Is CLM a Good Investment? Exploring Processes, Benefits, and Risks

Explore the potential of CLM as an investment. Gain insights into the processes, benefits and potential risks linked to investing in CLM solutions.
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Legal teams have often struggled with manual contract management. This lack of oversight into agreements results in missed deadlines, late fees and auto renewals putting a strain on the business's profit. Without sufficient transparency and oversight, manually managing your portfolio of contracts is a time-consuming and costly process that introduces your business to unnecessary financial and compliance risks.

Contracts run through the heart of every business. But like any investment, proving the value of a contract lifecycle management (CLM) comes with its own set of challenges. This guide will explore the potential of CLM as an investment, the processes and the benefits.

What is Contract Lifecycle Management?

Contract Lifecycle Management is a process that encompasses multiple key phases of the contract lifecycle, with its core goal to ensure that contracts are managed in the most efficient way that maximizes value, minimises risk and ensures legal compliance.  

Contract lifecycle management software brings consistency to contracting processes while speeding up the contract lifecycle. The software automates manual tasks, allowing legal teams to manage their contracts, with minimal intervention.  

Why do businesses use CLM software?

Contracts span the entire business. But despite this, contracting processes are often manual, complex, and almost always involve risk. If you work in a department that frequently interacts with contracts, you’ve probably encountered delays caused by bottlenecks. If you are part of a legal team, you’ve likely been inundated with requests. We’ve highlighted some of the reasons why businesses take on a CLM solution:

A lack of visibility

Contracts move with time and storing them in one place with no insight into them makes it challenging to keep up with their contents, leading to unwanted renewals, missed deadlines and compliance issues.

Lack of tech infrastructure

Every business has contracts, and efficiently managing them is critical to its success, but investing in technology can be daunting, and legal teams often underestimate the time and effort it needs as part of the implementation process to set the solution up for success.

Slow contract cycles

Contracts and business growth are intertwined. When contractual processes are slow, the business is slow. So, as your contracts naturally evolve, your tools also need to so that they can continue supporting the business.

Legal and commercial teams are disconnected

The contract lifecycle process sits between legal and the wider business. However, these touchpoints can quickly become a bottleneck, leading to inefficiencies and delays in getting to revenue.
If you’ve faced any of the problems above, then yes, you should invest in CLM software. With the right CLM solution, the whole organisation will reap the benefits of streamlined and enhanced contract management. Businesses that implement a CLM tool see a vast range of benefits, but to simplify it, we’ve listed the top five below.
·     Mitigated risk
·     Enhance business efficiency
·     Faster and improved revenue generation
·     Data-driven decision-making
·     Improved cross-functional collaboration

How CLM works

Each business is different and will have its own differing set of stages, but to simplify the process, we’ve provided the eight most commonly used stages of the contract lifecycle.

1. Requests

This initial phase is pivotal, laying the foundations for the agreement between involved parties. At this stage, parties collate the necessary information and documents for the new agreement.

2. Authoring

Contract authoring, also known as contract generation or drafting involves establishing the terms and conditions, clauses, key dates and other essential information.

3. Negotiation

Once the contract is drafted, parties engage in negotiations to agree on terms and conditions. This back-and-forth process often involves manual edits in Microsoft Word, which can introduce unnecessary risks and lead to delays.
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4. Approval

The approval stage is when parties legally agree.

5. Execution

After signing, the contract becomes legally binding, and parties must adhere to the agreed-upon terms.

6. Storage

Once a contract has been executed, it's then stored. Cloud storage is the most popular method. but many still rely on traditional methods. Ensuring that signed contracts are easily accessible and visible to stakeholders is key to their long-term success.
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7. Auditing

The auditing phase, sometimes overlooked, it allows parties to review the agreement's relevance and ensure compliance.

8. Expiry

All contracts have expiration dates. Parties must decide whether to renew or let the contract expire.

Is CLM a good investment?

CLM can significantly impact and create ROI in various ways. By automating the contract lifecycle, CLM software reduces the need for human intervention, enhancing efficiency and reducing time and associated costs. With faster sales cycles and improved visibility into contract performance, business stakeholders can expedite faster and improved revenue generation from their contracts.  

