XML Takes Pain Out Of Contracts

By Tom Smith

Two early users of an XML-based transaction and document exchange system are achieving significant cost and cycle-time reductions in executing contracts with customers.

The State of Utah's Department of Community and Economic Development and software developer Novell Inc. are in the early stages of deploying NxLight Inc.'s NxLight Transaction Network. The State of Utah has deployed the system to cut the time required to process contracts with companies that are receiving economic development incentives. In Novell's case, the company is using the system to manage the thousands of boilerplate contracts it executes with K-to-12 schools.

Today, neither company has integrated the contracts it's managing into other corporate systems, but both indicated that the system's use of XML as the means of packaging and delivering information will make it easy to integrate contracting activities into financial systems, customer relationship management (CRM), and even enterprise resource planning (ERP) systems.

Their efforts with the NxLight Transaction Network address a number of business processes that are core elements of supply-chain strategy: customer service, contract management, and contract negotiation, to name a few.

Better Controls, Faster Turnaround

Utah's Department of Community and Economic Development/Business and Economic Development Division has deployed NxLight's system on a hosted basis to accelerate execution of contracts with employers that apply for state incentives that reward their job creation results.

In the past, an employer would print and complete an application for incentive funds off the organization's Web site, then submit more than a dozen copies of that form to the state, which would evaluate the application and determine whether to approve it. If it were approved, the two sides would enter into a contract negotiation process that involved painstaking back-and-forth e-mail communications between attorneys that would mark up the document based on their requirements, making it difficult to exert version control. "That process was extremely insecure; we had no idea what changes were being made by the company or by us," noted Tamee Roberts, program specialist with the Department of Community and Economic Development.

NxLight's system builds and transmits what the company refers to as smart packages -- XML-based documents with embedded workflow rules and business logic. It also includes templates for common business processes. A number of security options are available but, in a nutshell, companies have the ability to use digital certificates to validate the identity of those signing contracts. A business partner only needs a browser to participate in NxLight transactions.

The State of Utah is using NxLight on a hosted basis. With the software in place, the state approves the application for incentive funds, and notifies the company by e-mail that a contract is now available for review. The company is given an account to log in to NxLight. The company can access and print the contract, but cannot make changes. The state has exerted change control so that only its employees can revise a contract. In a typical scenario, Roberts will collaborate by phone with the company, make necessary changes, save those changes, and then let the company see the updated document in real time.

After obtaining a digital certificate, the company applying for incentive funds can then digitally sign the document, followed by the state giving its signatures; e-mail alerts are used to notify each state employee that the document is ready to be signed. Once completed, the company applying for funds can access and print the completed, signed contract.

In May, the state completed four such contracts through NxLight, compared with three contracts in the preceding six months. With the reduced attorney time and document handling costs, a given contract has been reduced from roughly $7,000 to less than $1,000, Roberts said. The system has nearly paid for itself already, Roberts said.

Roberts said the state selected NxLight in large measure for its workflow functions, its ability to create an audit trail of all activities with the document, and the ability to support digital signatures. "Looking to the future, we're going to have to make this jive with state finances, state archives, and different departments," Roberts said, and XML should facilitate that integration.

Managing Software Contracts

Novell, the big developer of network operating system and directory software, is also in the early stages of deploying NxLight. The company is using the system to put the thousands of contracts it signs annually with K-to-12 schools online. Because those contracts are essentially standard -- or "transactional," as the company refers to them -- there isn't lots of back and forth with the customers.

In fact, NxLight affords the ability to reduce several steps in the process. Prior to this level of automation, there was required interaction between the customer and the Novell reseller, then the reseller and Novell on the front end of signing a contract. Then similar interactions happened in reverse, as Novell worked with its reseller and the reseller closed the deal with the customer.

"One of the really cool things about this is the face to the customer we're achieving," said Mike Bready, director of contract management at Novell. "Previous to these types of contracts, we had a two-loop commerce system. It was almost like a figure-eight."

Now Bready's organization gives a URL to the K-to-12 salesperson, and the K-to-12 customer goes to that URL, creates a NxLight account, and goes directly to the Novell contract. The school enters appropriate information and the system fills in some required details as well. The customer signs the contract and receives notification to fax a purchase order over to Novell; when the purchase order signature matches up with that on the contract, Novell then signs the contract as well.

This automation of transactional contracts -- which could save as much as 75 percent of Novell's processing costs -- is a precursor to more extensive deployment of NxLight technology. Future possibilities include management of orders from big customers that have negotiated terms with Novell and place frequent orders for software based on those terms. Automating such interactions could be a boon when dealing with big customers such as JP Morgan Chase. "Chase will sign a contract once every several years but will order nonstop," Bready said.

He added: "Now that I've captured this contract in XML, I can exploit this through the entire enterprise to hook into CRM and ERP systems." The company's overall goal is to give customers a portal to access all the contracts they've signed, as well as their sales history. Novell's own DirXML directory technology will be key to achieving this level of integration, Bready noted.

Farther down the road, Bready believes Novell will be able to use NxLight even for its negotiated contracts.

The software developer will likely spend about $1 million around the entire NxLight implementation -- including consulting services and systems integration -- and achieve payback in 12 to 18 months. NxLight software -- which Novell plans to host internally in the future -- will represent at most about $200,000 of that investment.