Almost 90% of customers who enter into a contract with OutSystems accept the company’s online master service agreement as-is, but there’s still room to make the contracting process more efficient, the company’s vice president of commercial says in a webcast with LinkSquares Chief Legal Officer Tim Parilla.
“Where do you go when almost 90% of your customers just accept your online MSA, with no negotiation?” said Shawn Hoyt, an in-house legal veteran who joined OutSystems last year. “It opens up this world of possibilities.”
OutSystems is a software-as-a-service company that hosts a low-code platform for companies to build their own customer-facing apps and portals. Under its high-volume business model, the company onboards hundreds of customers a month, typically at low-dollar amounts, with the goal of making the service easy and useful enough that they’ll convert to higher-value uses of the platform.
“If they have a good experience, the product expands on its own,” said Hoyt.
To keep up, the contracting process must be quick and easy, so the legal team has created a tiered system in which salespeople can complete on their own, without any deal desk involvement, tier 1 deals. These are deals in which the customer accepts the standard contract as-is.
Tier 2 deals are those the salesperson and customer agree to by drawing from a set of pre-approved contract terms. They can also go forward without deal desk involvement. Tier 3 and 4 deals require deal desk involvement and tier 5 deals are those that present novel issues requiring review.
“Tier 5 are the ones we haven’t seen before and might need to go all the way up to legal,” Hoyt said. “Then, once we craft a response, we can push that down and make it tier 3 or 4 for the future.”
The idea of reusing a provision, once it’s been crafted by the legal team, along with empowering salespeople and others to get deals done using the tiered approach, are Hoyt’s go-to tactics for scaling the process as the company grows.
“Reuse and empowerment, in my view, are the two ways you scale,” he said.
With the high volume approach, salespeople have the flexibility to cut a deal without having to maximize every term, including pricing, as long as they stay within the parameters of the system.
“Maybe it’s okay in some situations to underprice it a bit but that’s the way we’re going to get the most customers on board,” he said.
By building in the pre-approved terms and adding new ones as they get written by the legal team, the deal desk effectively becomes the central repository of expertise for getting complex deals done, Hoyt said.
“The average salesperson in the course of the year actually doesn’t do that many deals, so even though they’re knowledgeable about how to sell the product, they’re not knowledgeable about things that can happen over the course of negotiation,” he said. “If an objection comes up, how do you respond to that? If you need to navigate the internal approval process, how do you do that really fast?”
Answers to these questions, and the process salespeople follow, are built into the system.
“We anticipate the objections that might come in and pre-build the fallbacks and also pre-build the delegation of authority,” he said. “So, rather than each time an objection comes in I’ve got to figure out who approves it, ideally they’ve already been empowered to adopt those positions without having to seek approval as long as they’re within certain parameters. That way, you can respond to objections quickly without having to go through a lot of process.”
The company has about 5,000 customers in almost 90 countries; Hoyt’s goal is to scale the deal desk to handle 10,000 customers.
“Negotiation takes money, time and resources,” he said. “They have a cost. If it's a small deal, it’s not worth it to negotiate.”
That leads to the tiered system, he said. “So, we have no-touch and low-touch thresholds.”