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Electronic Contracting: Have You Signed Up?

January 26, 2011

Electronic signatures appear to be gaining real momentum. After many years of debate (including regular discussion at IACCM conferences), results from leading service providers suggest that the reservations (over issues of enforceability) and inertia (over questions of benefit) are at last disappearing.

Last week, I spoke with Jason Lemkin, CEO of Echosign, who had just reported 2010 year-on-year revenue growth of 120% and almost ‘3,000,000 users e-signing across the globe’. I asked Jason why this upsurge was occurring – was it, for example, primarily seen as another way to cut costs?

The answer was interesting. Jason’s view is that the driver has more to do with web-based technologies maturing than with efficiencies and cost. “Executives are saying ‘We’re doing so much on the web, why can’t we do contract signatures?'” The failure to automate is seen increasingly as not just an irritant, but contrary to the image that businesses want to project. This is reflected in the fact that new Echosign clients are not only tech companies like Google and Facebook, but also more traditional brands such as Aetna and P&G.

“Word and e-mail were great efficiency gains (for the contracting process), but management wants to see next steps. Many have invested in contract lifecycle tools and these have progressed from store and manage, to create agreements, to integration with other systems and processes. E-signing is an obvious advance – and of course, it reinforces the idea of being a company that is easy to do business with, collaborative.” As mobile devices such as the I-Pad gain adoption, the ability to sign ‘on the go’ is important to good business controls.

While Procurement has been the primary driver for many contract applications, the advance in e-signature software has been promoted more by the sell-side of the business. They are of course anxious to close business faster, to reduce the risk of second thoughts. And internal control functions welcome the increased tracking that electronic signatures offer, ensuring compliance with audit rules.

I asked Jason about the jurisdictional barriers since, in my experience, a major inhibitor to e-signing has been the concern by law departments over enforceability. From his answer, it is clear that many still require master agreements to be physically signed (with clauses enabling e-signature thereafter); this is reflected in the rapid growth of e-signing for post-award documents (amendments, renewals etc.).  

“The market has been driven by US and UK multi-nationals to support their international contracting. We launched a global version, multi-language. It is certainly true that there is country variability in enforcement, but 95% of the issues can be resolved through choice of law,” obserrved Jason.

Perhaps one of the most significant comments to come from our discussion was the parting sentence.”Once your contract process is on the web, expectations of speed, collaboration and visibility grow – and that impacts on the wider expectations the business has from contracts and legal staff”.

Once again, the groups that flourish are those that are leading change, rather than being seen as reluctant or opponents.

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