Deloitte is a $50 billion revenue Big Four firm dominated by audit and business consulting. But why the growing focus on contract management? Craig Conte, a partner responsible for Deloitte’s Contracts Legal Management Consulting team, put it this way: ‘Contracts are at the core of the business, they are touched by everyone and owned by no-one.’
In short, here is undeveloped territory inside all companies. Deloitte, along with other Big Four firms, several ALSPs, the consulting and managed service arms of some larger law firms, and of course CLM and other tech companies, all want a part of it.
‘Contract management affects the business, so Deloitte has to be there,’ Conte added.
So, Why Now?
Most of the advisory players in this growing segment of the market have been around for a long time, why the surge of interest now?
Conte (pictured above) explained that it’s been a steady evolution to get here. He pointed out that companies have been developing internal systems and bringing in software for many years that connects to contracts, such as for CRM, and one could add for sales, HR, and accounting software for invoices. But, they’ve been biting at contracts around the edges, one might say.
Then on the CLM side, he noted that the earliest contract management systems were basically just depositories, but in the last five years they have exploded with features and sophistication.
Then came the first wave of Business Process Outsourcing work, which again was fairly basic at the beginning, but which has now morphed across the world into a field with sophisticated legal managed services offerings.
And finally, the catalysing piece in the jigsaw.
‘More companies have realised they can get so much data out of their contracts. They asked: isn’t everything we do in these pages? If so, why are we not mining this?’ Conte explained.
What’s Driving The Drivers?
And as mentioned, Deloitte – and many others – are now simply following the growing level of interest from the clients themselves. But why did the clients get so interested in this? Was it the rise of legal ops?
Conte is not so certain that legal ops is at the core of this change. For him, it’s really the C-suite, the top managers across all the key departments of the business, that has triggered this change. Tied to this are a mass of legal needs, he added, but it’s a mistake to think that it’s the legal teams that are driving all of this change – even if they are now front and centre of those changes and their effects.
So, what is leading this?
‘My take is that this is not a purely legal thing. It’s not legal ops all the time. It’s roles such as the Chief Procurement Officer, or the COO, or the Chief Sales Officer,’ he stated.
‘It’s true that the CLM companies also sell to the GCs, but they are also selling to procurement teams that are managing supply chains, or they are selling to the sales teams. Ultimately it’s the C-suite [that is driving this],’ he added.
That said, Conte highlighted that one reason the C-suite is paying so much attention now is because of legal and compliance issues. He mentioned the rise of data regulation, new accounting rules, the obligation to meet ESG policies – and all of this operating on a complex global basis. So, legal risk and how that connects to contracts is feeding into the way the C-suite is thinking like never before.
But, Conte also stressed that beyond the legal risk dimension is just basic economics, i.e. poor contracting processes and weak contract management can cost the business money, while the reverse can help make more money. Any business that is serious about improving its financials will want to get on top of its contracts.
Conte added: ‘If you can sign contracts faster would the company make more money? (The answer is: probably yes).’
Then there is the resource issue. ‘And why do you need a lawyer with 20 years of experience to handle a simple NDA?’ he asked.
Again, it comes down to economics. The business has paid a lot for a great team of experienced inhouse lawyers, and then it makes them do work they possibly don’t even need to do – because you could create a self-serve system, or hand that work to a legal managed service.
CLM Growth
And no discussion of contracts can avoid the rise of CLM systems. But, this site asked Conte about the recent data saying that 77% of inhouse lawyers had experienced a tech implementation failure. Did that sound right to him?
‘The failure rate? I’m not surprised,’ he said and stressed that the key problem with CLM – (and Deloitte has strong relationships with several such companies) – is that the buyers don’t appreciate the subtle pros and cons of each system.
‘Often it’s a mismatch, different needs demand different tools. People think that CLM is monolithic, but the use cases are different and companies need to know that,’ he said.
He then gave the example of how some companies’ needs may really centre around procurement contracts, perhaps because they are a global manufacturing company and the supply chain is core to their business. Some CLM systems are better for that kind of need than others. If you go in too fast you’ll end up with the wrong tool for the job, he noted.
Conte also highlighted that there are risks in the C-suite driving a CLM decision when the legal team is not fully up to speed and ready for such changes. He explained that if you drive a CLM implementation from the top, but the legal team has not got a handle on its contract templates, or is not prepared to move to a more digital way of contracting, then things won’t work well.
So, for example, if part of the implementation project is to have lots of nicely standardised template contracts that the whole business is happy to use as part of the CLM contract authoring module – but the legal team is a 100 miles away from getting to that point, then the implementation will not go well.
‘It’s like arriving at a party with a pizza covered with cheese, but you then find that everyone is lactose intolerant,’ Conte put it.
‘Sometimes companies don’t even ask if legal wants this, or if they even have templates ready to go into a CLM system. In which case they will be disappointed,’ he added.
And that makes a lot of sense. This site remembers talking to one global company that mentioned it had literally dozens of NDA versions, and when it came to more complex contracts, they were so random and in so many versions the idea of being able to have a document that you could base a template on was – at that point – a non-starter. And that’s just the authoring piece of the puzzle.
Conte then added: ‘Do you have a clause bank ready? Do you already have decision trees (i.e. known and articulated work processes) ready to become part of the CLM system?’
Then consider the KM and data management aspect. You may have a contract depository, you may now have an ability to gather key data, but where does it all go, how is it categorised, what is your taxonomy, does that way of cutting the data match up with what other departments want, does how legal works tally with how sales works in terms of contract data needs? And the list goes on.
In short, whether contract management starts with legal, or with the C-suite, it’s hard to take shortcuts.
Conclusion
Given all the above: the needs, the challenges, the opportunities, this is what Deloitte and others are now focused on. Why? Because there is so much to do here.
‘This is why we exist,’ Conte concluded, ‘we can bridge the gap. We can take all these components and run with it.’
And even though it has taken many years to get to this point, the impact of the growing focus on contracts is only really getting started. Deloitte clearly plans to be right at the centre of these changes.