue to improve their product, provide support, and help fix any problems that may arise. If you choose a VC-funded startup, you may not be so lucky – if the funding evaporates, so will support for your system.
While the technology at a startup might be cutting-edge, it might also be buggier, not to mention the possibility of slow upgrades and spotty customer service while they’re focused on building their own business and securing their next round of funding.
Unless you need a specific new technology that you can only get from a startup company, look at established companies with proven products. They are much more likely to be around in the years to come to provide essential upgrades and support.
Tip #2: Be Wary of the Market Behemoths
Some companies look at the market leader and assume that they’re a safe bet since so many other businesses are using their software. If it’s good enough for them, it’s good enough for you, right? Not necessarily. Consider these factors:
- They may have established their market dominance years ago with technology that is now outdated or difficult to integrate with modern systems. Technology changes fast. The market leader may not be able to keep up simply because making drastic changes would alienate their existing customers who like the software just the way it is.
- When a company has captured a significant part of the market, it’s likely because they focused on the “typical” client. If your contract management process is not typical, it can be like trying to fit a square peg in a round hole. The market leaders can probably customize their product for you, but this custom coding will introduce additional costs, massive delays, and the uncertainty of custom bugs as well.
- Any company with a colossal marketing budget can easily gain market share even if their product is subpar. Maybe you can think of a company with a buggy, unreliable product that is still a leader in their market…
- When you’re the king of the hill, you can charge a premium simply because you’re the king. The high price doesn’t necessarily reflect the quality of the product or service.
What matters here is not just how much of the market a company has cornered, but the stability of the company, the quality of their product, how well suited it is to meet your particular business requirements, and at what cost. And that is what the following tips will help you discover.
Tip #3: Define Your Business Process in Detail
The goal with contract management is to find a system that helps you operate more efficiently. You might think that your process is fairly standard, but many companies find out the hard way that’s not the case. That’s why it’s important to define your process in detail from the very beginning. If you skip this exercise and end up with a system that can’t meet your specific requirements, you may have to spend a fortune to customize it post-implementation, or abandon it altogether.
Create a document that details your current contract processes, where the problems are, and what you’d like to improve. Get input from C-level stakeholders, when possible, to help determine which processes are most critical, how they should work, and the value that will be derived from the improvements.
Every provider will claim to be able to meet your needs, but by focusing on your specific requirements, you can quickly see their limitations. The key is to ask detailed, quantitative questions. Be as precise as possible, based on the processes you have defined.
For example, instead of asking if a system can assign tasks automatically, you might ask providers how much it would cost to customize the system to:
- auto-assign a contract to the employee responsible for the approval of that contract;
- automatically send an email notification with a link to view and edit the contract, and the link should work on smartphones, tablets, and desktops;
- automatically send a follow-up email if the employee does not update the record within 24 hours; and
- escalate to the manager of the employee with an automatic email which includes the same link and a message indicating the current status.
The latter would be much more helpful in finding out which vendor would really be able to map your exact process. Ask questions relevant to your specific situation, instead of broad questions about basic software features.
Tip #4: Send a Mini-RFP Before Asking for More Detailed Information
Don’t bother sending out a ten page RFP to every company. You won’t get the detailed responses you need, and there’s a better way: Start with a mini-RFP. A mini-RFP can help you quickly establish a short list of potential vendors that can handle your project.
Your mini-RFP should be short and sweet. Make it available in electronic format to streamline the process. Ask no more than 10 questions, so it can be completed in about 15 minutes.
Right off the bat, present the vendor with two or three of your most vital requirements (with the level of detail described above), and ask if they can implement them. Additional questions will be determined by your specific circumstances, but might include:
- How long it will take to implement the system?
- What is the approximate cost to maintain the software per year?
- What kind of expertise is needed to maintain the system?
- Will we be able to change or expand the system in-house when your processes change, or will we have to pay for you to do it for us?
- Can we test the system before purchasing?
Once you get the responses back, you can narrow down the field. Eliminate the companies that didn’t respond and the companies that don’t seem like a good fit, based on their responses.
Send your full RFP to the remaining vendors. Let them know that they’re on your short list – you’ll get a better response if they know they have a good chance of getting the deal.
Again, make sure your follow-up RFP is detailed and quantifiable. Look back at the contract process document you created based on Tip #3, spell out the exact requirements you’re looking for, and ask them how long it would take to implement each one. Some systems can be customized to meet your needs within a few days, while others may take months and cost tens of thousands of dollars in consulting fees. But if you don’t ask up front, you won’t find out until it’s too late.
Tip #5: Request a Custom Demonstration of Your Specific Process
Some vendors give the same generic demo for every potential customer. They showcase the features that highlight their strengths and avoid the areas that might divulge their weaknesses.
On the other hand, it would be cost-prohibitive for the vendor to customize the entire product and give a 100% unique demonstration for each potential customer. Luckily, there is a way around this:
Step One: Choose one of the critical business processes that is unique to your company and ask the vendor to give you a custom demonstration of that process. If a vendor can demo your most unique process, they can probably handle the more standard ones. Make sure you give them a limited amount of time so you can see how quickly they can implement the process. If it takes 3 weeks to implement one process for a demo, consider how long your entire implementation will take.
Step Two: Ask them to reconfigure the system to meet another unique business requirement while you watch, so you can see just how difficult it is. You’ll want to tell them ahead of time that you’ll be asking to see a system modification so they have the resources they need, but don’t tell them exactly what you’re going to ask them to change. Watch closely – you want to see how complicated it is to modify the system, and assess whether your staff could modify it themselves. Your processes will inevitably change over time, and you don’t want to be on the hook for hefty consulting fees every time they do.
Tip #6: Contact the Vendor’s References and Speak to them One on One
Before finalizing your choice, ask the vendor for customer references and tell them you’d like to speak with them privately. While the vendor might want to have a marketing or sales rep on the phone call with you, you’ll get a much more candid response if you talk to the reference one on one. If the vendor insists on being on the call with you, consider it a red flag.
When you speak to the reference on the phone, tell them you’re still considering your options, even if that particular vendor is at the top of your list. That way, you’re likely to get more honest feedback, and you still have leverage when negotiating price.
Ask the reference for specifics. “The system went live in two months with zero downtime” is much more meaningful than, “the implementation was fast and easy.” Be sure to ask if there were any unpleasant surprises around total cost of the system or the deployment. If the reference has been a customer for a long time, ask how easy it has been to adapt the system to their changing needs.
Tip #7: Get the Best Product for Your Specific Needs at a Reasonable Price
So, now that you’ve thoroughly reviewed your RFPs, observed a few custom demos, and spoken to vendor references, you’re ready to choose your solution provider. But first you need to negotiate the price to make sure it fits in your budget – not just today, but over the long term.
There are a number of ways vendors might try to nickel and dime you but you can protect yourself by presenting a specification of your required system pre-sales and requiring that any contenders provide a range for the possible prices. The more detailed your requirements, the more narrow the price range that they should be able to provide – all the way down to a fixed price quote.
The right contract management solution can make your company more efficient, as well as reduce costs and risk. You’ll need to do your due diligence to filter out the empty promises and hype from vendors whose product won’t ultimately satisfy your requirements but rather leave you with an expensive, unused product. But if you follow the advice above, you can make a well-informed decision with confidence, and you’ll be on your way to a successful implementation of a system that satisfies all of your requirements at a reasonable price.
(Colin Earl is the Founder and CEO at Agiloft. Agiloft software has over 2.5 million users at small enterprises, U.S. government agencies and Fortune 100 companies.)