September 2–3, 2004 Royal Sonesta Hotel New Orleans New Orleans, LA NCMA 4th Annual Commercial Contract Management Conference Tools, Jewels, and Rules:

NCMA 4th Annual Commercial Contract Management ConferenceTools, Jewels, and Rules: Leveraging the Contract Management Process 2

September 2–3, 2004Royal Sonesta Hotel New OrleansNew Orleans, LA

Moderator:

Lenn Vincent, Vice President, CACI, International

Panelists:

Dennie Norman, Principal Strategist, SAS Supply Chain Intelligence

Nick Bomba, Contract Management Director, Lucent Technologies

Peter Murley, Senior Manager, Global Contract Management, Avaya

Contract Management Tools:Transformation in Action



CACI International Inc

A $1.5 billion international information technology solutions company

Experienced management team

A legacy of stability, earnings growth, and strong cash flow

Leading provider of IT services, communications and solutions, primarily to U.S. Government

Approximately 9,400 highly skilled employees; over 65% with security clearances



• World-Wide provider of professional services from concept definition through life cycle support including:– Designing, developing and integrating systems – Performance testing of systems – Workflow analysis and business process modeling &

simulation– Program management support – Integrated financial systems execution– Integrated logistics support– Interoperability analyses and interface design

• Acquisition/contracting support / e-procurement system design, development and consulting

Corporate Capabilities



Technology Foundations

Transforming the Way We Create & Manage Contracts

• Computers: Paperless Contracting• Ubiquitous Networks: The World Wide Web• Common Meaning: Information Standards• Useful Meaning: the Semantic Web• Wireless: Freedom• Frictionless Information Exchange • Security: Safety in an Online World• Collaboration: the Collapse of Space and Time



But You Have to be Watchful of Technology

•Application costs• Licensing & maintenance fees

•Other Costs• Program & project management• Requirements scoping• Implementation• Digitization• Systems Integration• Change management• Contract rationalization• Process re-engineering• End-user training• Associated licensing

(e.g., document management tools)

* From Contract Life Cycle Management in the Real-Time Enterprise, Gartner Symposium ITXPO 2002; © 2002 GartnerG2

Gartner on the Hidden Costs*



General Session

Dennie Norman, WW Director

Supply Chain Intelligence

SAS Institute

Date September 2, 2004

Time 9 AM

Demand Driven Sourcing -

Manage Uncertainty



Global Reach & Local PresenceConnecting with Customers

• 238 offices in 53 countries• 9,100 employees• 3.5 million users worldwide

– 40,200 sites – 113 countries– 90% of Fortune 500 – 97 of Forbes Super 100

• Hundreds of local user groups globally• Largest privately held software company



The Mandate …

...reach 5-10% cost savings and still satisfy our customers.

See our supplier base profile. What do we buy, from whom, how much?

Enhance our negotiating position. Financial, technical and performance information.

Reduce time to look for info. Standardized reports on the fly.

Leverage our buying power. Pool volumes and move to key suppliers.

Reduce inventory costs Optimize inventory levels and on time delivery

Target only the best suppliers. Profiles of successful/unsuccessful suppliers.

Reduce lead time for contracts. Access/reuse already legally approved contracts.

Better control our risks. Assessment reports and performance.

Reduce the number of suppliers. Availability of primary and secondary sources.



The Strategy! (Enabled by an Analytical SRM Solution)

•Leverage total buying power– Commodity Segmentation– Pool and move volumes to fewer suppliers

•Partnership contracts, for critical commodities – Premium Partners, to receive 80% of total volume– Prices based on 2-year forecasted volume, no guarantees

•Management– Change program– Commodity teams– Cost savings metrics

•Goals for cost savings – 15% >10% >5%

Drive your future!



Leverage demand to reduce price

Volume

Price/ Unit

$100/unit

$90/unit

$80/unit

1000 2000 3000

Contract Total Volume

Price/ unit ($)

Total Spend

Year 1 1000 $100 $100k

Year 2 2000 $90 $180k

Year 1 + 2 3000 $80 $240k

Leverage spend saves $40,000 (14%)



eSMART (ABB SRM) Functionalities

From whom ?From whom ?

