New York, May 13, 2020
We have been serving you as our clients for more than 20 years. We know many of you personally, some by reputation. We feel deep empathy for you - and for all of us - that we’re submerged in the current chaos.
This letter is not about what matters most - the top of mind issues around the health and safety of our families and fellow humans - so apologies for that.
This, instead, is about a business problem we think most General Counsel haven’t yet had the time or headspace to focus on. And we’re here to offer some provocative, possibly offensive, and certainly self-serving thoughts.
We hope you’ll give them some reflection because, in spite of all that, we’re pretty sure they’re right.
The around-the-corner crisis.
Everyone already knows that the economic chaos ahead will disrupt individual business relationships, en masse. Large companies are constructed of hundreds of thousands of commercial arrangements in all directions (suppliers, customers, partners, employees, etc.). Those arrangements are about to come under immense pressure, inspiring a tidal wave of urgent requests and questions (What arrangements can we undo? Where do we have supplier capacity issues? What are our data privacy constraints in moving work around? What can our partners, customers or suppliers do to us and how do we plan for that?).
The answers to those questions – and a rumble of others just out of view - are sitting in your contracts. Unfortunately, despite spending tens of millions of dollars annually on pedigreed lawyers to write and negotiate favorable agreements in the first place, most companies don’t know and can’t access their contractual obligations, entitlements and risks. And that’s about to become a massive, possibly career-defining problem for those responsible.
As we wrote here, most companies don't even know how many contracts their company has entered into, let alone what’s in them. Far too often, the contracts are lost (80% of companies struggle to find their contracts – IACCM).
We’ve been working in close proximity to the contracting functions of large enterprises for ~20 years and they are, more often than not, an unmitigated disaster. Eighty-five percent of companies still default to manual systems to track their contracts. (Aberdeen). Most have attempted to integrate Contract Lifecycle Management software, but only one-third of those efforts reach full deployment (IACCM), and only eighteen percent of users claim success (Ultria).
Even when the contracts are found, answering questions about them is disturbingly cumbersome. We have to find contracts in dispersed systems (hiding in data silos or, God forbid, filing cabinets), figure out if they’re in final form (why are there five near-identical versions?), track down amendments that could be anywhere, occasionally find the lawyer who negotiated them, and then of course read and interpret. It can take several hours to several days to revert with seemingly simple answers to a single question about a single contract.
But what happens when we’re presented – in short order - with hundreds of questions about thousands of contracts? High-stakes contracts Q&A presents itself sporadically enough in normal times that we suffer through the raised eyebrows, frustration and embarrassment in the moment and move onto the next problem. The inquisition ahead, though, is of an entirely different magnitude. And this underlying shortcoming we’ve all worked around forever is about to become visible, important, and destructive.
What can be done?
The technology (albeit imperfect) and know-how needed to navigate this problem exists.
At a minimum, here’s what you need: A different kind of contracts repository, one that you can drag contracts into from any of your current systems; one that makes the contracts immediately searchable and filterable; one that surfaces basic contract data, reliably.
You need to de-dupe and cull your contracts repository so it’s not filled with dreck, and – critically – you must organize all of your contracts into families that accurately capture “roll-up data”, so you can see the entire state of the counterparty relationship in one place (without having to wonder if there’s an amendment or statement of work floating around somewhere).
The solution we see as minimally necessary requires no implementation beyond uploading as many of your contracts as you can find, from your CLM systems, SharePoints or elsewhere. It can be delivering answers in a matter of days, not years.
This is not a panacea and - in our minds - doesn’t go far enough, but it’s urgently useful, hence the broadcast intervention.
A personal note (and our self-interests disclosed).
We have been obsessing about the lack of visibility into contract positions for close to a decade. We sold our company - Axiom – late last year. Before we did, we spun out Knowable and left the company we’d been building for twenty years to run it.
Our theory was that, like most things in this industry, this effort would take its own sweet time. We foresaw an evolutionary process in stages from knowing what’s in your contracts, to far more exciting and modern applications of contracts analytics. Across time we hoped to help change the role of the company lawyer forever and for the better. Years would pass.
We woke up a couple weeks ago and realized, there is no time. Our clients, you, are drifting through these pandemic rapids, focused on more important issues like the immediate safety and sanity of your employees, heading right for a cliff.
If you are prepared for this, and some of you are, we think this crisis can go from a source of embarrassment to an opportunity for a certain kind of heroism.
No hiding the ball – this letter is self-serving. Of course, we want the world to know about us and helping companies in need may also help our business. But we are not the only company that can be of service. The important message is that you figure out what you need, find a way to get the help you need, and get to work.
And more broadly, be aware that there’s a whole parade of legal tech companies out there trying to be helpful in all different ways. This link has a good list.
We don’t know how this letter will be received, or if it will be read at all amidst the barrage of dystopian developments. We’re frankly a little worried it will appear tone-deaf as the humanitarian and macroeconomic impact of this crisis unfolds. But the conflict we see coming merits anxious waving, stomping, shouting and pointing.
And that’s what we’re doing.