1. Contract Management
in the Cloud
The Contract Management Impact
of Moving into the Cloud

2. Contract Management in the Cloud
The New State of Normal
The worst recession since the Great Depression has resulted in a profound
transformation in the manner in which companies do business. Supply uncertainty,
capacity volatility, resource constraints, and a heightened need to assess and mitigate
operational and trading partner risk have fundamentally changed the way companies
organize and measure success. As the recovery progresses, one thing is becoming
clear—this is no temporary shift in approach. Leading companies have realized that the
organizational agility required to survive the downturn can act as a differentiator,
enabling them to emerge more strongly positioned to compete and be successful.
This new state of normal places a laser focus on managing costs while better
anticipating fluctuations in market conditions. Both buyers and sellers must place a
renewed importance on building successful relationships. No longer can buyers bleed
sellers for savings to the point of insolvency. In addition to cost savings attainment,
more elegant methods of measuring success are necessary for procurement—including
supplier satisfaction and innovation. Meanwhile, sellers are required to be more flexible
with their customers, often agreeing to renegotiate terms and service levels.
The tools and processes that companies are employing to achieve success today are
wide and varied. However, in terms of technology, a clear transformation has taken
place. Faster time to value, lower total cost of ownership, more flexible pricing and
usage models, and rapid innovation cycles have brought Software-as-a-Service (SaaS)
and Cloud computing delivery models to the forefront—as has the fact that these
models enable the CIO to focus on more strategic initiatives and manage information
versus technology. Leveraging SaaS solutions, businesses can be up and running
faster with minimal upfront investment. They also have the ability to dial up (or down)
usage in order to meet the needs of the organization and pressures of the market. And
while we will discuss a number of data and security considerations in this paper, the
reality is that the security level provided by leading SaaS providers exceeds that of most
enterprise companies.
The emergence and growing acceptance of these models has sparked a fundamental
shift in the way that procurement, sales operations, IT, and finance go about achieving
their objectives. Legal and contracting professionals must be at the forefront enabling
this organizational transformation. In the remainder of this paper, we’ll discuss how
legal and contracting can benefit from operating in a Cloud environment, as well as
things to consider in selecting SaaS solutions to support their processes and objectives.
2 Copyright © 2010 Ariba, Inc. All rights reserved.

3. Contract Management in the Cloud
Start Internally
Ask a legal or contracting professional what his or her largest pain point in negotiating
contracts is, and you’ll likely hear that it is a lack of alignment between the buying group
who sources a contract and those responsible for negotiating the actual agreement.
Too often, thorough diligence in evaluating SaaS or Cloud-based solutions focuses on
educating consumers on the benefits of technology to automate the contract process
and allaying concerns about data availability, access, and security. Contract negotiators
are not commonly included in these discussions and, as a result, their concerns—and
ultimately, the real issues related to contract negotiations—are not captured and must
be revisited after the fact.
The good news is, all is not lost. This challenge is fairly easily overcome with better
internal communication. While some organizations have a policy either embracing or
rejecting Cloud-enabled technology purchases, in most cases this is not practical or a
best practice. As stated earlier, there is clear value in the SaaS/Cloud model. To flatly
reject (or accept) all things Cloud would probably be a mistake. Instead, the contract
management group should consider creating a checklist that will enable the business
functions to acquire the tools and benefits they seek. Meanwhile, it can be assured that
the company as a whole is comfortable with the terms of the agreement in order to open
the dialogue between functional areas of the business and legal/contract management.
Tanya Forsheit, Founding Partner of the InformationLawGroup (www.infolawgroup.com),
provides a great starting point. According to Ms. Forsheit, the following questions
should be discussed internally before engaging with any third party when considering
SaaS or Cloud-delivered information and solutions:
• What kind of data will be in the Cloud?
• Where do the data subjects reside?
• Where will the data be stored?
• Where are the servers?
• Will the data be transferred to other locations and, if so, when and where?
• Can certain types of data be restricted to particular geographic areas?
• What is our compliance plan for cross-border data transfers?
Copyright © 2010 Ariba, Inc. All rights reserved. 3

