High tech companies involve numerous negotiations during the execution of contracts. These contracts can be related to professional implementation services, governance of software licenses, or hardware and infrastructure assets. There can also be other related contracts like Master Service Agreements (MSAs), Statements-of-Work (SoWs), sales and customer contracts, order forms, and product addendums. Depending on the situation, all these different types of contracts can be categorized into –
- Licensing Agreements – Contracts with resellers and distributors of your software or hardware
- IP Agreements – Patents, trademarks, and copyrights that protect your intellectual property
- Vendor Agreements – License agreements for the use of technology belonging to other companies
- Employee Contracts – Contracts with employee workers and contractors, including NDAs and non-competes
- Lease Agreements – Equipment leases, real estate contracts, etc.
- Customer and Partner Agreements – Customer contracts, joint venture, M&A, and strategic alliance agreements
In addition to this, high tech companies are often affiliated with companies and divisions in other countries. Fluctuating global markets increases these contracts’ complexity, raising the need for a proper contract management solution to deal with international and domestic transactions.
Contracts in the high tech industry are segregated into buy-side and sell-side contracts. Buy-side contracts deal with processes involving the exchange of goods or services from the seller. The teams that manage buy-side contracts deal with procurement, licensing and outsourcing, vendor management, facilities management, or related departments. Sell-side contracts correspond to the sale and delivery of goods, services, or securities to a buyer. The sales team usually manages sell-side contracts.
A well-designed and flexible solution should have the capability to house all contract types. As important as it is to separate buy-side and sell-side departments within an organization, combining the two in a single management system will lessen the burden on shared departments like administrative, IT, and legal. These teams will –
- pay for a single system
- streamline data and be able to provide comprehensive data for strategic decisions
- have complete financial data for both expenditure budgeting and sales forecasting.
- give an executive-level view for visibility into every contract across the organization.
Like all industries, the high tech industry is also subjected to regulatory and GDPR compliance. While regulations protect people and ideas, the cost of maintaining and updating all these regulations will fall on businesses. Enterprises in the high tech industry that lack advanced legal tech like contract management will have to spend a lot of time dealing with consumer data and piracy issues. These arise due to the lack of a central repository holding all of their contracts. Currently, the regulation onslaught has just begun for this industry. Still, with proper legal tech for drafting and managing contracts, companies will be able to maximize profits along with managing obligations.
New startups are developing advanced software solutions, utilizing artificial intelligence and machine learning to enhance productivity, lower billing costs, and track compliance. Most new contract management technologies reduce the turnaround time by automating repetitive processes ranging from document review to drafting contracts.
Contracting Challenges Faced by the high tech industry
Eight months into the COVID-19 pandemic, enterprises in the high tech industry are shifting from on-premises technology to cloud-based services. There is strong growth in hyper-converged infrastructure and infrastructure automation. This means that businesses adopting new technologies will need better contract management technologies to boost profitability amidst the changing market. While working with and speaking with many companies in the high tech industry, Zycus has found some of the major contracting challenges they face:
- Lack of self- service contract authoring techniques slows down the functioning of the sales teams, leading to slower time-to-revenue
- Intense workload can make it challenging to stay on top of deadlines and renewal dates, resulting in delayed negotiations and eventually losses in the business.
- Primitive contract management systems cause leakage and inefficiencies.
- Many related contracts must be created separately and manually compiled to close a single deal.
- Tracking obligations, renewals, and deliverables become difficult with poor post-award contract analytics.
Benefits of Incorporating CLM in the high tech industry
An automated contract management solution can significantly improve an enterprise’s profitability by automating mundane and repetitive tasks, quickening the entire contract management process, and reducing any room for error. For the high tech industry, this is beneficial as the use of a CLM solution –
- Risk –Minimizes the risk involved, which can occur due to oversight or human error, reducing the exposure to legal risks, eventually capturing benefits for organizations and giving an edge to the enterprise during negotiations.
- Time –Shortens the document generation time, which improves the time-to-revenue leading to shorter contract closing times, which eventually accelerates contract authoring.
- Workflows– Generates advanced workflows for approvals and negotiations, and speeds up the negotiation stage by enabling transparency and automation in user workflows.
- Clause Library – It creates and stores templates with pre-approved language, a clause library, and a correct form in a built-in clause repository. Robust clause management with system-driven usage of approved language from the clause library tracks deviations, organizes clause approval workflows, and manages different versions of contracts.
- Metadata searches –Safeguards all documents which can be found when needed using advanced metadata extraction capabilities to extract metadata like expiry and renewal dates, payment terms, clauses, and obligations, etc.
With its integrated and expanded AI approach, Zycus iContract drives increased productivity and effectiveness in deriving useful information from legacy and unstructured contract data-stores. Zycus’s Merlin AI-powered CLM digitizes and centralizes all contractual documents and data for a simple lifecycle comprehensive management of contracts. It ensures quicker contract authoring and approvals, effective contract utilization, and obligation tracking.