Contract outsourcing empowers businesses to stay lean and focused on high-value tasks. Outsourcing high volume, routine contracts to a specialized partner adds value and improves efficiency by standardizing the entire contracting process, ranging from positions in negotiations to the creation and use of contract data. Firms that internally manage legal documents divert scarce resources away from growth and higher-value legal work, while potentially damaging employee morale and effectiveness.
Types of Services Rendered
Successful contract outsourcing starts by building an efficient process at the onset of the relationship with the outsourcing provider. The relationship should only begin once the company seeking to outsource its contracts is sure the provider has both the experience and the scalability to manage the firm’s flow of contracts, however large it may become.
Companies often outsource routine legal documents to traditional law firms, which are often the same law firms working on the companies’ more complex legal needs. However, new technologies and labor models are enabling businesses to outsource contracts to legal technology companies or alternative legal services providers that can automate many steps of the contracting process, including the initial proposal of contract terms, contract markup, execution, and contract data extraction and analysis.
Some Examples of Contract Types to Outsource Are:
- Non-Disclosure Agreements
- Non-Reliance Letters
- Vendor Contracts
- Master Services Agreements
- Engagement Letters
- Access Agreements
- Franchise Documents
Payment Types & Options
Contract outsourcing pricing models vary depending on the industry of the company seeking to outsource, as well as the types and number of contracts to be outsourced. Payment options can range from upfront or after a project to retainers, pay-as-you-go, and hourly models.
An advantage to partnering with a specialized outsourced provider is that, as the contracting process is standardized, more cost-efficient rates become available. Efficiencies created through superior technology, process standardization, and more efficient labor models can also reduce costs.
Overview of Process
The contract outsourcing process begins with the customer and the outsourcing provider establishing the types of contracts that will be managed. Some partial solutions are merely limited to loading legal documents into a contract management system to provide visibility.
In a complete contract outsourcing solution, the provider, with the customer’s input, creates playbooks that standardize the approach to the negotiation of all provisions of the contracts to be managed, and specify the customer’s preferred and fallback positions. Then, the business’ flow of contracts is shifted to the provider, which assumes all or most of the burden associated with the contracting process.
With this end-to-end contract management solution established, the customer can shift its focus and resources to its most important business functions knowing that its outsourced contracts are being effectively, independently managed, and should not require attention in anything other than unusual circumstances.
Finally, it is important for both the business and the contract outsourcing provider to periodically review the playbooks and processes. As business and market conditions evolve, priorities, strategic goals, and the market for contract terms may change. This is why it is important for companies considering outsourcing to evaluate whether a provider has qualified personnel and access to market data on contract terms. Regular upkeep of the roadmaps that determine how a business’ contracts will be negotiated is one of the keys to its ability to maintain long-term, improved efficiency in contract management.
Tips & Best Practices
Given that all business contracts, including routine and repetitive agreements, create legal and compliance obligations and involve important interactions with business counterparties, any firm outsourcing its contracts must ensure they do so with a provider that can manage contract workflows end-to-end and secure best-in-class results now and in the future.
It is also important that businesses explicitly establish their relationship with contract outsourcing providers beyond simple work expectations. The agreement should contain the details of quality parameters, timelines, and pricing.
Among the keys to improving efficiency is a purpose-built tech platform where all contracts are uploaded and stored with easily trackable statuses. The platform also should be able to aggregate, analyze, and report on contract trends and terms like jurisdiction and governing law, term, whether there are non-solicit clauses, and relevant exemptions and carveouts.
By having these resources, both the business and the provider managing the contracts begin to create contract intelligence. Here, large numbers of disorganized contracts become data offering insight into current operations and benchmarks for future negotiations.
The final piece of the puzzle comes when artificial intelligence and machine learning programs analyze contract intelligence and progress toward more complete contract automation. Purpose-built document management platforms will first be able to analyze contracts and establish whether certain provisions are present, and then advance to a point where specific terms can be almost automatically negotiated. Outsourcing legal documents this way will reduce the cost and amount of work required to process each contract while improving time to execution, adherence to playbooks, and overall business outcomes.
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