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DocuSign's Road Map for Success Relies on the Propagation of This "System"

By Asit Sharma - Apr 4, 2019 at 11:39AM

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Sometimes you have to reveal needs to customers which they're not aware they have.

DocuSign (DOCU 4.00%) recently displayed the type of monster customer acquisition growth that has helped push annual year-over-year revenue improvement above 35%. The digital signature company added 22,000 customers to its rolls over the last three months, bringing its total of paying customers to 477,000. Of course, DocuSign's marketing model entices customers to sign on for the company's low-cost, core electronic signature service first, with the aim of selling additional services tied to expanded use cases over time.

These expanded use cases generally fit within a concept DocuSign hopes to embed in the managerial consciousness of both SMBs (small and medium-sized businesses) and enterprise clients: Systems of Agreement, or SOA. SOA is explained in a white paper written by two of DocuSign's executives along with a third co-author called The Rise of Modern Systems of Agreement.

The paper points out that most businesses have established systems of record (SORs) -- that is, sources of business data essential to customer relationship management (CRM), human resources, IT, and enterprise resource planning (ERP). Businesses also have systems of engagement (SOE), which facilitate internal and external communication (i.e., email, word processing and spreadsheet programs, video conferencing software, etc.). 

However, the majority of businesses, large or small, don't possess an SOA, a "collection of technologies and processes used for preparing, signing, acting on, and managing agreements."

DocuSign has identified over 70 types of common agreements that span major functions like finance, marketing, sales, human resources, and operations. Through its SOA white paper, DocuSign posits that time and money can be saved through better handling of company data that will eventually find its way into typical agreements like vendor contracts, sales agreements, invoices, nondisclosure agreements, and a host of other documents that constitute legal contracts.

A person signing a document on a tablet device with a stylus.

Image source: Getty Images.

Perhaps mimicking the evolution of modern systems of record and systems of engagement, DocuSign predicts that systems of agreement will flourish as the agreement lifecycle -- which can be more succinctly phrased as prepare, sign, act on, and manage -- is automated.

Of course, since it's attempting to introduce and proselytize the concept of SOA, DocuSign is investing heavily in cloud-based systems to facilitate real-time agreement generation and management, most recently through its purchase of automated contract lifecycle software leader SpringCM in September 2018.

DocuSign is also building out components of its SOA technology on Salesforce.com's (CRM 1.76%) customer relationship management (CRM) platform. It recently introduced DocuSign for Salesforce Essentials, which aims to equip SMBs with the organization's e-signature technology. Executives have also promised the impending rollout of DocuSign Gen for Salesforce. Powered by SpringCM's technology, this new app "allows sales reps to automatically generate signature-ready contracts with a few clicks, driven by data from a Salesforce opportunity," in the words of CEO Dan Springer on DocuSign's recent earnings conference call.

It's not difficult to imagine how adoption of the SOA concept could lead to a more efficient agreement process within and between companies. Take nondisclosure agreements, or NDAs. These agreements typically allow two companies discussing a business proposition to map out sensitive information areas that each side agrees not to share with outside parties.

In current practice, NDAs go through an often-drawn-out drafting process in which each company adds specific information types that are prohibited from outside disclosure, like customer information, trade secrets, manufacturing processes, and strategic plans.

In the future, two parties that embrace the SOA concept may already have detailed nondisclosable information types categorized and accessible to the SOA system in separate internal documents, leading to near automation of an NDA document. This would trim down the current iterative drafting process and require minimal revision from legal advisors.

Will DocuSign be able to convince its customers that they need to build a new type of system that they weren't aware they lacked? It seems clear that wide acceptance of the SOA concept could create the best-case scenario for DocuSign's future revenue expansion. This systems-based approach to agreements may be most useful for larger, enterprise clients.

Even if the SOA doesn't catch on as necessary business architecture, DocuSign should still benefit greatly from a widening of use cases for electronic signatures and agreements. It's likely to continue to push innovation in a piecemeal manner through platforms like Salesforce, which allow companies to fractionally invest in business automation through integrated apps. In sum, DocuSign doesn't have a problem acquiring customers, but to prosper over a long horizon, it needs to convince its purchasers to continually invest more in the "prepare, sign, act on, and manage" agreement lifecycle.

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