4. Contract Management in the Cloud
Doing Business in the Cloud - Contracting Considerations
The impact of Cloud computing on contracting and legal professionals is only beginning
to be recognized. In the simplest terms, SaaS, as its name denotes, represents a
technology-buying shift from good to service with sweeping implications from a contract
perspective. As Tim Cummins, CEO and President of IACCM, recently commented on
his ‘Commitment Matters’ blog (http://tcummins.wordpress.com).
“The Impacts of Cloud computing are only now being grasped and it will raise a
wide variety of strategic and governance challenges, as well as opportunities.
Among the implications is the need to review existing and future contracts.
Emerging technologies will revolutionize the relationships with some existing
suppliers; in other cases, it will mean forming relationships with brand new
suppliers. Terminating, renegotiating and new sourcing will be a major effort and
fundamental in its impact – especially with regard to getting good alignment with
business needs.”
This transition to new sellers or alternative delivery models with existing sellers and the
associated impact on contracts, however, represents only a single ripple in what will
have more far-reaching contract and negotiation implications for procurement, legal, and
contracting professionals. While naming conventions and definitions may differ, and
additional considerations exist, we will examine the impact of the Cloud on three major
areas in respect to contract and commitment management: 1) data considerations, 2)
terms and service level matters, and 3) risk management.
Data Considerations
In most cases, the first issue raised when considering technology delivered as a service
or in a Cloud environment is of data security. Security and privacy provisions that need
to be addressed when moving data into the Cloud will vary depending upon a number of
factors. The first of these is the type of data being considered. All proprietary data is
sensitive to an organization, and a degree of hesitancy is natural when deciding to move
a new business process or function to the Cloud. This is particularly true for the first
pioneers to engage in a SaaS or Cloud model in a particular business discipline—an
acceptance curve applicable in many new forms of innovation. For example, those
enterprises who were the first to sign up for Salesforce’s CRM SaaS model back at the
turn of the millennium did so requiring much more confidence and faith in the company
than those today, adding to the company’s customer base of over 55,000. Today,
companies of all sizes and industries leverage SaaS solutions for virtually all types of
data and related processes including finance, sales, procurement, and HR information
to name a few. Even personal information is beginning to find its way into the Cloud—a
highly documented, sometimes controversial fact—although this particular subset of
data can have a regulatory impact that must be considered. A good practice is to
leverage provider customer references in order to share concerns and learn about
benefits of alternative delivery models.
4 Copyright © 2010 Ariba, Inc. All rights reserved.

5. Contract Management in the Cloud
Given the meteoric rise of SaaS and Cloud, it is not surprising that the regulatory
statutes are still emerging and rapidly changing. The Health Insurance Portability and
Accountability Act (HIPAA) is an obvious example in the case of individuals’ medical
information outlining privacy and security guidelines. Meanwhile, state privacy laws
continue to emerge concerning sharing of data, data encryption, and breach notification.
These are important to review and understand for both Cloud providers as well as
potential customers.
Additional data considerations to discuss include:
• Where is data stored?
• With whom is data shared?
• Who technically ‘owns’ the data?
• When and how is data archived? And, how quickly can data be accessed or
retrieved and in what forms?
These final questions are of record retention—particularly important to the legal function
as litigation holds and data requests must reach into the Cloud. But beware. The Cloud
by its very nature often includes open platform sharing, meaning answering these types
of questions can raise additional questions.
Negotiating Terms and Service Levels
One of the most fundamental benefits of technology delivered in a SaaS model is the
agility that it provides. With a model often referred to as “pay-as-you-go”, usage is more
easily tuned up or down based on need. While many providers will not necessarily
agree to out clauses, variable subscription terms through SaaS delivery offer the
flexibility and speed needed to operate in today’s rapidly changing economic and
cultural environment.
However, since data is now shared, service levels regarding availability, retention, and
uptime must be discussed. In the past, when negotiating on-premise software, although
related implications existed, contract negotiators were concerned primarily with two
things in provider contracts—license and maintenance fees. With Cloud-based
solutions, there are no license or maintenance fees. But there are other considerations.
The following table presents terms and services levels to be considered for contract
inclusion when doing business in a traditional on-premise software model vs. SaaS. All
should be addressed not only in the negotiation process, but in the early sales cycle—
including the request for proposal (RFP) stage—to assure that a Cloud solution is a
viable option.
Copyright © 2010 Ariba, Inc. All rights reserved. 5

