Contracts in the Flow

Contracts are the point around which much of a companys dealings with its suppliers pivots. Buyers and vendors can spend a lot of time hammering out details about obligations and remuneration, incentives, and contingencies.

But for large companies that have hundreds of contracts, making sure that suppliers adhere to contract details is often so cumbersome that it simply doesnt get done. On the flip side, those same companies also can find that enforcing corporate goals, such as standardizing payment terms for all suppliers, is unmanageable as the number of contracts gets bigger.

"There are tons of contracts that have expired, and people keep buying off them," said Peter Scott, program manager for e-sourcing at Exostar LLC, a procurement and sourcing portal for major aerospace and defense companies.

Enter an emerging category of software that automates the processes of creating and administering supplier contracts with the goal of rationalizing corporate buying to save money through tighter contract management. A variety of vendors—including Zeborg Inc., MindFlow Technologies Inc., diCarta Inc. and Frictionless Commerce Inc.—are tweaking their respective sourcing software with upgrades that bolster an enterprises ability to manage contracts and squeeze more efficiency out of that part of their business.

In addition to simply standardizing contract language and requirements, the efficiencies are gained through analysis of all the contracts to show trends and identify weaknesses in the processes.

New York-based Zeborg this week will release its RFx Sourcing Suite, which provides tools for discovering the best prices through an automated bid and analysis process. The software is used for sourcing that leads to long-term contracts, not just one-off purchases, officials said.

Zeborgs sourcing technology doubles as a compliance tool by including a contract compliance application tailored to negotiated terms. It allows purchasing managers to run What if scenarios when choosing among suppliers and can incorporate as many as 1,000 priorities when weighing the merits of various contracts.

Separately, MindFlow, of Plano, Texas, last week began shipping Version 4.1 of its namesake Sourcing Suite, which aims to help sourcing professionals cut costs before contracts are signed. It also captures payment terms and other bid attributes from requests for quotes to use in analysis of contract performance.

Meanwhile, Version 4 of diCarta Contracts, which the San Carlos, Calif., company released last week, enables users to edit contract drafts in Microsoft Corp. Word, then import those documents directly into the system. It also has a new Executive Dashboard to provide key metrics for productivity, workload planning, dollars under contract and risk. Other features, such as Auditors Workbench, speed audits and enable enhanced contract compliance reporting.

For its part, Frictionless, of Cambridge, Mass., last week made available Version 3.0 of its Frictionless Sourcing platform. Highlights include contract spend tracking and legal contract generation.

The upgrade also features a globalization capability, a supplier portal, and integration APIs for built-in connectivity to Microsoft Office applications and enterprise software from SAP AG, Oracle Corp., PeopleSoft Inc. and others, officials said.

Some efforts look beyond strictly managing the contract documents. Exostar, of Herndon, Va., this summer will make available in its sourcing portal new contract management capabilities created by Emptoris Inc. These will allow users to embed contract terms throughout Exostars sourcing solution so that buyers can track the life cycle of a negotiation and know when conditions in a contract are met, Scott said.

Managing spending has long been important at KeySpan Corp. But since the company has bought several businesses in the last five years and annual purchasing has risen from $150 million to $850 million, the importance of purchasing to the bottom line has become more visible, said Jerry Rowan, director of purchasing and materials management.

"Now it gets a lot more attention from senior management," Rowan said.

Zeborg software and services have enabled KeySpan to reduce the number of vendors it taps when purchasing IT contingency labor from about 50 to eight. In the process, the company has unbundled the components of the contracts and worked to drive down the markup on each part. The result has been reductions of as much as 40 percent in some aspects of its purchasing, said Rowan, in Hicksville, N.Y.

"What we like is visibility into the nature of the spend; [Zeborgs offerings] give us more ability to analyze that than [our] Oracle [financials and supply chain software] does," Rowan said. Zeborg "also gives us ability to look at [subsidiaries] not on Oracle so we can take an enterprise view of spending," he said.