Why is technology critical to improving performance in Enterprise Contracting?

The need to use technology to improve legal contracting processes is paramount. This was one of the key messages from our third EY round table discussing Enterprise Contracting in Life Sciences in May 2022. As with previous iterations of this roundtable, the panel brought together market-leading representatives from the in-house legal and procurement teams of major pharma companies and built on insights developed from the 2021 EY Law Survey (in collaboration with Harvard Law School and the Center on the Legal Profession). The urgency of the panel’s views on the subject of digital change came through loud and clear. One panelist put it perfectly: “I believe you absolutely need to digitize your contract management process; companies need to be digitizing any process they can.”

The key driver for this urgency? In one word; efficiency. As one panelist noted, “efficiencies are a huge priority for all companies right now and COVID-19 has made that even more clear.” As another panelist emphasized, “right now we're in a huge transformation, not just in the legal sector, but in the world: any solutions that you can think of, that are going to help people to work more efficiently will be critical.”

These efficiency gains could be things as simple as making e-signatures a streamlined aspect of the contract management system. But more broadly, efficiency for contracting teams means ensuring that legal teams can focus on the contracts that are really driving the strategic objectives of the organization. Meanwhile, the large volume of contracts that are more transactional – ?and have lower organizational value or lower risk – need to be automated, “so that our focus and our efforts can really be on the more strategic contracts.” As one panelist told the group, “our business partners want speed, simplicity and transparency: we can deliver all three things if we agree as an organization to move away from this transactional viewpoint and open up to an enterprise viewpoint.”

This efficiency drive means automating workflows as far as possible and enabling better management and maintenance of contract templates for more efficient processing. Achieving this shift allows professionals to access in real time a template model that can simplify contracting: “this can lead to a self-service contracting model; it's super exciting where we are right now with the technology and what it can enable.”

Starting on the change management journey

How organizations decide where to focus their efforts with contracting technology will depend largely on their current senior leadership goals. Do companies have key objectives to meet or critical fires to fight, such as expired supply agreements or business continuity issues? These immediate priorities are likely to be the short-term focus for digital transformation.

Wherever companies target their efforts, panelists were clear that a number of challenges need to be overcome to make contracting reform a reality. One example the group agreed on was “the level of change management that it takes to successfully implement contracting technologies.” The change process involves working with a large stakeholder base, including the contracting and legal teams, risk functions, procurement teams, “and all of them have to be aligned on the objectives and be a part of that journey in order for it to be successful.” Upfront investment and buy-in is needed: “make sure people know where we're going and why; as you implement, listen to what they have to say, ensure they know we're listening, and then make them part of the solution – hopefully you can turn them into champions!”

Companies also need to understand and distinguish between what can be standardized and what can’t be. One panelist talked about the downstream consequences of allowing deviations or customizations, with what should have been a simple upgrade to the next version of the technology becoming more difficult, “because you’re introducing complexity which makes the implementation more challenging.” While there are significant benefits to centralizing information and preventing inefficient silo-ing, the scaling of standardization has to work across geographies and different markets. Assessing local differences may become a key challenge: “what an affiliate needs in terms of contract process may be different than what we need globally.”

Despite these caveats and complexities, however, the key message from the discussion is that companies need to get the change process underway. As one panelist described it, people need to recognize that “technology’s just a tool, and you’re not going to have the perfect tool right away.” Improving the technological toolkit needs an iterative, improvement-driven process: “aim high but accept reality, and once you roll out, listen to the user feedback and then work really hard to make the system better; you need to be passionate about continuous improvement of the user experience.”

Whether companies start this process by building a SaaS solution or other small-scale initiative, or by attempting more ambitious transformations with third-party technology providers and service implementers, the urgent imperative to begin the journey now was evident throughout this discussion. Panelists emphasized: “don’t wait; I encourage people to start as soon as possible if you haven’t already – we all need to digitize our contract processes, and we need to get there as soon as we can.”