• The Cisco Sales Legal department adopted Geoffrey Moore's core-versus-context framework to focus its resources and human capital on what is core to our business and to outsource/out-task context activities.
• Cisco’s contracting philosophy focuses on placing key resources where our clients and customers need them. Locally placed resources are ideal for complex deals — they ensure early involvement in shaping the deal, understand local customs, and are viewed as trusted advisors by the local clients.
• Standardized processes, policies and tools streamline the work for local resources, allowing them to concentrate on core activities, increase productivity, and deal with more complexity.
The complex landscape of contracting
Today’s contracting world is getting more complex due to many factors, including globalization, outsourcing and out-tasking, requests for more integrated and collaborative relationships, and the ever-increasing speed of business in today’s networked world.
Customers with business problems are requiring individualized solutions, not just off-the-shelf products and services. Contracts are expected to do more than document revenue and provide risk management. A contract needs to be an enablement tool as well as a risk-containment tool. At Cisco, we have spent a lot of time trying to figure out how the contracts function is scaled to meet these needs in a productive and efficient manner. We believe the Sales Legal department is structured to succeed in this complex landscape, but it didn’t happen overnight. We want to share with you the steps that Cisco’s Sales Legal team took to enable us to provide contract services in this complex world.
To operate in this environment, Cisco relies on core values to define our strategy. We have the following four core values:
Cisco Sales Legal values
• Ensure transparency and integrity
• Be change agents
• Provide cost-effective, high-quality legal services and make the best use of people and technology
• Partner with our clients
All of the activities in the Cisco legal and contracts functions read back onto these four core values, which have not changed in some 10 years. It is worth stressing that our goal of transparency and integrity underpins everything we do. We look to ensure in our contractual decision making that the right people at Cisco make the right decision with the right facts in front of them at the right time. The role of the Sales Legal group is to ensure we provide crisp advice to the relevant stakeholders and reflect their decision making in the contract. This is how we set our strategy. Now, let’s turn to how we organized the department to support this strategy.
Core versus context
Cisco’s legal staff has adopted a core-versus-context framework along the lines set out in Geoffrey Moore’s book Living on the Fault Line: Managing for Shareholder Value in Any Economy (HarperBusiness, 2002). Moore explains that when reallocating resources and human capital, a business can gain a competitive advantage by focusing on what is ‘core’ in the enterprise and by outsourcing ‘context’ activities. To help define how we have used the core-versus-context framework within the Cisco legal department, it is worth spending some time explaining the key tenets of our approach.
Core work is about creating market-differentiating value. It is what makes a company unique to its customers. Some companies have created their core around dimensions such as brand, product differentiation or service.
Context work is just as important, but in a different way. Context comprises the vast majority of the business operations that support the core. All companies must have context, but the key is to do context work effectively to improve productivity. Even though at the broader business level, the contracts function is arguably all context, the Sales Legal team does follow the model to focus resources on the most differentiating, customer-focused elements.
Specifically, this framework has been embraced in our contracts process with the fundamental goals being to:
• make context work as efficient as possible;
• improve productivity in order to redeploy team members to support core areas of the business; and
• use core and context exercises to determine strategy around outsourcing, out-tasking, or eliminating activities, as appropriate
Chart 1 on page 9 shows how the Cisco legal department has applied the core-versus-context framework to its activities. All Sales Legal activities can be grouped into one of four quadrants:
Context — mission critical
These are key activities over which we want to maintain control, but since they do not represent a competitive advantage, we are willing to out-task them to our trusted partners.
Context — non-mission critical
These are tasks over which we don’t need to have control and that we want to make as efficient as possible. Here is where we outsource.
Core — mission critical
We perform these tasks in-house with the majority of our resources and develop key initiatives. These activities support functions that drive Cisco’s competitive advantage.
Core — non-mission critical
These tasks contribute to a competitive advantage, so we want to maintain some control, but they are ripe for improvement through a self-service model.
Our mantra is to always focus our resources on what is core for Cisco’s business. About 85 percent of the legal department’s resources are focused on the core activities. In our view, the core legal activities support the design and sale of Cisco products and services. In contrast, the purchase and leasing of real estate is a context activity. We have more than 100 people supporting sales, two people supporting 65,000 people on human resource matters, and no one is exclusively dedicated to workplace facilities and real estate.
