Introducing Omnicent - the knowledge based contract management framework
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INTRODUCING OMNICENT
What is contract management? Contract management is about avoiding loss of value and ensuring that benefits are realised, while creating possibilities for improvements and increased value during the lifecycle of an outsourcing contract. The idea is to enable the organisation to work efficiently in pursuance of its goals and visions of the outsourcing. The decision to outsource functions is rarely impulsive, so why should the process of managing the contract be conducted without proper processes to ensure success? Contract management methodology provides a structured approach to processes and workflows. This helps to ensure effective management of the contract’s lifecycle. Contract management is carried out by individuals and groups of individuals collaborating in a co-ordinated manner with distinct responsibilities.
The goal is to establish processes to ensure the proper roles and functions of an organisation work efficiently together to solve any problems and conflicts that arise out of an outsourcing contract after it has been signed. Furthermore, the contract management aims at using well-structured know-how in a consistent manner and taking appropriate discretionary decisions. An organisation is a step closer to success in this respect when decisions are taken by well-trained people applying years of accumulated know-how and best practices.
Anchoring by understanding and mapping the stakeholders - How will your silos work together? Key work flows and processes that will always be there New business needs leading to changes A problem with the service occurs Net sales
Procurement
Legal Finance Domain experts Recipient/user Contract owner
Financial control Commercial decisions
Contract manager
Management!
Project management
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The business case for investing in contract management By now, you should be asking what the business case is for investing in contract management capabilities, support through systems or tools, and Omnicent? We would like to pose you a question; what would be the business and financial value to you of being able to perform to contract management KPIs such as the following: -
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Reach ability to conduct contract and vendor management at IACCM maturity level 4 (out of scale of 5) applicable after 24 months 90% of all change requests are without additional implementation cost (except for changes clearly outside the scope of original services and requiring significant additional supplier resources) Less than 2% deviation from projected cost baseline for contract (except for consumption over agreed and expected volume baselines) 90% compliance on all deliverables and obligations being tracked at the end of year one and 95% at the end of year two and remain at 95% or higher Decrease number of unresolved category/severity 1, 2, and 3 disputes by 10% per quarter from baseline established after 6 months of operation Ability to foster innovation of services and support of new business initiatives at maturity level 4 (scale of 1-5, 5 being the highest) Ability to maintain supplier relationship at relationship satisfaction level 3 (scale of 1-5, 5 being the highest) Ability to mitigate (avoid risks developing into incident or outages) 90% or more of all risks being identified as part of relevant contractual risk management procedures
These are the type of KPIs and targets that are achievable through structured contract management using the processes, check-lists and procedures embedded in Omnicent. The International Association of Contract and Commercial Management (IACCM) has in studies documented that the lost value of inefficient contract management amounts to 9.15% of the value of contracts. Taking this in, consider your current pain points related to the contract management of your most critical contracts or your organisation’s ability to conduct consistent and value creating contract management across large numbers of non-business critical contracts. What would it take to free up time spent fighting fires to proactively manage vendors, optimise rather than just attempting to limit value leakage, and renegotiate prices and delivery/service scope and methodology frequently? You might say: “more resources�. We would offer that most organisations already possess adequate resources to conduct supremely efficient structured contract management but that the difference in efficiency and achievement of contract management goals is found in industrialising and standardising how contract management is conducted. Omnicent is our methodology for exactly this kind of industrialised approach. The building blocks of strong contract management capabilities Where do you start when embarking on the journey towards contract management maturity? Our recommendation is that organisation should recognise that five essential building blocks must be in place.
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INTRODUCING OMNICENT
How can contract management be implemented? From the customer’s perspective, contract management is about organising the operational processes of the customer organisation to ensure that: - -
The person with the most expertise of the issue at hand takes care of that particular issue. The same types of issues are dealt with in a consistent manner.
One of the goals of a successful contract management organisation is to go from a reaction-based approach managed by team members (based on their individual prior experience) to a structured, proactive approach.