6. Contract Management in the Cloud
On-Premise Installed Software SaaS or Cloud Solutions
• License fees • Subscription and pricing terms
• Maintenance fees • Data availability/uptime
• Upgrade fees • Data storage, retention, and retrieval
• Software installation support • Data encryption and security
• Third party outsourcing (IT, support, • Provider stability
maintenance, etc.)
Provider stability is particularly important when evaluating SaaS vendors. Since your
data is being temporarily hosted by the provider, any discontinuance of service will be
challenging and bring with it inherent risk. In the event that a provider goes out of
business or is acquired, what recourse do you as a customer have? What assurances
do you have that you will be able to access and retrieve your data?
Risk Allocation
No matter how well-intentioned and planned, no system—installed or Cloud—is
foolproof. In the event that a failure or breach does take place, how is the provider
expected to respond? The provider should be on the hook to “make things right”.
However, this is often not the case.
With the understanding that risk cannot be driven out of any third-party relationship, how
can areas of risk be identified and mitigated prior to an event? Frequent and open
communication is the key. Some SaaS and Cloud standards exist, including
certifications from third parties, such as WebTrust. Providers should make the results of
these security audits and the like available to customers when they affect their data.
Finally, some SaaS providers offer flexibility in their delivery models, offering installed
software in addition to on-demand technology on the same platform. While some
change management may still be required, the potential benefit of such an arrangement
permits a customer to move their data from either an installed behind-the-firewall
environment to a SaaS delivery model or vice versa depending upon policy, cultural, or
market changes.
6 Copyright © 2010 Ariba, Inc. All rights reserved.

7. Contract Management in the Cloud
SaaS-Delivered Contract Management
An increasing number of companies are embracing SaaS and Cloud-based solutions to
manage critical tasks across legal, procurement, IT, finance, AP/treasury and sales and
marketing. And contract management is among these tasks.
Solutions that automate contract and commitment management have been around for a
number of years. With capabilities including a central repository for search and
reporting, clause libraries for contract authoring, workflows for negotiation and
approvals, and electronic signatures to improve security, contract management
automation delivers a fully paperless contracting option. Only recently, however, have
some companies begun to deliver these capabilities in a SaaS model.
The benefits of leveraging SaaS contract management solutions reflect the general
benefits already discussed in this paper. Companies can be up and running faster with
lower total costs in order to achieve a return on their investment faster. All of this is
delivered in a more flexible scoping and pricing model, permitting users to leverage the
solutions as needed and to also minimize the cost investment. Meanwhile, innovative
features and capabilities can be incorporated with limited to no disruption versus
complex upgrades that were expensive and took weeks to months to complete. And all
of this is delivered along with the traditional benefits of contract management
automation, including standardization of the contracting process, improved visibility and
performance management into existing contract terms, and upcoming milestones and
faster cycle times benefitting the organization through more high-value agreements.
Justine Henwood, Chief Financial Officer of Crown Melbourne, sums up the benefit of
SaaS contract management for her company,
“We are using technology which is powerful and easy to use, flexible and easy to
grasp to automate formerly paper-based internal processes, which allows us to be
more tactical rather than transactionally focused. And we are already seeing results.
Centralization of our contracts is crucial to reducing duplication across our business
units, achieving greater cost efficiencies, greater transparency and speeding up the
time it takes to procure and implement contracts. Ariba’s [Contract Management]
technology has allowed us to create and maintain a centralized contracts repository
with rich search capabilities that we can leverage to achieve these goals. It’s a
significant cost saving to owning and maintaining the software ourselves.”
Copyright © 2010 Ariba, Inc. All rights reserved. 7

8. Contract Management in the Cloud
For More Information
The new state of normal has resulted in numerous changes in the way companies do
business including leveraging technology delivered via SaaS or the Cloud. This has a
tremendous impact on the contract management function as well as how contracts are
negotiated, executed and enforced. To continue the discussion and chime in with your
thoughts on the topic, go to Ariba’s open community, the Ariba Exchange
(http://ariba.hosted.jivesoftware.com/community/solutions/contractmanagement) or
contact Ken Miklos, Sr. Solutions Marketing Manager of Ariba Contract Management
directly at the e-mail or phone number below.
To learn more about Ariba’s Contract Management solutions and how they can benefit
your organization, go to: http://www.ariba.com/solutions/contractmanagement.cfm.
Ken Miklos
Sr. Solutions Marketing Manager
kmiklos@ariba.com
412.297.7413
8 Copyright © 2010 Ariba, Inc. All rights reserved.