Category: Contract Lifecycle Management

Until recently, contract management was a manual process, making it rife with inefficiencies, says Charmel Rhyne, Contract Lifecycle Management (CLM) Director for Onit. She shares how the best CLM tools incorporate configurable workflows that adapt to users’ way of working, not the other way around, and shares the seven attributes of a best-in-class CLM system, while conforming to your preferred work style. 

When it comes to business, there’s a lot of talk about efficiency. The concept of efficiency, however, differs for larger corporations. When poor processes, communications and technologies prevail, the consequences are substantial. These inefficiencies hinder collaboration, visibility, compliance and, ultimately, growth.

The need for efficiency is especially prevalent in the legal industry, where the demand for contract lifecycle management (CLM) technology has skyrocketed. The global contract lifecycle management software market is projected to reach $2.9B by 2024, growing at a compound annual growth rate of around 13.5%.

The value of CLM solutions lies in their ability to make companies more efficient by capturing, automating and analyzing the entire contract lifecycle from initiation through approval, compliance and renewals. By eliminating data silos and automating workflows, CLM solutions reduce legal spend so teams can focus on higher value work.

The Pitfalls of Manual Contract Management

Traditional contract management is largely manual labor. From inception to execution and beyond, many teams find themselves cutting and pasting into templates, entering codes, writing and sending emails, searching for documents and data, and saving to multiple drives. While the work may seem mindless or harmless, the manual approach for contract management can come with significant risks, including:

• Inadequate delivery to customers. Failure to meet customer expectations is inevitable without clear and consistent protocols like establishing a project timeline, production schedule and delivery process — leading to missed revenue opportunities, lost time and inflated costs.
• Failure to enforce negotiated supplier terms. If businesses are not diligent about receiving or delivering everything agreed upon, the money gained through negotiations can be quickly lost — particularly if terms are buried in a file cabinet and easy to overlook.
• Time lost from disorganization. Looking for contracts, schedules, notes, and data drains time that could be dedicated to higher-value projects like analyzing data and seeking new contract opportunities.
• Perception as a cost center. Most enterprise employees view the legal departments as a cost center. CLM solutions empower legal departments to stop revenue leakage by proactively managing revenue-facing contractual obligations, eliminating manual processes and introducing efficiencies.

The 7 Attributes of a High-Quality Contract Lifecycle Management Solution

Don’t wait until the inefficiencies of manual contract management negatively affect company growth. The search for a new foundation must begin before the first cracks appear. However, in an industry where CLM solutions have only boomed since the Covid-19 pandemic proved remote or hybrid work possible, where does one begin? Here are the seven key features of a high-quality CLM solution:

• Collaboration – A secure collaborative capability facilitates editing and communication among various team members across departments.
• Client and partner self-service – Highly intuitive, streamlined portals give authorized individuals access to commonly used contract templates and verbiage.
• A central repository – A single source for all contracts and associated documentation means no more searching for information.
• E-sign capabilities – Timely signatures are vital to the contract process. After a contract is electronically signed, the CLM solution should automatically store the contract in the central repository with all the expected notifications and without any additional intervention.
• Routing and approval – The technology should enable the easy building of configurable workflows to route contracts for review and/or approval. Intuitive, lightweight and human-centric user interfaces should require little to no training.
• Notifications – Proactive alerts such as notifications or reminders should be sent by the technology as the contract progresses through its lifecycle.
• Enterprise contract management – The software should manage sell-side, buy-side and corporate contracts.

The Future of End-to-End CLM

The profound impact of CLM solutions is gaining visibility globally as more companies realize the extensive benefits. These cloud-based technologies reduce legal spend and provide painless integration, user-friendly interfaces, and increased workflow for organizations of all sizes and needs. They also introduce more collaborative functionality across departments and external participants. To be truly effective, CLM solutions should increase the efficiency in managing customer contracts in all stages — from review to approval to execution to renewal.