All phases: - Relationship Mana - Contract Informat
This can be accomplished through role allocation, where managers are designated a specific role that carries with it particular tasks and responsibility. Each manager will receive training to ensure each manager understands the role and responsibility and how to work together with other contract managers. Each manager will have a list of responsibilities that he/she must take care of. Some of the responsibilities are things the manager needs to do on a yearly basis, some each quarter and some more often or only when relevant (see below, Objectives/main processes).
Procure
Termination services
End of T or Termi
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To ensure each manager is aware of his/her responsibilities and when to conduct them, each manager is given a role description, which is specifically designed to the role, setting out overall To ensure each manager is aware of his/her responsibilities and when to conduct them, each manager is given a role description, which is specifically designed to the role, setting out overall responsibilities and task for the role. The role description is essentially a work process description with elaborate checklists for daily, weekly, and monthly tasks.
Each role can be supported by a “playbook” which sets out scripted ways of dealing with often encountered issues. A playbook can be contract specific. responsibilities and task for the role. The role description is essentially a work process description with elaborate checklists for daily, weekly, and monthly tasks. Each role can be supported by a “playbook” which sets out scripted ways of dealing with often encountered issues. A playbook can be contract specific.
Re-transfer Manag Performance Man
This way the overall cont
Role descr Tasks for roles Roles Processes
INTRODUCING OMNICENT
ager tion Manager
Ad hoc: - Despute Manager - Data Protection Manager - Regulatory, Policies and Confidentiality Manager - Risk and Security Manager - Deviation Manager
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Transition and Transformation
Transition Manager Change Manager
- - -
On-going Services delivery Recurring for the term
ement
Yearly planning
Performance of benchmarking and audit
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Performance Manager Multiple Vendor Manager Budget Control Manager
- - - -
Implementation of Changes
Term ination
ger nager
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Change Manager Finance Change Manager Budget Control Manager Innovation Manager
Time Manager
Benchmarking Manager Audit Manager
The above cycle gives a brief idea of in which circumstances each manager has responsibilities.
ntract management framework looks like this:
riptions - Service and contract Workflows between roles
Contract specific Playbook/contract manuals
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INTRODUCING OMNICENT
The story behind Omnicent Gorrissen Federspiel’s outsourcing and complex contract team is recognised by IAOP (the International Association of Outsourcing Professionals) as a global leader in outsourcing advisory. After many years of advising on complex procurement of services and products, it became obvious to us that those clients that did well and achieved acceptable return of investments in vendor services, were those clients that were good at contract management, and regrettably, that even the best possible contract could not save the client who did not possess good contract management practices and maturity. This should not have been a revelation and when a client within the global communication business asked us “what are your thoughts on contract management and can
you help us implement good contract management principles”, we set out developing Omnicent. Essentially, we have attempted to distil everything we have learned over the last 25 years of supporting global organisations business critical sourcing into processes, activities, check lists, play book, and best practices. Our focus was not legal or just contractual; it was much more about what we felt had developed into best practices when combining operational, technical, financial and commercial best practices with a practical approach to levering contract rights.
The journey behind Omnicent – distilling 20 years of outsourcing knowledge into workflows and checklists In 2014 a client asked us: How do you see contract management – what is contract management to you?
Commercial
Having responded we were then asked: Please implement your ideas... And then we had to start really thinking! After a number of pilot-projects for leading Nordic companies we have developed a standardised knowhow based contract management framework. The framework is unique and it and combines commercial, technical, and legal knowledge. The result is easy to use checklist and workflows taking a role based approach to anchoring the day to day operational approach.
Technical
Legal
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What is Omnicent Omnicent is not a “system” and it is not a software solution. If you know ITIl, Omnicent is simply put an ITIL like framework for contract management purposes. Omnicent is the processes, roles, the tasks, checklists and knowhow that can be integrated into and will power your contract management lifecycle tools. Contract management lifecycle tools are good at supporting activities and work processes but such tools will not tell you how to conduct contract management and will not define the norm within your organisation for efficient contract management – but that is exactly what Omnicent does and why using Omnicent in conjunction with market leading contract management tools is the best practice option.
