Avasant Keynote Session Features Lessons Learned by a Healthcare Company and University During the Pandemic
By: Sandy Frinton, PULSE Editor
Most companies have disaster contingency plans written into their outsourcing contracts. But no one planned for a scenario quite like COVID-19.
Experts from such leaders as Facebook, Bristol-Myers Squibb, AkzoNobel, BNY Mellon, ISG GovernX and Merck shared at GOV20 how their playbooks changed when the global pandemic hit.
Avasant was a key sponsor for the IAOP virtual conference, Oct. 7-9.
In the opening keynote session on Governance Reimagined: Enabling Business Agility in the Digital Enterprise, Kevin S. Parikh, Chairman and CEO of Avasant, noted that contracts are now being managed remotely in a 24-7 environment, requiring different sets of technology and automation.
COVID accelerated a transformation that already has been underway. Governance has moved from focusing on cost reduction in the 2000s to platform-based governance in 2010 to “transformational governance in 2020,” according to Parikh’s presentation.
Transformational governance is based on cloud-first architecture, optimized processes for multi-vendor governance, AI and automation-based analytics, and business-driven real-time KPIs and SLAs.
“Transformational governance never sleeps,” he said. “It’s about pre-analyzing problems before they even arise. And it’s analytics-driven.”
Factors driving transformational governance include a 10-15 percent decrease in managed services costs due to shifting labor offshore, declining wages and currency devaluation, as well as the shift to less costly home-work environments compared to corporate centers.
This shift from offshore and offsite delivery to remote work post-COVID has led to contracts increasingly becoming on-demand structures, resulting in contract revisions and terminations, hiring of new service providers, and the need for platform-based support.
“Human beings can’t do it alone,” Parikh said. “We need help.”
Along with the increased automation requirements, greater business value is expected with improved adherence to service levels, better pricing against benchmarks, elimination of duplication, reduced time to market and less contract leakage, he added.
All of the different vendors offering products and solutions need to be integrated and communicate with each other, and companies need to understand how the failure of one vendor affects the others, Parikh said.
Panelist Share Expertise
Panelists Rawle Howard, Executive Director, Office of Procurement & Contracting at Howard University and Michael Serghiou, Director, Procurement and Category Management of Professional Services and Outsourcing at Merck, shared their expertise at GOV20. The discussion was moderated by Avasant partners, Anupam Govil and Joe Frampus.
Serghiou noted that Merck has moved past basic governance to having strategic discussions with business stakeholders that require more energy to gain alignment. The company has created Strategic Sourcing Councils with procurement representatives acting as ambassadors around the world to provide feedback and build regional relationships.
Merck had the right technology in place when the pandemic happened with its vendor partners already having laptops so they could quickly transition to work from home, Serghiou said.
“We had no language in our contracts for COVID,” he said. “We had to beef up our contracts and put in several amendments. We had to relook at our processes and other criteria and also make sure our people were Okay. We were very fortunate. It also reminded us that in addition to traditional disaster recovery, we had to add the pandemic into the mix. Beyond the technology, we are much more attuned to risk management and performing more frequent risk assessments. We are putting the right measures in place to make sure the operations aren’t interrupted.”
The company has successfully leveraged its shared services centers and hybrid models and has added more frequent business reviews with vendors and data privacy provisions into contracts.
Howard shared that his university’s governance was less mature and only recently established an appropriate structure for its cloud-based agreements since beginning to work with Avasant, which has resulted in greater visibility.
As a result of the pandemic, the college had to quickly move students off-campus and experienced a significant loss in revenue, forcing it to change its focus to emergency preparedness.
Howard had to revise terms of contracts to bring down costs without impacting the educational and medical center services provided. This led to the university gaining significant insights into contracts and allowed the parties to work together to come up with mutually beneficial solutions.
“This is certainly nothing that any of us anticipated,” he said. “It truly brought to bear the business partnerships you had into a circumstance such as this.”
The flexibility of vendors to adapt to this new reality and continue to operate with the right service levels - despite being hit on multiple sides - has been critical, Govil said.
As a silver lining, Frampus noted that COVID has led to greater communication within IT businesses.
“We are seeing more collaboration between business units and the IT organizations than ever before,” he said. “IT is now more aware of the end-user and business outcomes.”
Putting an Extra “R” to Highlight “Relationships” into Third-Party Risk Management to Drive Sourcing Excellence
Managing external third parties and suppliers is more complex today than ever. But focusing solely on the compliance and regulatory aspects isn’t enough anymore. The secret sauce is all about proactively managing third party relationships with a combination of transformation and technology, two governance experts said at GOV20.
Suraj Prashad, Vice President and Chief Procurement Officer, Hanover Insurance and Mark Voytek, SirionLabs’ Chief Customer Officer, shared their best practices and lessons learned during a compelling presentation entitled Procurement Transformation: Unlocking the Full Potential of Third-Party Relationships at Hanover Insurance.
SirionLabs, the leader in AI-powered contract lifecycle management (CLM) technology, was a key sponsor of the virtual forum held Oct. 7-9.
“Companies need to think about Third-Party Risk and Relationship Management (TPRRM), extending the focus to ensure the realization of business outcomes from the relationship - deliverables, efficiency, savings, performance, and so on,” Voytek said. “That extra ‘R’ that adds ‘Relationships’ to Third Party Risk Management brings the focus on operational excellence. This provides a foundation for large organizations to move from reports to analysis, and, ultimately, to drive insights and actions for sourcing and third-party governance. Modern CLM tools such as Sirion are making the transition to TPRRM easier by providing a single integrated platform for managing all aspects of supplier relationships - from contract creation and auto-validation of performance and invoices to managing buyer-supplier collaboration, issues/actions and disputes.”