What is purchased ?What is purchased ?

Who purchases (BAU) ?Who purchases (BAU) ?

How much ?How much ?

Volume ?Volume ?

Business Intelligence



Future with eSMART

• Data is available on mouse click

• Data is combined for all locations of a supplier

• Data is supplied by all ABB locations on eSMART

• Profiles can be supplied by Division, by BA, by BAU, or by region

• By click you get a bar chart profile

Supplier Base Profile Today without eSMART

• Must send out surveys to otherBAUs to obtain information

• Must follow up with eMails andtelephone calls to obtain data

• Must manually assemble into spreadsheet for analysis

Issues

• Time & resource consuming

• Data incomplete

• No common supplier number



Click the “Reach-through” button

in the Viewer. A new window will be opened.

Reuse of Contracts

Future with eSMART

Reach through functionality from eSMART to CAFÉ SCM where contracts are stored

Today without eSMART

• Must request information from other ABB locations using e-mails & telephone calls

• Time & resource consuming



Contract

A

C

B

TodayTime (yr)

$/Volume

Demand driven strategic sourcing

Increase negotiated volume Long term contracts Form strategic partnerships Maximize volume for fixed price

Understand demand drivers Leverage market demand Increase forecast accuracy Become a predictable customer

NCMA 4th Annual Commercial Contract Management ConferenceTools, Jewels, and Rules: Leveraging the Contract Management Process


You need to see what is behind you, but…

Current forecasting situation…

NCMA 4th Annual Commercial Contract Management ConferenceTools, Jewels, and Rules: Leveraging the Contract Management Process


This is what “true” analytics can do for your forecasting process – see it all!

Challenges Are Ahead…



Analytics Drive the Power of Information

RO

I

Raw data

Data Cleansing & Classification

Reports & OLAP

Descriptive modeling

Predictive modeling

Data Information Knowledge Intelligence

Optimization

Insight Vs. Hindsight

What will happen ? What will happen ?

What is the best What is the best that could happen ?that could happen ?

En

terp

rise

Per

form

ance

Why did it happen ?Why did it happen ?

Scenario modeling & root cause analysis

What happened (hindsight)?What happened (hindsight)?

How can I act on How can I act on this insight?this insight?

RROI



An SRM system will make you the most informed person at the negotiating table able to deliver sustainable growth under control

Supply Manager Benefits• Ad-hoc reporting that answers the five basic questions:

– What? How Much? From Whom? By Whom? From Where? • Provides intelligence, “one version of the truth”, for decision-making

– Links to Contracts– Dependency Ratios– Supplier Performance Monitoring– Risk exposure

• Ensure corporate governance for contracts, compliance and spend• Improve quality and quantity of information • Move from awareness to knowledge in a repeatable process• More accurately forecast actual demand



Contract

A

C

B

Today

Time (yr)

$/Volume

Why demand driven strategic sourcing

Consider the impact of the following on your organization? 10% better forecasting accuracy Advance knowledge of peaks & valleys Accurate long term cash flow predictions True insight to demand drivers Supplier partnerships directly supporting your business goals



ForecastingProblems

SimplisticErroneousMissing

The impact of poor forecasting…

Profit Margin erosion

Bad Inventory Policy

OverstocksOut-of-StocksObsolescence

Distributor

Leads to…

Purchasing

Poor Sourcing

Higher pricesHigher riskUnreliable

Poor Planning

Dissatisfied Cust.Unsynch. Capac.Low OTD

Management

Leads to…

Forecaster

Leads to

Forecaster

Leads to…

Missed expectations > Contract disputes



Who said risk is good - Where is Lady Luck when I need her?

Make uncertainty your friend

“Gambling is the fastest growing industry in the world”New York Times – September 25, 1995



Nick Bomba

Contract Management Director

SBC Customer Team

Lucent Technologies Inc.

September 2, 2004

System Tools & Processes Facilitating Contract Management



Lucent Quote To Cash (QTC) Initiative

• What is Quote to Cash?

