Company lawyers automate contracts to ease pain of quote-to-cash

At this week’s Apttus Accelerate conference in San Francisco, Apttus CEO Kirk Krappe opened his keynote by describing the importance of “defining moments.” With great levity he talked about two individuals whose lives were defined by the stock market crash of 1929 — one a high flying economist whose fortunes were wiped out, and the other a former farmer who shorted the market and earned millions from his intuition.

Krappe’s analogy highlighted how companies can either take control of critical moments or fall victim to them.

Those in the audience were there to learn how to take control of their company’s quote-to-cash process. Although it sounds like just another boring, overused buzzword, those in the know recognize quote-to-cash as one of the most crucial processes affecting a company’s revenue.

There are a number of defining moments in the quote-to-cash journey — starting from the moment a sales rep presents a price, to contract negotiations with procurement and legal, through finance sending an invoice. How a company handles each of these moments greatly impacts a customer’s experience, with a direct effect on the company's bottom line.

Most companies already recognize the importance of the early stages in this journey, and have made investments in tools to improve their sales operations. However, far fewer are making a similar investment in legal operations, even though automating a highly labor-intensive, largely paper-based contracting process can have a big downstream effect on the ultimate success of a sale.

To find out what can be achieved, I talked with two companies that have recently invested in Contract Lifecycle Management (CLM) — software which automates the process of managing a contract from initiation through execution, compliance and renewal. People from their legal teams told me about the benefits they are seeing from taking control of these defining moments.

Cadence speeds contract cadence

Barbara Rogan is VP and Associate General Counsel at Cadence, a company that sells software and hardware that other companies use to design everything from robotics and mobile phones to jets and medical devices. Rogan’s self-described goal for herself and her six-person legal group is to reduce the friction of transacting business with Cadence, while protecting the company’s interests.

Legal is a small team globally [within Cadence] so we need to be very efficient and cost conscious about everything we do. We knew [CLM] could help us with processes that were a lot of work, but not as core to our revenue as other things.

We handle several thousand contracts a year. Some are more important than others but we were treating them all the same.

Four years ago, Cadence’s legal department chose to use Apttus’ Contract Management product to automate and speed up what was then a manual, time-consuming and painful process.

I had stacks of contracts on my desk. Some were from sales, some were free-of-charge licenses for customers in the middle of a design cycle, some for evaluations. Every one of them had to be printed, filled out manually, signed, scanned back in, emailed and manually tracked. It was a waste of time.

While the initiative was driven by legal, the project involved buy-in and participation from sales, sales operations, and finance. Rogan credits this cross-functional approach as one reason why the implementation has been so successful.

I’ve never authorized a license. I’ve never put together a quote. I don’t know what I don’t know and for this to get the maximum benefit for the company, those teams needed to come to the table. Now we’re able to process such a bigger volume of transactions. We can focus on the things that count now.

The biggest benefit though has been visibility. If you would’ve asked me what confidentiality agreements we had with specific customers, it would’ve taken me weeks to find that information. Now I can tell you in minutes what agreements are in place, what licenses they are for. I can monitor what things are being used and ensure we’re complying with each customer’s special requirements.

Silicon Labs springs out-of-the-box with CLM

Joe Brock is Director of Legal Affairs at Silicon Labs, a semiconductor company that makes the silicon, sensors and other software used in various devices. Like Rogan at Cadence, Brock was struggling with an inefficient contract management process that was growing more complex as the chipmaker expanded and entered into new markets, including Internet of Things (IoT).

There are a lot of large, well-known companies that are leading the way in IoT, and we have been selling semiconductors to these companies for many years ... Many of the newer companies in the IoT space rely on us to provide the semiconductor, the software and perhaps even the multi-function module that they will plug into their product. This adds complexity to our contracting process because we are licensing software in addition to selling a product.

Silicon Labs shares many similarities with Cadence. Both are global, publicly traded technology companies in adjacent industries. Both have unique complexities in their contracting processes, and both chose Apttus as their CLM solution. However, the two companies have taken different approaches when it came to implementing their contract management solution, mainly due to different sales models.

Brock explains Silicon Labs’ approach:

The majority of our customers are handled through an extensive distribution network. The remaining customers represent important long-term relationships ...

Most of our business is accomplished via purchase orders and invoices, with standard terms and conditions of sale. A small number of our customers need to have a master contract in place, especially if they have multiple purchasing entities or if they are in a very contract-driven industry, like automotive.

Using standard, out-of-the box workflows in Apttus, we were able to develop approval processes that are 100% electronic, fast, and easy to use. This replaced an older, paper-based system that involved emails, printing, scanning, more emails and more printing. The whole multi-step approval process can be accomplished in minutes instead of days, and there is no chance of losing any paper. It’s 100% auditable.

Cadence on the other hand was more interested in a flexible platform that could handle the unique sensitivities of its business. Even its NDAs are non-standard, sometimes involving multiple parties and highly sensitive information. Rogan explains:

We wanted a tool that had core functionality but also had the flexibility to do the non standard stuff our business requires. We’ve done a lot of things Apttus wasn’t designed for.

For example, many of Cadence’s customers have a requirement that any Cadence designers working on their systems don’t work on similar or competitive systems in the future. Using its CLM tool, Cadence can now track which people have worked on which systems and provide it to managers to see who is restricted. The company also needed its CLM system to integrate with Cadence’s proprietary system built for the complexities of licensing EDA (electronic design automation) software.

My take

Cadence and Silicon Labs took somewhat different approaches to their CLM implementation, but the results have been similar — increased visibility for legal and sales, better auditability and faster contract execution.

CLM may not be as sexy as some other applications out there, but the ability to automate and better manage the lifecycle of contracts can have a lasting impact on a company’s revenue and ultimately create a better relationship with business partners.

Any company still managing contracts with spreadsheets and paper could be missing a great opportunity to lower costs and protect its assets. It might be time to go talk to legal about taking better control of the function's own defining moments.