At the end of the day, high-quality CLM solutions must simplify the increasingly complicated contract process. The submission, review, approval, and management of contracts should be in one easy-to-use tool where team members never have to search their inbox or hard drive for the latest version or keep an Excel spreadsheet to manage their contracts.

Contract lifecycle management, powered by analytics and reporting engines, represent a significant opportunity to increase productivity, achieve higher compliance, compress time to revenue and improve accuracy across organizations.

Learn how Onit’s CLM solution supports every element of the contract lifecycle, from capture and creation through negotiations and approvals to execution and management.

Originally posted on Future of Sourcing

This article by Charmel Rhyne was first published on Law.com. 

The final part of this series on CLM’s growth examines how first- and next-generation solutions have evolved can help with selecting the right type of contract management tool. Part one outlined the distinction between contract management and contract lifecycle management and discussed the challenges solved by first-generation CLM platforms and what drives their continued evolution.

By the end of the 2010s, first-generation contract lifecycle management was starting to look very much like a comprehensive end-to-end solution close to enterprise maturity. But these offerings were still costly and expensive. Legal departments began to recognize the importance of taking CLM up a notch with factors like rightsizing, perfecting both buy-side and sell-side solutions, and implementing AI-driven CLM solutions. With those drivers in mind, next-generation CLM was just around the corner.

Brainstorming Next Generation CLM

Software developers have recently been diverging into two general branches of next-generation CLM. One is designed to handle all kinds of contracts—buy-side, sell-side, and otherwise. The second is for only buy-side contracts and primarily included with source-to-contract software packages. Interestingly, statistics show that organizations with either type of solution have been doing well with their CLM implementations of contract repositories and contract reports and analysis, but there is still room for improvement for other processes, particularly when managing all contracts.

Rightsizing is a crucial factor to consider when choosing the most appropriate CLM solution. All too often, a legal department will do due diligence and spend a lot of time deliberating, only to implement a solution that does not meet all its growth requirements or is more than what is needed. By choosing a rightsized CLM solution, you can’t go wrong. For example, by having the ability to configure and deploy the processes you need when you need them, you can enhance existing solutions and add new departments as your company evolves.

AI and machine learning are other areas of innovation taking CLM by storm. When pre-signature and post-signature AI contract solutions are built on an intelligent platform, machine learning and natural language processing come together to empower the organization with a solution that reads, writes, and reasons like a lawyer. Most CLM vendors have focused on the extraction of key terms/clauses, while very few have taken the much harder approach to automate redlining.

Connecting legal to the whole enterprise is another lofty goal, as legal departments often operate in a silo. While it’s no secret they are well-positioned to operationalize internal efficiencies, by investing in relationships with other departments, legal can have a significant impact on the enterprise at large. What does this have to do with contracting? Managing all the necessary steps in your contract process is hard enough internally across several departments. The complexity of managing contracts increases exponentially when you are overseeing them across several office locations, time zones, or languages. The ability to have everything centrally located with changes tracked in real-time becomes critical.

What About the Future of CLM?

One current school of thought says ERP and CRM vendors will expand in the CLM arena, forcing CLM out of its present niche. This is unlikely since ERP and CRM are transaction-driven and CLM merges art and science. The science here is clearly process automation, but what is the art?

A key factor in the future of CLM is the standardization of legal terms—the practice of law is the art. The art is in the negotiation and the exact, precise wording of what’s in the contract. Simplification of standard terms and conditions in contracts would make negotiations easier and less costly—think of how legal invoicing standards were finessed with the establishment of the Legal Electronic Data Exchange Standard (LEDES). Even though some modern solutions allow users to set conditional rules for the review of nonstandard terms, the problem remains that we need more standard terms across the board. The merging of art and science in contracting will be something to watch for in the coming years.

The bottom line is next-generation CLM solutions and other legal tech innovations are driving the industry toward even more intriguing and uncharted territory, and it’s up to all of us to help it get there.

This article by Charmel Rhyne was first published on Law.com. 