- Quote to Cash (QTC) is a globally deployed end-to-end process & associated tool sets by which Lucent receives a customer's request for a quote or proposal for a solution and ends with the cash payments for delivery of that solution.

• Benefits

- Reduces operating costs through streamlined business processes & tool sets.

Replaced local financial platforms for one global financial platform, resulting in faster reporting, increased reliability of information and smaller and flexible organization.



System Tools

1. B&P/Contracts Tool

2. Pricing Database

3. Pricing Engine

4. Enterprise Resource Planning (ERP) Platform



System Interaction

PricingEngine

PricingEngine

ERPPlatformERP

Platform

When a quote is priced and committed in Surround:Records Total Dollar amount of quote, Date quote was priced in Pricing Engine, Expiration date of quote.

Whe

n pr

iced

and

com

mitt

ed in

Pric

ing

Engin

e:•Q

uote

Hea

der i

nfo

•Pric

ing

(Ord

erab

le It

ems,

Com

code

s, e

tc.)

When a Quote is entered in B&P/Contracts TOOL Quotes:Quote Number, Quote Created Date, Customer Request Number, Quote Due Date, Customer Name, ERP sold to Number, Type of Service (engineering, installation, etc)

B&P/CONTRACTS

TOOL

B&P/CONTRACTS

TOOL

Quotes

When a Purchase Order is entered into SAP:

•Lucent Order Number

•Customer PO Number

•PO Received Date

•PO Amount•Project Number

PricingDB

PricingDB

For Hybrid Quotes (uncontracted items are present),

nothing automatically transferred. Enter Quote #, etc.

directly in Price Database

•Agreement N

ame &

Description, Effective &

Expiration Date, Item

Codes

and Price.

•Can add to existing

Agreement or create new

.

•Pricing Pools Need to be

UPD

ATED in Pricing Engine.



B&P/Contracts Tools Summary

13© Lucent Technologies Proprietary 2004 -All Rights Reserved

Global SalesGlobal Sales

End-to-End Quote, Proposal, Contract Management

The globally supported B&P tool for Lucent

Manages the end-to-end quote and proposal request management process

A central repository and archive for all Quotes, Proposals

Automates workflow and routing of information (between AE, TC, SE, proposal team and other key stakeholders)

Provides Electronic Document Management (incl. Search capabilities) for all bid and quote opportunity-related information

On-line reporting and analysis of bid and quote opportunity information, including bid and quoted opportunity status and process metrics

Provided through a user’s web-browser and e-mail systems utilizing a relational database

Lucent’s has a single globally supported B&P/Contracts tool Lucent’s has a single globally supported B&P/Contracts tool

Charter:One Global system for B&P and quoting activity that supports the users by being flexible, efficient, easy to use and available as part of the approved Lucent-CIO architecture..



B&P/Contracts Tool Functions

14© Lucent Technologies Proprietary 2004 - All Rights Reserved

Global SalesGlobal Sales

Contracts and eApprovals

Contracts

Repository of customer contract and agreement information

Contract manager inputs summary information

Visibility for others who require access

Ability to attach contract-related documents

Query capability on summary information and/or full-text of attachments

Excel export capability

e-Approvals

Electronic approvals of business cases, Advance Authorizations, Telephone Equipment Orders (TEOs) and ARMS Reservation Request Forms (ARRFs).

Reduces delays in circulating hard copies and eliminates the expense of sending documents via overnight carriers.

Provides multiple levels of approvers and automatic email notification through MS Exchange.

Excel export capability

Contract Repository and Electronic Authorizations Contract Repository and Electronic Authorizations



B&P/Contracts Tool (Features)

Lucent’s global B&P Tool for entering, tracking, archiving quotes. End-to-end quote and proposal management.

Used by sales force, project mgrs, contract managers for:• Quote generation• Electronic document storing & management• Win/Loss Statistics• Track B&P expenses to opportunity level

The Contracts module of B&P/Contracts Tool is used primarily by Contract Managers as Lucent’s central repository for customer contract and agreement information. Information is captured in summary form, as well as, attachments of actual contracts.



