This article by Richard Kemp and Nooreen Ajmal was first published in Practical Law’s In-House Blog in September 2018.
In the last few years, General Counsel ‘Barometers’ on legal management, technology trends and digital transformation have started to appear, assessing in-house responses to these key and overlapping issues. One of the areas they all focus on is contract life-cycle management (CLM) software, which is identified by Wolters Kluwer as “the most common type of work where legal teams use technology” and by EY as “transforming and vastly accelerating time-consuming detail work”.
Although the range of CLM software providers can seem bewildering (two recent reports by Forrester and Software Advice each identified over 20 different providers with remarkably little overlap) they can be segmented into three types.
Big three legal information and software providers
Each of the big three legal information and software providers has their own CLM suite which integrates with their other information and technology assets:
- Thomson Reuters has Contract Express and Drafting Assistant which, alongside Practical Law, combine to allow users to customise Practical Law templates in Microsoft Word using their Contract Express instance.
- Lexis Nexis has Lexis Bespoke and Contract Creator.
- Wolters Kluwer has Effacts.
Large global enterprise software providers
Several large global enterprise software vendors have their own CLM suites. For example:
- IBM has Emptoris.
- SAP has Ariba.
- Oracle has Oracle Cloud Contracts.
Specialist developers
There are a range of specialist developers who focus almost exclusively on the CLM market, including:
- Apptus.
- Icertis (who Forrester have leading the pack).
- ContractRoom (used by several large technology integrators).
Common components of the contract life-cycle
Forrester distinguishes between CLM software use cases focused on:
- The buy-side (Legal + Procurement).
- Sell-side (Legal + Sales).
- Intellectual property (Legal + R&D).
- All contracts (all the above + Operations + HR).
Nevertheless, all these use cases have several common components over the life-cycle, relating to contract:
- Creation.
- Negotiation.
- Approval.
- Repository.
- Reporting.
- Analysis.
- Change.
- Renewals.
Most systems allow users to draft and negotiate terms using standardised and approved language and then track, organise and analyse their documents. These systems automate the contract lifecycle, allowing approvals and input to be obtained from relevant stakeholders. They can also send alerts and notifications about contract milestones and renewals dates.
A poster child use case for technology
Today, most large CLM software users have processes and procedures in place for managing these components that yield significant efficiencies in time and cost, and CLM has consequently emerged as a poster child use case for technology. The legal department can objectively demonstrate to senior management that it is both doing more with less and adding real value. For example, contract automation:
- Enables standardisation and cost reduction, both in the company’s contracting operations and in procurement.
- Increases revenues by enabling terms subject to lengthy negotiation (such as liability and cloud security) to be streamlined, therefore reducing time to sell and bringing forward revenue generation.
- Liberates resource for higher value tasks.
The software records the company’s commitments and enables the CLM to become the repository for all the organisation’s contractual commitments.
The next stage of development for CLM systems is focused on:
- Delivering business intelligence and management insights (AI is now routinely being plumbed into CLM software development).
- Integration with other internal systems (B2B, eProcurement, Salesforce or HR).
- Contract optimisation (improving contract terms and process).
How to successfully implement a CLM system
As ever, a critical success factor in the implementation of CLM systems is the thought and care that the business takes in looking at each aspect of adoption (and procurement time) over both the short and long term. For example:
- What is the change plan for the ‘now’ contracting world?
- How will the new authority and approval levels work?
- Will the system be on-prem or in-cloud?
- If in-cloud, how will data protection and data security be addressed?
- What does the technology route map look like one, two or five years out?
- How will the CLM system integrate with other core systems in future?
Organisations are increasingly grappling with these more strategic questions now that they have harvested low hanging fruit time and cost efficiencies.
Market consolidation
There are questions about how the market plays out on the supply side. The big three law-related CLM developers have a secure base in the law firm and legal department markets, while the large global software vendors (for whom law has generally been a small, complicated vertical that’s difficult to sell into) may continue to prefer to concentrate on the Fortune 500. The market is certainly active:
- Last year, IBM and SAP Ariba announced a strategic global partnership, leveraging SAP’s Leonardo innovation platform, IBM Watson technologies and SAP Ariba.
- Business-spend management supplier Coupa acquired Trade Extensions and Spend360 in 2017.
- Purchase-to pay provider Jaggaer (previously SciQuest) acquired several companies in recent years, including CLM provider Upside, spend analysis software provider Spend Radar, and sourcing software provide, CombineNet.
The cloud and AI are likely to make life difficult in the long run for the smaller players and this will lead in time honoured fashion to the winnowing out of market through consolidation.