Omnicent consists of: - 6 contract management processes - a role based structure with a number of different contract manager roles - sub-process and task descriptions for each role, including work process maps - event based playbooks for each role - a library of templates and best practice guidance - access to training materials and training programmes - access to yearly updates of all of the above - access to the community of companies and contract managers that use Omnicent
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INTRODUCING OMNICENT
The 6 contract management processes
Performance management
To ensure performance of the services and to enable enforcement of such performance
The objective of performance management is to ensure performance of services rendered and to enable enforcement of such performance. Throughout the lifecycle of the contract, the managers will take on different responsibilities to ensure performance of the various services
Financial management
Financial control, budget compliance and foreseeability and to avoid over-payments and value leakages and to use financial incentives to drive behaviour
The objective of financial management is to ensure financial control, budget compliance and budget foreseeability, avoid overpayments and value leakages, and use financial incentives to drive behaviour. Throughout the
Optimization management
which must be performed by the supplier, and ensure that the customer meets their responsibilities, to ensure the supplier’s performance. Performance management can consist of the following managers:
lifecycle of the contract, the managers will take on different responsibilities to ensure budgetary and financial certainty and fairness of the costs of the various services that must be performed by the supplier.
To extract value the parties contracted for and to optimize the value beyond the original expectation
The objective of optimisation management is to extract the value the parties contracted for and to optimise the value beyond the original expectation. Throughout the
lifecycle of the contract, the managers will take on different responsibilities to ensure optimisation of the value of the contract.
INTRODUCING OMNICENT
Compliance management
To enable the Customer to remain compliant with legal requirements relevant to its business
The objective of compliance management is to enable the customer to remain compliant with the legal requirements relevant to its business. Throughout the lifecycle of the contract, the managers have different responsibilities to ensure the customers’ compliance with regulation and policies. This is conducted within different categories relevant to the customer. For most customers in an IT-related outsourcing it is necessary
Dispute management
to have a data protection manager, who is responsible with compliance with all data protection initiatives both regulatory and internally conducted. Overall, the managers in this category must ensure compliance within a specific field of regulation, and the responsibilities of the managers can vary depending on in which field the customer is conducting its business.
So that disputes and disagreements are dealt with efficiently and quickly without a detrimental effect on the relationship between the parties
The objective of dispute management is to ensure that all disputes and disagreements are dealt with efficiently and quickly without a detrimental effect on the relationship between the parties. Dispute management can consist of a dispute manager, who must assume
Time management
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responsibility for disputes and maintain a registry of disputes. He/she must maintain readiness to endure in a fast track dispute resolution, and manage disputes and proceedings.
So the Customer is aware of the rights that apply at particular intervals or times and if relevant exercise such rights
The objective of time management is that the customer is aware of the rights that apply at particular intervals or times during the agreement’s lifecycle, and on a holistic basis makes all relevant strategic choices and then executes accordingly. Time management can consist of a time manager, who must develop an annual strategic plan and ensure that such plan is executed, maintained and followed throughout the year. Furthermore, the
time manager must consider alignment of expiry and prolongation of the contract and overall customer satisfaction. With this information he/she can consider price negotiation, benchmarking, optimisation initiatives and audits. However, these initiatives must be managed with the relevant manager of the relevant category.
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INTRODUCING OMNICENT
Roles and disciplines A number of contract manager roles work within each of the processes and collaborate with one another in accordance with the work process maps embedded in the sub-process and task descriptions for each role. This is the role structure:
Performance management
The sub-process and task descriptions are the core engine of Omnicent. This is where daily, weekly, monthly and yearly contract manager tasks are described. Sub-processes and tasks are set out at three levels ending with detailed checklists.
Financial management
Strategic & relationship level
Optimization management
Compliance management
Dispute management
Time management
Relationship Manager
Performance Manager Deviation Manager Daily operations
Multiple Vendor Manager Change Manager
Operational contract managers
Budget Control Manager
Innovation Manager
Financial Change Manager
Contract Information Manager
Data Protection Manager Regulatory, Policies and Confidentiality Manager
Dispute Manager*
Risk and Security Manager
Ad hoc tasks
Transition Manager
Audit Manager
Retransfer Manager
Benchmarking Manager
* A role is not a FTE. A person can have more roles. Not all roles need to be handled in-house. Some can be outsourced on an ad hoc basis or simply not performed.