B&P/Contracts ToolContract Manager Responsibilities

For each new contract the CM populates the module by answering 30 questions:

Fields: Contract No., Eff. Date, term, payment terms, title/ROLSpecial Provisions:

-Most Preferred Customer (MPC)-Liquidated Damages-Non-standard acceptance terms

• Separate questionnaire for MPC.- Frequency of reporting- Prospective or retroactive remedy

Upon completion of questionaire(s) attach contract files and related attachments.

• Each CM can access a list of their contracts or search for any archived contract.



29Proposal Number: Enter the proposal number associated with the contract.30 Comments: Additional Comments / Notes

Contract Manager:NBOMBA (N. J. (Nick) J. Bomba) POST Entry

Additional Team Members:

Check

Attachments

Contract Documents: Related Documents:

Attach File Delete Attachment

Attach File Delete Attachment



B&P/Contracts Tool (In Search Of)

• Search CapabilitiesPerform either a Field or Full Text Search Fields: - Customer name- Contract Mgr.- Contract No.- Product Unit- Region

Editing capabilities Isolate the desired contract to make desired changes (e.g. correct entry previous entry errors; add/delete attachments)

Exporting Data• Under can Export this information to their PC.• Report Generation



Pricing Database Tool

Business Functionality

• Used by Sales Personnel for the following:

Access Repository of Global List Prices Determine Market based pricing Perform “What If” Pricing Scenarios Create Volume Discount Schedules for Bid Opportunity

- Bundled Discounts - Multi-Tiered Pricing

- Configuration Level Pricing- Below Floor Pricing Flag

Ad-hoc Reporting (user defined criteria) & Analysis



Pricing Engine

• Contains:

- Algorithms

- Pricing Pools

- Pricing logic and rules

• Interfaces with customer ordering systems

- Facilitates EDI



Sarbanes-Oxley Compliance

• In order to comply with Sarbanes-Oxley, Lucent Contract Management is a designated control point for Contract Loading into Pricing Engine. This control is required in all contracts, amendments, Special offers, etc.

• CM provides notification and confirmation to the Contract Loading Teams (CLT) that:- Business case done & approved by Finance org.- Contract signed or offer accepted in writing- No “side-deals” are sanctioned

CM verifies appropriate pricing and terms and approves loading of contract/pricing into Pricing Engine

• After loading, Pricing Engine verifies that prices in customer PO match actual prices in the contract- This maintains business case integrity- Contract compliance; deters gaming



B&PProcess

ContractNegotiation

Contract HandoffDocument preparedand e-mailed to mtginvitees (includingContract Loading

Team)

Contract Handoffmeeting held with

stakeholders(including

Contract LoadingTeam)

Customer andLU signcontract

B&P/ContractsTool

PricingEngine

Contract isentered into

B&P/Contracts

Tool

Contract Loading Teamcollaborates with Contract

Mgmt and/or Sales todetermine how Pricingshould be presented in

Pricing Engine

ContractLoading Teampulls contract

from B&P/Contracts Tool

A

A

Completed Pricingtemplate loaded to

B&P/Contracts Tool forreference and retention

Contract LoadingTeam performstests to ensurepricing actions,rules, and pools

work as expected

Notify CM, CAM,AE, Order Mgmtand others with aneed to know thatpricing is loaded

A = Notification from Contract Mgmt of the signed contract is thetrigger to load and activate contract pricing. Contracts beingnegotiated with extensive or complex pricing terms may be loadedprior to signing but should not be activated.

ContractLoadingTeam

completesthe loading

Two Stage Selling - Contract Notification andPrice Loading Process

A



Lucent.com (Made to Order)

• www.lucent.com portal • 7X24 access for Online ordering• Order status capabilities• Ability to track all orders (paper, fax, email, web)

- Completion dates- Drill down to view component level detail- Check shipping data

• Invoices link - Quantities ordered & shipped- Itemization (material, installation, engr., transportation charges)- Payment terms; due date; amounts due- Tax info.



