IBM aims to become a premier globally integrated enterprise, where work flows to wherever it can be done best and where open environments allow powerful innovation. This strategy means that new product and service solutions are being launched all the time and there is continuous expectation that all employees will contribute by generating higher value.
It is two years since we last interviewed M.C. McBain, Vice President Global Alliances & Contract Development . Since then, IBM was the inaugural winner of our ‘Most Admired Companies for Contract Management’ and has undergone significant evolution in the way it handles terms and conditions development and negotiation. This interview offers an update to the IBM approach to contracting – both in terms of supporting product and service solutions and in ensuring that the contracts themselves represent solutions to customer and market needs.
IACCM: When we last spoke, I recall being especially impressed by the way that IBM had devoted contracts expertise to the product lifecycle. This yielded a range of benefits, but especially that products and services came to market clothed with appropriate terms and contract structures – and that there were resources in place to ensure continuing alignment over time. Has anything changed?
MC McBain: Since we last spoke, we have seen the consolidation of the Contracts & Negotiations function with the Legal department. This has allowed the legal standard agreements team – the group that designs and maintains IBM’s core contracts – to be integrated with the team that oversees broader policies and practices for the product and service divisions. This has enabled increased speed and responsiveness to the needs of the business and external changes. It also ensures that IBM’s agreements and terms are flexible to the needs of solution packages.
IACCM: I know that one of your goals is to stay ahead of the game – to anticipate shifts in the market, rather than find yourself always reacting. Does that remain a key objective?
MC McBain: Absolutely – and there are two examples which I would like to use. First, we are focused as a group on ‘the next big thing’ – or, given the scope of IBM, I should perhaps say ‘the next big things’. This means we are focusing work on solution initiatives and technologies that have high impact. Current examples are Cloud Computing and IBM’s ‘Smarter Planet’ initiatives, programs such as new models for electric grid management, water management, and healthcare . Working in leading-edge areas like this is very exciting and rewarding for contract professionals.
The second example is the need for ever-increasing sophistication in understanding customer expectations. You may recall when we last spoke that we had developed a market management model, laying out eight key relationship types which facilitate businesses in shaping their customer or partner offerings and ensuring timely involvement of the right support resources. We try hard to stay on top of changes to these models and to develop contract terms and practices that are appropriate for different relationship segments.
Through our client value initiative, we seek to monitor differences in buying patterns and values and to adjust contract offerings accordingly, as we bring new solutions to market or learn from shifts in market needs. Sometimes that is hard; for example, we know that customers who are interested in Cloud Computing typically prefer a fully electronic service – click and accept contracts, electronic invoices etc. But such approaches may not be legally acceptable everywhere, some countries simply do not allow the advanced techniques our customers would like. So we must monitor, adapt and adjust to come up with the best solutions.
IACCM: ‘Ease of doing business’ is viewed as an important issue for many of our members – facilitating better internal and external relationships. As we know, that can be tough to achieve in an environment of continuous and rapid change – especially reconciling old business models with the needs created by new solution offerings. Is this an issue that features in your work?
MC McBain: We learned long ago that ease of doing business requires a ‘one company’ approach. Customers and business partners are doing business with IBM Corporation, not its individual divisions or product groups. So we must ensure consistent ‘look and feel’ and the contract must have solution characteristics. In more recent times, we have been further extending this philosophy. We have focused on designing systems that deliver integrated ingredients, often from an extended supply network or ‘eco-system’ that goes beyond IBM.
We have a massive advantage over companies where contracts and legal groups are fragmented. On my team, we work with everyone and this offers unique insights and opportunities for cross-fertilization of needs and ideas. It means that we are not only better at innovating, but that when we innovate we have the potential to do it consistently across the enterprise. If you like, you could say that when it comes to contracts and contract practices, we operate as a center of excellence for the enterprise.
But of course having the vision and the information is only one part of the story. As your question implies, the challenge is often to ensure that new commitments can be matched by execution capabilities. Enterprise modeling has allowed better and faster understanding of the downstream connections. We have a strong belief in ‘ Get it right rather than fix it’ – so that is why we have invested so much in having a proactive front-end contracts and legal organization. We get involved right at the outset of product and service ideas and concepts, we ask questions early to be sure that the terms and commitments can be shaped as part of the planning, not as some after-thought.
IACCM: Despite ever-tougher global competition, IBM remains one of the most successful brands. We know from past experience – and recent results – that the Corporation understands the importance of contract terms and contract management discipline in demonstrating and delivering value. What are some of the key lessons for those in contracts and legal groups?
MC McNeill: You have to be ready to make a cultural shift – perhaps on a regular basis. We operate in a global economy and business conditions are often tough. The business demands that we deliver innovation, yet with models that can be replicated and which we are confident about delivering.
I would say that businesses must get the front end right. The contracts and terms – and the associated resources - that support solutions must be right at the outset, they must be affordable and they must be responsive to on-going needs. You must build market confidence in your ability to deliver against your promises.
Business analytics is also important and another indicator of the cultural shift that I mentioned earlier. Traditionally, contracts and legal groups both tended to work at specific deals and attempts to capture and learn from experience were limited. That has changed; we must capture and analyze data so that we are aligned with the market and customer needs from the outset.
Finding and developing the right people for today’s contracts groups can be tough. In a solutions market, you need knowledge workers with critical skills who know what it will take to compete effectively. You need expertise and professionalism – people who will not compromise on quality and reputation. This really is key in a solutions market, where customers rely on the outcomes you have promised.
IACCM’s Tim Cummins interviewed M.C. McBain on May 29th, 2009.