In-house legal teams face many demands that can lead to bottlenecks and delays,impacting business operations and creating friction between departments. One central painpoint for legal teams is the manual handling of contracts, which can take up significant time and resources. However, adopting a CLM solution can help to ease these issues, as it can automate many aspects of the contract lifecycle including generation and review.

"With Summize in place and our Slack integration for self-service contract creation, NDAs and trial agreements are being signed faster, which was a key objective for Thought Machine. Version control is easier, stakeholders are pleased with the new template/process, and the legal team has more time to spend on the more strategic work".

Kate Armstrong, Senior Legal Counsel /Head of Legal Design and Operations at Thought Machine.

You can read the full customer story here.

The important features to look for

Implementing the right CLM solution can significantly impact your legal team and wider business. So, to ensure that the solution can reduce costs and return ROI, as well as address contractual challenges, you must research the market beforehand. To make this easier, we have provided a list of the top features that you should look for in a new CLM solution.  

Integrations: The software should embed contact workflows into your existing tech stack to create a zero-change approach to CLM.

Central Repository: It should offer a central repository for your agreements and related files accessible by a simple search, making contracts accessible to business stakeholders.

Legal front door: Does it create a legal front door that’s accessible to the wider business, enabling self-serve contract generation, first-pass reviews, issue resolution and guidance in Teams or Slack?  

Artificial Intelligence:
A leading CLM will utilise AI across the contract lifecycle to speed up cycles and automatically extract contractual information and data, minimising the need for human intervention.
Rich data:
A CLM tool should surface hidden data, allowing you to improve your decision-making with data-rich reports and analytics.  

Key date extraction: Does the CLM automatically extract key contract milestones such as auto-renewals, with built-in email reminders?

Playbooks: Is it possible to integrate your company Playbooks to promote consistency and compliance across negotiations?

Implementing CLM across your business

    CLM software is poised to play an ever-increasingly important role in digital transformation for businesses. But CLM implementation comes with its own set of challenges, and with 77% of CLM implementation failing, you must know how to overcome these.  

    To improve your chances of success, we’ve provided some top tips to ensure a successful CLM implementation.

    1. Every department uses contracts, so be sure to identify the business stakeholders and secure their buy-in.  

    2. Make sure that the end user is satisfied with the choice of CLM. They are going to be the ones who use it, so it’s important that they are happy with the choice of tool.

    3. Identify where problems are occurring in your current processes, and how a CLM tool will overcome these.

    4. Establish what success looks like from implementing a CLM. Be sure to have a vision of what you want to achieve so you can work towards the goal.

    5. Review and remediate your existing agreement templates. If they are currently causing you issues, uploading them to a CLM won’t solve your problem.

    6. Appoint a Super User. This individual will work closely with your vendor throughout implantation, acting as the main point of contact between users, stakeholders and vendor. They will help advise and make key decisions around usage and workflows.  

    7. Appoint an Internal Champion. They will be the name behind the project in your business. It’s a great opportunity to champion change and to drive a project that will have a massive impact on efficiencies.

    The future of Contract Lifecycle Management

    The Contract Lifecycle Management landscape is evolving rapidly, and its future is marked by several trends and developments. With teams now operating remotely across the globe, collaboration tools like Teams and Slack are indispensable for modern workplaces. These platforms have evolved into more than just an instant messaging platforms. They have grown into central, intelligent hubs for business collaboration. They are smarter, faster, and integrated into common business-wide applications.  

    This new integrated landscape has led to improved and advanced functionality and a more seamless user experience, ultimately maximising adoption. This approach prioritises the end user, facilitating smoother communication and collaboration, while enhancing the capabilities of our existing tools to contribute to more effective teamwork and communication.  

    Summize seamlessly embeds your contract processes into familiar tools your business already knows and loves (e.g. Teams, Slack and Word) to maximise adoption and prioritise usability. This approach to CLM liberates in-house legal teams from time-consultative work and leads you to high-value legal work faster.  

    Take control of your contract and book your personalised demo today.
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