Lucent.com (Support)

• Array of Customer Support Available

-Searchable knowledge database of products

-Comprehensive product index

Product Descriptions

Feature Sets

- Product Training

- Buying instructions

-Repair & Exchange Services

- Technical Support via email

- Helpdesk link

- Online trouble reporting, tracking, status



EDI

• Value Added Network (VANs) Utilized• Transaction Sets

-Purchase Orders-Functional Acknowledgment (Handshake)-Change Orders-Mechanized Order Acknowledgement (MOA)-Invoices-Advanced Ship Notices

• Lucent moved EDI functionality from legacy systems to an ERP platform- Enabled a consistent, standard format for all invoices.- Thousands of invoices are generated each month- 16% of orders placed using EDI - 1% of orders via lucent.com portal



Peter Murley, Senior Manager

Strategic Accounts and Public Sector

Global Contract Management Organization

[email protected]

Internet Protocol (IP) Telephony

Linking a Global Contract Management

Organization



• Bullet point 1– Bullet point 2

• Bullet point 3

Who Is

A leading global provider of communications systems, applications and services – helping enterprises large tosmall to communicateand deliver superior business results

Enabling customers to efficiently, seamlessly and securely drive their business from where it is today to where it needs it to be.



Fast Facts• 15,000+ people worldwide with offices in 50 countries

• 75 Contract Professionals in 16 Countries

• Best-performing tech stock in the S&P 500 in 2003

• Market Leadership:No. 1 worldwide in IP TelephonyNo. 1 worldwide in Voice Messaging(Every day, people use 100 million of our mailboxes)No. 1 in Call Centers (The Americas, APAC and Western Europe)

• One of the most widely held stocks in Americawith more than 2 million shareholders

• More than 1 million customers, including 90% of the FORTUNE 500®



• Former Contracting Picture

• Current Organizational Structure

• How Did We Move From Old to New

• Tools We Employ

• Jewels We Enjoy



Contract Management circa 2001

• CM’s Reported to Sales Organization With Regional Focus

• No Processes to Govern Negotiations• Lack of Organizational Identity• Unclear Risk Profile• No Central Document Generation or

Retrieval• Reinvent Every Deal



Global Contract Management Organization Today

• Organization Reports Into Law Division

• Processes Developed and Documented

• Centralized Storage and Retrieval of Documents

• Standard Contract Templates

= Strong Global Organizational Focus

= Clear Risk Profile and Flexibility Defined

= Efficient Knowledge Transfer to the Business

= Transactional Efficiency



Communications-Driven Results

Avaya Global Contract Management Organization achieves superior results: Reduce Costs, Lower Risk and Grow Revenue

Reduce Costs

Do more with less budget and fewer associates

Lower RiskLower Risk and Increase Control Through Early Involvement in Negotiations

Grow Revenue EVERYTHING We Do Aims to Drive Revenue to Closure and Serve Customers Better



Benefits From Using its Own Technology and Services.

Global Contract Management Organization uses Avaya IP and Multimedia Messaging technology to reduce costs while supporting our ubiquitous community of contract managers deployed in virtual offices around the globe.



Tool Belt

Multimedia Messaging

Single Number Access

Virtual Office

Avaya VPN Gateway e-Enabled Applications



Tools and Jewels

Virtual Office/Remote Worker

Single Number Access

= Deploy closer to our business clients.

= Increased accessibility through “frictionless” communication.



Tools and Jewels

• Multimedia Messaging with Speech Access

• Positive organizational image built through rapid responsiveness achieved using seamless messaging interfaces.

• CM’s are engaged earlier in the sales process.



Tools and Jewels

• High Bandwidth Avaya VPN access with Web-Enabled Applications

• e-Document Generation and Storage Reduces Transactional Costs, Minimizes Corporate Risk and Provides the CM with “Brick Office” Capabilities.

Global Contract Platform



Future Plans Built On Flexible Platform

• Reorganizing to Maximize Impact on Revenue Growth

• Tools Remain Effective

• Fewer Associates Required to Support Revenue Growth



The Challenge

• Is Your Organization Realizing Communication-Driven Results?

• Do You Employ Technology That Makes Your Mission More Effective?

• Does Your Technology Provide You Flexibility to Change With Your Clients?



Questions?