Aberdeen Does Sales Contracts

What better time than end of quarter to reflect on the fun of writing sales contracts in a mad rush. The sales team wants to close the deal. They don't want to wait two weeks for legal and miss their quarter-end target. They want their bonuses. Can't we just delete that pesky clause and sign?



Such are the challenges of sales contract management, on which the Aberdeen Group recently had this to say:

• Sales contracts are highly labor-intensive, requiring frequent drafting, review, negotiations and approval.
• It's difficult to ensure that standard language and pricing structures are followed, and to keep track of clauses used, especially if sales teams have a hand in the drafting.
• Enforcing terms and clauses pre-approved by legal can significantly reduce risk, but is hard to do when a company is using only partially automated processes.
• Best in class companies that do automate the process can lower their contract cycle times to the point where they are three times faster at closing deals than their competitors.
• 46% of companies see the enforcement of standard contract terms as a top strategic action for contract management.
• Companies are looking primarily toward the on demand, hosted model, which is lower-cost, more user-friendly and works well for sales teams scattered across different regions.

Who knows, with a bit of automation, next quarter might be your biggest yet.

For more details, get yourself a copy of The Contract Management Benchmark Report: Sales Contracts, April 2006.

Political Sole-Sourcing

In what appears to be a classic case of local vendor bias, Canadian transport manufacturer Bombardier, Inc. has found itself in hot water over sole-source contracts with two separate municipal authorities. Both deals are political, with Bombardier's promise of local jobs seeming to influence the decision not to go out to public tender.



One contract involves the supply of 234 new subway cars to the Toronto Transit Commission, with rival Siemens claiming it could do the job C$100M cheaper by manufacturing offshore.

The other contract is a C$1.2B deal with the Quebec government to replace Montreal's ageing fleet of 336 subway cars. Rival French vendor Alstom SA is challenging the Montreal subway deal in court. "We are of the opinion that the law calls for an open bidding process for any public transit equipment or material valued at more than $100,000" said Alstom Canada spokesman Pierre Renault.

The Montreal dispute should be of interest to government procurement teams worldwide, as it deals with a fairly universal question: what happens if we don't follow our own procurement rules? You end up in court is one answer. What happens next remains to be seen.

Paperclips Are Like, So Last Year

That's right. A career in procurement no longer means you're "in charge of paperclips". In somewhat provocative terms, the Financial Times (subscription required) reckons that procurement has undergone a revolution. It's no longer a career dead-end. No longer a mere support service. The modern procurement department is experienced, professional and respected, and it's being unleashed on an ever wider array of goods, and services. Not just stationery, furniture and laptops, but lawyers, accountants and consultants.



But at the same time as procurement spreads its wings to tackle services, it's also getting more sophisticated. The best procurement teams know that a good deal on services is not just about getting the lowest price. Sure, price matters. But in services, relationships matter too. As Gartner VP Mark Hollands writes for CIO, "the relationship will determine the success or failure of a deal, not how little you managed to pay." His advice to CIOs: don't screw your supplier too hard to the floor - it can be a career limiting move in the medium to long term.

One risk with doing bottom dollar deals is that you might fall victim to what Hollands calls "land and expand" strategies. Vendors take a bath on the first deal to get a foot in the door, then cast their net for more profitable work to recover their losses. Over time, the A Team is replaced with F Troop, as big vendors feel the pressure to hit their own profitability targets.

So the challenge for the procurement team is clear. Use your skill and knowledge to get a good price and deliver savings. But don't squeeze so hard that good relationships turn into unpleasant, adversarial ones.