How to implement a Contract Lifecycle Management (CLM) tool?
The Contract Lifecycle Management (CLM) segment is one of the most dynamic in the software industry. According to an IMARC Group study, the market, currently estimated at US$1.5 billion, is expected to reach US$6 billion by 2026.
This growth, which has been sustained since the 2010s, has led to the emergence of nearly 200 Contract Lifecycle Management solutions, sparking the interest of companies. However, the profusion of offers, which complicates the purchasing process, has also given rise to numerous questions.
- What are the best tools?
- How should we choose?
- What is the business case?
We are regularly asked these types of questions and we will endeavor to provide some answers here.
Contract Lifecycle Management software: what can it be used for?
First of all, let’s remember that Contract Lifecycle Management solutions aim to automate the management of the contract lifecycle, from its drafting phase to its closing, including the so-called performance phase (post-signing).
Gartner offers the following definition, “Contract lifecycle management applications digitize and automate the contracting process to improve the speed, efficiency, visibility and compliance of legal-document management across an organization.”
Contract Lifecycle Management solutions therefore aim to cover, from end to end, all stages of the contractual relationship, addressing the needs of multiple stakeholders within the company (legal experts, operational teams, risk managers, buyers, finance teams, etc.).
More specifically, these solutions aim to:
- Reduce contractualization lead times, particularly the time devoted to negotiating clauses prior to signature;
- Improve visibility on the content of contracts and associated contractual risks, by making it possible to identify in real time the applicable conditions, deadlines, and commitments made by one of the contracting parties or granted by the other;
- Increase team productivity and efficiency by avoiding low value-added tasks such as reviewing, collecting, reconciling, and consolidating information from the contract database.
According to Gartner, no fewer than 90% of multinationals and 50% of midsize companies plan to implement a Contract Lifecycle Management solution in the coming years – a sign that companies have recognized the importance of better contract governance and proactive contract management (for more information on this point, see our book, co-authored with Alain Brunet: Contract Management, Springer, ISBN 978-3-030-68075-6).
What segmentation is there between publishers on the Contract Lifecycle Management market?
There are many competing Contract Lifecycle Management solutions on the market, but not all of them have the same functionalities, nor the same ability to manage the contractual relationship in an extensive and integrated manner.
Although most solutions offer collaborative features in the upstream phase (pre-signing), one of the main dividing lines lies in the ability to manage the post-signing phase, with solutions that are more or less mature in terms of contract monitoring, commitment management, and operational performance monitoring.
The solutions on the market stem from recent developments and still bear the marks of their original DNA, with several distinct types of players:
- Players in the (mature) procurement and e-sourcing segment, who have expanded their (procurement) contract management functionalities by digitizing collaboration, vendor management, or supplier relationship management (SRM) processes;
- Actors from the document management world who capitalize on the power of their recognition (OCR), indexing, and search engines;
- Publishers in the legal software segment who have developed contract management modules, in an essentially compliance-centered approach;
- Pure player contract management solutions, often developed by specialized start-ups, cultivating a “best-of-breed” approach.
Faced with this profusion of offerings, the main Contract Lifecycle Management publishers are now seeking to integrate with leading software packages, aware of the necessity of having APIs with Salesforce, SAP (Ariba), Docusign, etc., to be able to meet the key IT integration challenges.
We would also note that customers thinking about acquiring a solution should plan ahead for the consolidation phase of the CLM market that will inevitably occur in the coming years.
In practice: what concrete benefits can you expect from a CLM solution?
Beyond the intangible benefits (ease of access, visibility of the contract portfolio, transparency, traceability, etc.), the business case for CLM projects is most often based on the following triptych.
Risk Management
CLM solutions help companies to understand underlying business risks. By developing scoring logics, sometimes supported by artificial intelligence, these software packages provide qualified information to evaluate the relevance of the contract templates proposed by contractors, to qualify deviations from the company’s standard clauses, and to propose alternatives to facilitate the negotiation process.
Compliance
CLM solutions help transform a document written in “natural language” into structured content, composed of searchable metadata, making it possible to analyze and verify the compliance of contractual clauses with company policies (risk policy).
Efficiency
CLM solutions help to accelerate and automate the legal review process, enabling teams to focus their time and expertise on non-standard or high-risk clauses, where the legal team’s added value is most tangible.
How can iQo support you in your Contract Management issues?
In a crowded CLM market that competes via marketing efforts, companies naturally compare the functionalities of the various tools in relation to their needs. We also emphasize the importance, in any solution selection process, of integrating a detailed understanding of the business case and of market developments: looking beyond the various players to take into account product roadmaps and changes stemming from artificial intelligence seems to us to be an integral part of the decision criteria.
Specialized in Contract Management / Claims Management for nearly 15 years, our teams have developed a range of services, references, and benchmarks that are unique on the market, based on two pillars.
Strategy consulting and organization of the Contract Management function
- Audit of exposure to contractual risks
- Diagnosis of organizational maturity
- Defining and implementing Contract Management processes and the related organization
- Training and developing internal frameworks
- Assistance in the choice of tools
Contract Management / Operational Claims Management for large projects
- Contractualization strategy
- Contract reviews (clauses, risks, etc.)
- Contract management assistance during the performance phase
- Qualification of discrepancies and quantification of damages
- Drafting or management of claims files