Time Manager
INTRODUCING OMNICENT
We’ve taken each role & have set out their resposibilities in role and task descriptions and have developed playbooks that are event based manuals to support each role
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The contract
Future contracts can use this framework
The resulting tools...
Role desription - setting out overall/ general responsibilities for that role
Proactive
Playbook / Contract manual setting out responsibilities for that role which are contract specific
Reactive
The Role and Task descriptions and playbook are supported by different templates that can help make the execution of tasks more effective
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INTRODUCING OMNICENT
Example of a role description for a Deviation Manager
The role description sets out the role, objectives, tasks and responsibilities of a given role and serves as a general description. The role description consists of a set of different tasks, D&Os, workflows and a RACI matrix. Below is illustrated the role description for a Deviation Manager.
Sub-processes
Tasks
1.
All deviations referred from the relevant manager are captured and qualified
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Assume responsibility for deviations from the relevant manager. * Investigate and qualify deviations.
2.
All external remediation actions are managed with the supplier
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Initiate and follow-up on actions with the supplier and manage dialogue. Continuously update the Dispute Manager on ongoing deviations and correspondences.
3.
Any internal remediation actions are managed with the relevant stakeholders
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Initiate and follow-up on actions with the relevant stakeholders and manage dialogue.
4.
All disagreements with the supplier are referred to the Dispute Manager
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Refer disputes to the Dispute Manager (if applicable).
* Detailed overview The detailed overview of main tasks for the Deviation Manager role outlines the main tasks and the associated activities.
INTRODUCING OMNICENT
Task
Checklist
Frequency
Contact Manager D&O
1.
□
On-going
Deliverables N/A
Assume responsibility for deviations from the relevant manager.
Seperate deviations from the day-to-day operation of the agreement so that the deviations are handled separatly and aside from the day-to-day operation.
□
Assume responsibility and assess what it will take to prevent the deviation from disrupting the ongoing management and performance of the agreement.
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Take into account whether the relevant manager already
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EBA
Obligations – Separate deviations and handle separatly. – Prevent deviations from disrupting management and performance of agreement. – the supplier.
RACI Matrix Task
Responsible
Accountable
Consult
Inform
1.
Assume responsibility for deviations referred from other managers
Deviation Manager
Relationship Manager
Dispute Manager Performance Manager Relationship Manager
2.
Investigate and qualify deviations
Deviation Manager
Relationship Manager
Dispute Manager Performance Manager Relationship Manager
3.
Initiate and follow-up on actions with the supplier and manage dialogue
Deviation Manager
Relationship Manager
Dispute Manager
Dispute Manager
4.
Continuously update the Dispute Manager on ongoing deviations and correspondences
Deviation Manager
Performance Manager
Dispute Manager
Dispute Manager
5.
Initiate actions with stakeholders and manage dialogue
Deviation Manager
Relationship Manager
Relationship Manager
Dispute Manager Relationship Manager
6.
Refer disputes to the Dispute Manager and inform other relevant managers (if applicable)
Deviation Manager
Relationship Manager
Dispute Manager
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INTRODUCING OMNICENT
Playbook example While you go through the steps, the playbook will provide you with recommended actions and relevant references A trigger has been allocated to you: The Playbook contains an overview of how to deal with triggers:
01. Allocation of task
A Trigger is identified by you Trigger is logged in CM support
Step 1 – A trigger is allocated to you – I.E: Breach of Service Level
02. Qualification of trigger
Qualify trigger in one of the categories set out below
Step 2 – The trigger is qualified/identified by you in accordance with playbook
03. Consult manual and select options
Each trigger category is described below. For each trigger category you will find information on: Expected Supplier behavior, your options (these are not necessarily a sequential process, the manager may skip or combine options/steps) and workflow recommendation per option.