This two-part series examines the evolution of contract lifecycle management (CLM), which has accelerated tremendously in recent years. Yet despite the continued innovation driving steep market growth, there is no true one-size-fits-all CLM solution. Many organizations purchase expensive platforms rich with features they will never use, rather than a solution based on their actual business needs. But the right system can help legal teams better position themselves as a partner within their organization, facilitating a streamlined approach to handling contracts with improved business outcomes.

Part I: Ancestors of CLM

The history of contract lifecycle management (CLM) can be traced back over 5,000 years when cuneiform tablets were used to record business transactions. Ledgers and contracts inscribed in clay were as important in ancient times as digital transactions are now in the 21st century. In fact, ancient Mesopotamians routinely used contracts such as labor agreements, sales agreements, and marriage agreements. Interestingly, writing was developed out of the need for contract recording, which was also crucial for true market-based economies.

CM Solutions, Late 20th Century

Fast forward to the late 20th century: The first digital contract management (CM) systems were systems of record — or document management systems — ensuring the accuracy of contract databases was their key function. These were the days before SaaS evolved to the point of sophistication it’s at today, so most software was hosted on-site. As a result, implementations required months to configure and complete. The early days of modern CM consisted of relying on spreadsheets, systems of record, emails, and phone calls, all of which contributed to difficulties of tracking contract status.

First Generation CLM Makes Its Debut

So, what’s the difference between CM and CLM? CM was essentially a document management system in the 1990s and early 2000s. Current CLM software, in contrast, empowers legal, sales, procurement, and other teams with end-to-end control of the entire contract cycle — its lifecycle — using the strategic mix of people and technology to maximize the process. Rather than dealing with a patchwork of spreadsheets and emails, CLM uses a contract repository with automated functionality that supports all phases of the contract lifecycle from capture and creation, through negotiations and approvals, to execution and post-execution management.

The era of first generation CLM was expectedly disjointed. Some software providers focused on specializing in certain domains such as spend management and matter management, while others focused on a specific stage of contract management. And to make matters worse, many vendors called their offerings “end-to-end,” adding to the confusion and disappointment. Although some legal departments and lawyers were initially happy with their rudimentary systems, in the end they invariably found themselves with limited CLM functionality. Since customer relationship management (CRM) and enterprise resource planning (ERP) solutions were already well established by that time, some providers were targeting customers of CRM and ERP with their CLM offerings.

Tweaking CLM to Help Better Meet the Needs of Lawyers

However, CLM has evolved a lot over the past decade. Many of the early CLM solutions were little more than glorified CM solutions with a few extra bells and whistles. While easy to implement, they had difficulty handling the more complicated tasks involved with contracts, as the inherent challenges of contracts presented significant roadblocks to the development of CLM. For example, digitizing the complex contract process and not considering how lawyers negotiate and finalize contracts have been formidable obstacles, given the complexity of contracts and the various functions required (such as redlining).

When you add the fact that many early CLM solutions didn’t fully address how lawyers negotiate and finalize contracts, it exacerbated the problems incurred in software development and usage. Not to mention, there still exists a lack of legal terminology standardization, adding to the complexities of developing effective CLM solutions that meet the needs of most users. Many legal professionals would consider managing contracts to be the most challenging business task in terms of technological and legal issues because of the lack of contract standardization, contract noncompliance, limited contract visibility, and process isolation from other systems. Another key issue is change management – lawyers want to work in Word because it’s familiar and they can avoid having to learn how to do the same thing in newly implemented software. And if the new software isn’t intuitive enough for the lawyers, it won’t be long before they revert to Word.

Fortunately, first generation CLM has gradually evolved over the years to become true next generation CLM solutions and systems of engagement that manage the end-to-end process of contracts, supporting all phases of their lifecycle. Part II of this series will focus on next-generation CLM solutions, and the innovation driving the industry toward even more intriguing and uncharted territory.

Part two of this two-part series will take a closer look at next generation CLM solutions, and how innovation is driving the move toward more rightsizing that prioritizes what users really need, helping to promote long-term success by connecting the legal department across the enterprise as a valued partner.