Voytek joined SirionLabs about four months ago and previously headed the Outsourcing Advisory group in the Americas for EY. He has over 25 years of experience as a transformational business executive focusing on GBS, Procurement Transformation, and enterprise cost reduction.
Prashad, who previously served in a leadership role in Global Procurement and Strategic Insurance Services at MetLife, joined Hanover about a year ago, drawn to the smaller and emerging firm that has allowed him to see a problem and address it.
After reflecting on how to drive culture and change, he recently rebranded his team from the Hanover Strategic Sourcing Office to a new name called SPARC – Sourcing Procurement and Relationship Consultants – helping to focus on relationships from beginning to end with his third-party partners as well as with the lines of business, ecosystem partners, and the end-customers, including policyholders and claimants.
The new name drives a sense of ownership and responsibility where Prashad’s sourcing team members have a defined purpose and understand the effect on daily decisions and how they impact the entire Hanover business including and, most importantly, their customers.
“We are focusing on early engagement and SPARC is foundational for the team,” he said. “We are developing insights to recognize where our suppliers fit in our business and then breaking down silos to make a difference and drive actions. The name change provided purpose and pride for the team and, frankly, has been a revitalization. We are now focused on an 18- to 24- month pipeline and we are strategizing and actioning for the future. I am really proud of the team and the culture and collaboration across the enterprise.”
An important part of the transformation at Hanover has been leveraging AI-powered technology, including the Sirion Contract Lifecycle Management platform, to improve visibility and alignment across the supplier lifecycle - from the pre-signature to post-signature.
“Everyone knows how to buy – but how many people know how to effectively and efficiently source?” Prashad asked. “The TPRRM piece isn’t just about the savings, it’s about relationships. If your business partners understand your vision and the ebbs and flows of the market and can tie business strategy and objectives to the role they play, then as an example the next SOW (Statement of Work) could evolve organically and everyone wins.”
“Successful TPRRM helps a sourcing organization by addressing both risk and operational excellence through partnering and better relationships. This commitment to excellence by leveraging people, process and technology essentially puts traditional internal auditing out of business or, at a minimum, makes the internal audit reviews easier with fewer issues and findings. Lastly, while the audit reviews are being done why not also address the relationships and drive operational excellence,” Voytek noted.
Prashad agreed, saying, “Internal Audit is not just highlighting gaps, more importantly, they are helping me see what’s broken, what can be improved, where to strive to be best-in-class and how we’re going to get there. Third-party relationship management is not just in vogue right now. It’s the future of strategic sourcing. You have to have great governance, and a great team to have great TPRRM. This is where we are going!”
AI is making it easier for organizations to assess the health of their supplier contract portfolio in real-time. CLM tools such as Sirion leverage AI to automatically extract static text from contracts and convert it into trackable data. This makes it possible to run advanced analytics to assess risk across the portfolio due to missing clauses and deviations from the standard language.
The global pandemic also has created a greater sense of urgency, the speakers stressed.
“The evolution of governance is key,” Prashad said. “As challenges happen during the pandemic, for every company across the board who didn’t have their governance organization ready, it’s about what are we doing right today and what should we be looking at in the future. This pandemic created the opportunity for us to bring several groups together and say ‘we should work together on this’ and we should put a focus on overarching governance – not just on how we buy, but when we buy and what tools do we use to buy.”
Voytek added, “this really is an evolution that can happen as a bit of a revolution, but taking on too much could stall, or even halt, the journey. We are seeing large companies use a maturity model and plotting where they are today, where they want to be, and how they want to get there.”
Five Tips to Doing TPRRM Right
- Leadership matters – Be sure to secure executive support and buy-in. Make sure that management understands the rigor of measurement risks. Build a team that will help you succeed.
- Develop a solid value proposition and business case and a model that expands while the savings grow
- Engage your technology partners - Start with the business problem first, and then see what role technology can play and the impact that it can have. Involve the advisory and or technology firms in the build of the value proposition and also explore what other ecosystem companies are doing. Prashad noted, “we are using Sirion and several of our key strategic partners to exploit innovation, leapfrog to a future state, and not be stifled by our legacy or our familiarity for how we do it today.”
- Communicate often - Constantly involve your stakeholders
- Celebrate the big and small wins - Make sure you highlight the people in the business lines you worked with. Remind your team that you got to the win because of your TPRRM process, along with its rigor, governance and executive buy-in. Create a victory tour and have your new advocates sell your work for you!
SirionLabs, the SaaS leader in enterprise contract management (CLM), helps enterprises manage the complete contracting lifecycle on a single, easy-to-use platform. SirionLabs’ proprietary solution, Sirion, applies breakthroughs in artificial intelligence to meet the needs of businesses in the digital age. Sirion’s AI-powered capabilities – from smart contract authoring to auto-contract extraction, real-time performance management, automated invoice validation, and data-based relationship management – enable enterprises to drive business velocity and outcomes, reduce risk and enhance revenue/savings in commercial engagements. SirionLabs enables 200+ leading companies such as Vodafone, Unilever, BP and Credit Suisse to manage 3.5+ million contracts across 100+ countries.