Step 3 – You consult the manual and review the steps/options related to the trigger
04. Strategize, align and engage with supplier
Follow recommended workflows related to: Collaboration with other roles, data collection, internal alignment and engagement with vendor.
Step 4– You decide how to engage with Supplier to address the triggers
Step 2: Qualification of trigger Overview of triggers. Review the information - Open your playbook and consider how the trigger should be qualified.
01. Breach of service level 02. Defect or non-performance 03. Reporting 04. Delay of deliverable Next step:
Move to the trigger category and see how you can deal with a Service Level Breach..
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Step 3: Consult the playbook For each trigger, the playbook will set out a number of options. In this situation, a Service Level has been breached.
1
Breach of service level
Open your playbook and navigate to the trigger.
Expected supplier behaviour
– – –
The supplier may state that breach of service level was due to the customer or third party. The supplier may state that there has been no breach of the service level. The supplier may understate or fail to record and report the true impact of the service level breach.
Here you will see details of options.
Your options/ necessary steps
1.
Collect information about the breach of service level and how it is affecting the services Inform the supplier about the breach of service level The supplier shall make a root cause analysis The supplier shall rectify the breach * The supplier shall credit/pay the customer the appropriate service level credits, if applicable Assess whether the breach constitutes a new risk, a warning signal of an existing risk or materialisation of a risk in the proactive risk management regime If the supplier does not begin the rectification, initiate the “deliver first, settle later” principle Consider if the customer can pursue a claim for damages If the breach cannot be resolved by the supplier, notify the Lead Manager and together escalate the issue to the appropriate governance forum
2. 3. 4. 5. 6. 7. 8. 9.
Each Playbook offers a number of steps and/or options. Based on these steps, the manager will make a decision on how to proceed
Step 3: Consult the playbook Collect information about the breach
Step 1: Collect information about the breach of service level and how it is affecting the agreement
The purpose af the collection of information is to make sure that you are in possession of relevant information that can be of use in the handling of this trigger. This ensures that the Customer gathers all relevant information
Step 1: A Service Level Has been Breached – collect the relevant information pertaining to the breach.
1.
Collect all information relevant to the breach of services level, including but not limited to:
It is crucial that you collect all necessary information, in order to engage with the Supplier in the most effective way.
a. b. c.
information on the breach, which servise level was breached and why/how it was breached; information on how the breach affects the agreement; any relevant contract documents e.g. schedules, Service Orders which detail the service level; information on whether this breach impacts other parts of the services, the Customer and the Supplier’s obligations under the agreement; information on whether the Supplier has done anything to remediate the breach; information on any losses to the customer resulting from the breach; and
Once information has been collected you notify the Contract Information Manager, who will update the Contract Management Library with the information
You must:
d. e. f.
Workflow Each trigger a work flow that illustrates the steps you mus take Workflow suggestions Inform the Suppler about the breach of service level if the Supplier is not already informed
Require the Supplier to make a root cause analysis
Assess if any service levels credits are payable and inform the Lead Manager and Budget Control Manager Collect relevant information to document the breach of service level
Require that the Supplier remedy the breach
If the supplier can or will not remedy the breach consider the Deliver First Settle Latter Principle and escalate to Lead Manager
Consider if the Customer should claim damages
Assess whether the breach constitutes a new risk or materialisation of a risk in the proactive risk management regime
Trigger: Breach of a Service Level The workflows illustrate your tasks and the steps you should conduet
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INTRODUCING OMNICENT
After reading this brochure, it is conceivable to think that the methodology may sound possible and well-structured, but that it is over-engineered and too bureaucratic. However, organisations may be able to streamline what would otherwise be a complex process by picking only the roles that they wish to implement.
Flexible, scalable, and supporting compliance Omnicent is flexible and scalable. This means that: - Omnicent can be used in large organisations with many contract managers, with a strong focus on contract management, or it can be used in smaller organisations with just one or very few contract managers. In the latter case, only very few contract manager roles will be used. -
Omnicent can be implemented in one team to manage one or a few business critical contracts or it can be implemented across your entire organisation as the methodology and processes by which your entire organisation conducts contract management.
