For legal departments, contracts have long been the forgotten piece of a company’s digital transformation puzzle.
An attorney in the department might be asked to enter the contract process for drafting, negotiation and review, and yet have little insight into the company’s body of contracts as a whole or how the contracts perform after execution. Confined to paper or perhaps a PDF with eSignature capabilities, the contract never got a second look by the legal department unless it was causing a delay in business or resurfacing during a dispute or, worse, litigation.
But that’s all changing, and fast. According to analysts, companies are giving a hard look at Contract Lifecycle Management (CLM) technology that can be used to manage the entire contracting process, from authoring to expiry.
“Customers’ interest in CLM is stronger than ever and is a leading topic raised by users of Gartner’s client inquiry service,” according to the 2018 Gartner Market Guide for Contract Lifecycle Management (CLM).
This should be music to the ears of legal operations professionals, given the legal headaches that come with traditional contract management.
However, when it comes to deploying a CLM solution, it’s not just a question of if but how. Enterprise-wide deployments provide clear advantages for legal operations departments and their companies.
If you are still unfamiliar with the basics of enterprise-wide contract management, here is a quick “5 Ws” guide to this exciting technology.
What: A Contract Management System for All Contracts
Enterprise contract management allows companies to put all their contracts—sales, procurement, HR, corporate—into a single system for holistic management.
This form of contract management is considered a best practice by analysts, if not commonly practiced in the “first wave” of contract management software deployments.
“Many organizations that have implemented a CLM solution have done so for just a portion of their business or a specific business function. This piecemeal approach frequently results in inefficient process workflows and deployment of multiple CLM tools,” Gartner says in its Market Report.
Often, contracts that originate in one department will have dependencies with a contract in another department. For example, a sales contract may precipitate the need for raw materials to be procured to ensure the deliverable is built to spec (in the contract management field we call this “back-to-back” contracting.) By managing all contracts on a single platform, legal operations teams can gain a holistic view across all a company’s contracts for improved analytics, better workflows and reduced risk.
Why: Proven ROI
For historically non-revenue-generating departments like legal, a proven return-on-investment for technology is vital. Thankfully for legal operation professionals, CLM has that covered.
“CLM presents a great opportunity for digital transformation, because it’s practical, well-scoped and executable. The technology is proven, as is the ROI, which companies can use to fund other initiatives on their digital business roadmap,” Gartner reports in its Market Guide.
The value delivered by enterprise contract management can be divided into three categories: acceleration, protection and optimization. Contract turnaround becomes faster, contract risk is proactively surfaced and monitored, and contract performance is continually evaluated to identify areas for improvement.
When: Now (And 5 Years from Now)
While CLM adoption has been growing in recent years, we are now at an inflection point of what the software can do for users.
As another report, this one from Forrester, puts it, “The CLM market is growing because more contract managers and legal and financial professionals use CLM to address the challenges of creating, managing, and getting the best business results from their contracts. Contract management and legal pros increasingly trust CLM providers to act as strategic partners, providing firms with the right tools to get the best value from their contracts.”
There’s a lot to unpack there, but the upshot is that contract management software is advancing to the point that legal departments—especially those responsible for managing thousands of contracts—can’t afford to manage contracts outside a CLM system.
But legal operations teams shouldn’t only be thinking about what the technology can do for them now, but also five years from now. There is a maturity model to contract management that starts with basics like creating contracts and progresses to capabilities like using artificial intelligence to analyze contract negotiation data and recommend tactics for better outcomes.
This doesn’t happen overnight. Legal operations departments should consider tools that they can “grow into” as their enterprise becomes more comfortable with the technology.
With enterprise contract management, everyone with proper permissions in a company can see any contract in its repository, breaking down traditional departmental and geographic silos that have historically hampered optimal contract management.
Vertiv, a global technology manufacturer, has driven a successful deployment of enterprise contract management and now enjoys instant visibility into all of its contracts, even those executed overseas. Prior to implementing an enterprise contract management system, agreements were scattered across the globe, with paper agreement locked in physical file cabinets or on the desktops of its employees. The company underwent a successful transition from a decentralized paper system to a global, searchable central repository so teams everywhere can quickly review purchasing contracts and other agreements and compare them to make sure the company is getting the best terms.
When selecting a CLM vendor, procurement and sales will often advocate for a solution that is tailored specifically to their role, since they often come as part of a larger software suite.
Yet if both sales and procurement—and likely HR as well—get the CLM built for their role, legal will end up working with three or more systems, unnecessarily adding to the technology plate that legal operations would need to manage. Even worse, the body of contracts will be fragmented across the enterprise (as warned against by Gartner earlier).
To avoid this situation, it is incumbent on CLOs and legal operations professionals to lead the push for an enterprise-wide solution for contract management.
Contracts no longer need to be the forgotten piece of a company’s digital transformation puzzle. In fact, guided by these Five Ws, legal operation professionals can lead an enterprise on its journey to transforming their contracts from static documents to strategic assets.
Want to learn more? Register for a demo today.
Bernadette Bulacan is Chief Evangelist at Icertis. You can follow her on Twitter at @InHouse_Bern.