Chart 1 also brings with it another reflection on how we are looking to build out our department. We have developed a range of IT tools to globally support those activities that can be repeatedly carried out in the same manner. As we will describe shortly, a key part of our global contracting strategy is the effective use of tools to ensure global productivity with minimal administrative overload.
Cisco’s contracting philosophy focuses on placing key resources where our clients and customers need them. The Sales Legal team is spread across 26 cities around the globe directly supporting sales contracts. The value of a local resource is to engage directly with the local clients and customers by participating in the complex deals in the region. Local customer and client demands will, in our view, continue to require local solutions that embrace the language, law and culture of a region or country.
We support these local resources with virtual back-office teams, global tools and a disciplined process, all of which we try to make seamless to our clients and customers.
Process, policy and tools Where we have repeatable processes — contract renewals, non-disclosure agreements, internet commerce agreements and manufacturer’s authorization forms — we embrace tools that truly enable self-service. We firmly believe that we cannot take work away from the legal function and place it on our clients. We attempt to provide our clients with effective self-service tools that empower them to do what they need to do anywhere in the world, at any time. We are successful if our clients no longer have to determine whom they need to talk to in our department and then explain what they want and follow up to ensure execution.
Likewise, we have come to the conclusion that intricate, regional policies do not work in the fast-moving global environment in which we live. Our experience has been that a detailed policy is out of date by the time it’s been reviewed by all relevant stakeholders and publicly made available. We are tending toward more umbrella policies that are sustainable in today’s world.
Finally, we have tended over the years, with our use of IT, to build enabling tools and platforms. By this, I mean the tools should not be application-specific or for one restricted purpose, but instead generic enough to be adapted to multiple needs and uses. Another goal is that all tools should be available globally. Tools and processes can provide the glue ¯ a consistent interface ¯ that joins people with different legal and business backgrounds around the world.
Here are some specific examples of tools we have deployed at the center of our sales contracting process:
• We used to have about 250 ‘contract templates.’ We have housed these in a common tool, with everything stored in a clause library. This means that we now have only eight core template families, and the local templates that are used in South Africa under South African law will be consistent with, say, the local templates used in India or Korea ¯ only local law, language and practice may cause differences. Any needed updates to the templates can be accomplished with a few keystrokes and, since everyone on the team uses the online tool for creating contracts, we can rest assured that any update has been instantly adopted by all the sales theaters.
• We have a web-based global playbook and legal exchange. The playbook provides online guidance and negotiation fallbacks for everyone on the team. Legal exchange supplements this with a structured chat room that is available 24x7; all members of the global team can post and respond to questions and difficult contract issues. The ability to post a question at the end of a day at the office, tap into the collective experience of our global team, and return to the office the next morning with a number of creative solutions to your question in your email in box is tremendously empowering. There were more than 8000 hits on the playbook in the past year, and we average about 350 contributions a year to the legal exchange system. The goal for our playbook and legal exchange tools is to get out of the one-to-one conversation and scale to the many-to-many, and ensure that all of our global team can contribute to our shared know-how.
Our sales contracts department aims to create a structure in which a locally placed resource focuses on the core tasks, supported by virtual teams, enabling tools and simplified processes. In this vision the local resource becomes an empowered member of a global team where access to information, the ability to act immediately to meet client and customer needs, and the available channels to engage with the rest of Cisco are not hampered by geographic constraints. Technology is the key to this world.
When we develop our tools, processes and policies, it is with the local legal resources in mind. Our goal is to continue to make the local resources more productive and more focused on the core of what matters for Cisco, and to bring to their aid a virtual team and tool set that can take away the routine, enabling them to act more quickly, deal with more complexity, and continue to increase our productivity. We see this as a competitive advantage.
Paul Segalini is a sales-side contract negotiator at Cisco. He has spent his entire career in high technology with a number of Fortune 500 companies. He has spent the last 14 years in a variety of sales-contracting roles, including the last eight years with Cisco’s Worldwide Legal Operations team.