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Omnicent can be used by applying all roles or just a few roles.
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Sub-process and task descriptions and playbooks can be tailored to your concrete needs and particular regulatory requirements.
Another inherent feature of Omnicent is that your contract management work processes will become well documented and auditable. This facilitates compliance in regulated industries, including documenting compliance with European Banking Authority Guidelines for Outsourcing.
Furthermore, it is important to remember that each role will quickly act as an expert on the matter, and when an organisation works on the basis of check-lists and tasklists with the appropriate tools they will be a lot more fact-based, which is often necessary, but can be difficult without the proper tools. Furthermore, the advantages of implementing such a system would mean that: - The organisation will work more efficiently, meaning that it conducts its tasks faster, more consistently, and with better results. - Work processes throughout the organisation will be connected.
Using Omnicent on contract management or ITSM platforms Omnicent can be implemented and put to efficient use without implementation of other tools or software. In that case, users of Omnicent have mostly used sharepoint or similar collaborative portals to create contract management portals, which give users access to the Omnicent materials. While this approach can work well, a more future proof approach is to embed Omnicent in commonly used work flows or ITSM tools. We work with a number of partners who have developed solutions around such tools, including ServiceNow and Pactius, where Omnicent is accessed and used as an integrated part of those tools. Using such tools also allows businesses to leverage performance and other data available through those systems for contract management purposes. The journey towards contract management maturity The implementation of contract life cycle tools and of Omnicent is a journey taken in small steps, where your contract management organisation will absorb new habits, see quick wins, and over time achieve structured contract management and the institutionalisation of the Omnicent processes and methodology. As a first step to contract management, we do not recommend consolidating all your contracts into a new contract management set up, nor should you adopt all Omnicent roles from the outset. Rather, we recommend that the roles should be adopted on a step by step basis, and contracts should be on-boarded based on criticality and volume.
A good starting point is to conduct an assessment of your organisation’s current contract management capabilities using IACCM’ capability maturity assessment model (or similar) and then set yearly goals in terms of achieving a higher degree of contract management capability, coinciding with a long term plan for using more Omnicent processes and roles across a wider range of contracts. How do you get to use Omnicent? Omnicent is developed by Gorrissen Federspiel and is provided under a simple no-nonsense license agreement. The license is based on a yearly fee which depends on the number of contracts managed under the Omnicent framework – in other words, it is consumption based. A license for unlimited use is available. A license will grant use rights to your entire group of companies. There is no purchase commitment and you can terminate your use at any time. Omnicent can be implemented and put into use without any further assistance from Gorrissen Federspiel. Your own resources or consultants may conduct all training and implementation activities but most often we will assist buyers of Omnicent on the strategic decision making associated with contract management strategies and the training of contract managers. Implementation projects will mostly take around 3 months depending on the scale of the future use.
INTRODUCING OMNICENT
Contact Gorrissen Federspiel We have offices in both Copenhagen and Aarhus with strong international relations Copenhagen Axeltorv 2 1609 Copenhagen V T +45 33 41 41 41 F +45 33 41 41 33 Aarhus Silkeborgvej 2 8000 Aarhus C T +45 86 20 75 00 F +45 86 20 75 99
Ole Horsfeldt Partner | IP & Digital Business D +45 33 41 43 65 M +45 24 28 68 40 oho@gorrissenfederspiel.com
Ole is a senior partner and the head of Gorrissen Federspiel’s Outsourcing, and IT Team of 13 lawyers. They are among the most highly specialised outsourcing advisers on a global scale. Their advice typically involves agreements with a regional or global reach and covers more than just ”the agreement” or the legal terms. As the only Danish and Nordic law firm, Gorrissen Federspiel is on the 2020 list of the world’s best outsourcing advisors ”Global Outsourcing 100.” The International Association of Outsourcing Professionals (IAOP) publishes the list.
Gorrissen Federspiel was recognised in four categories: Customer References Awards & Certifications Programs for Innovation Programs for Corporate Social Responsibility
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