Contract Lifecycle Management (CLM) solutions are an effective way to understand and manage contractual obligations that directly influence an organization’s legal compliance, financial stability, and risk management. Leaders who understand this stay focused on fulfilling the organization’s commitments at the highest standard while mitigating risks.
However, for most companies CLM solutions were not a strategic part of their planning. Rather, contracts were primarily used as manual tools for record keeping. Nonetheless, when businesses started realizing that a poorly drafted agreement can erode up to 8.6% of contract value, which often amounted to millions of dollars, there was a shift in focus. In addition, stricter legal and regulatory compliance (both local and global) further pushed companies to draft agreements more carefully and ensure there were no hidden clauses that would later lead to conflicts.
As companies adapted to these demands, the need for a robust contract management software became evident. Hence, the evolution of a peripheral function came to the fore and the humble CLM software solution became a business cornerstone for top performing companies.
In this blog, we will explore the role of CLM software solutions in strengthening a company’s position.
What Is Contract Lifecycle Management? Its Early Days & the Evolution
Contract Lifecycle Management (CLM) is the process of managing a contract from request to renewal or termination. The contract lifecycle typically involves several key stages to manage the process from start to finish. It includes Requesting, Drafting, Reviewing, Negotiating, Approving, Executing, Complying, and Renewing or Terminating the agreement.
Having CLM software helps companies get through the different stages of contract lifecycle quickly compared to manually handling each agreement. Also, implementing CLM software speeds up the process, results in fewer risks, improves compliance, and cuts costs. Plus, it helps companies track the renewals and deadlines so that the revenue-generating opportunities do not slip away.
However, in the early days of contract management, agreements were manually recorded on paper and stored in physical files, which were vulnerable to being misplaced or lost. Additionally, it was burdensome for the legal teams to track changes, identify all the risks, and ensure compliance with multiple regulations. This time-consuming, manual process was prone to errors and often led to multiple rounds of redlining and negotiations until finally (and physically) signed using ink and paper. Even then, the contracts were at the peril of being misinterpreted, leading to reputational damage, revenue leakage, and other consequences.
With the initiation of digital transformation and the development of CLM software, companies have sighed relief as the solution streamlines the entire contract lifecycle, automates tasks, stores the files digitally, and tracks the changes effortlessly.
Today, with AI capabilities, the solution can quickly search and retrieve agreements, notify stakeholders of upcoming deadlines, renewals, contracting obligations, and other smart features. The fact that contracts are word heavy and need a careful eye to scrutinize every single detail and analyze it to the truest meaning is both time- and effort-consuming. With the integration of AI, GenAI, and LLM technologies, these complex documents can be easily interpreted.
Some of the best contract lifecycle management software in the market include – Conga CLM, Icertis, Ironclad, and DocuSign.
Advantages of Implementing CLM Solutions
Automates the entire contract lifecycle process, which reduces manual efforts and saves time.
Extracts relevant clauses from a central repository to automatically draft contracts and minimize errors.
Develops standardized, professional-looking templates for easy contract creation and navigation.
AI-powered CLM software, like Conga CLM, identifies hidden and ambiguous parts in the agreement and highlights them for quick review and reduces potential legal, financial, and regulatory risks.
Maintains a central repository of contracts for easy access to the latest information, including pricing, approved terms, and other related details.
Improves cross-department collaboration with unified and up-to-date data. A benchmark report reveals that about 29% of an organization’s workforce is involved in the process to some extent.
Delivers real-time visibility and analytics for smarter decision-making.
Tracks obligations and deadlines so that they can be met.
Streamlines contract renewals and amendments and prevents missed opportunities for contract renewals.
The Shift to Strategic Contract Management
As CLM solutions continue to offer sophisticated features and streamline contract management, their importance can no longer be understated as a tactical or administrative function. Rather, it has become an essential part of a company’s strategic vision that drives business outcomes.
Per this report, the topmost measured areas post implementing CLM software are:
Cost reduction
Compliance with standards
Process efficiency/ Reduction in cycle times (bid-contract & purchase-pay)
Improvement in revenue or margins
Customer satisfaction
However, many organizations hesitate to adopt CLM software due to operational workloads and budget constraints. Yet, companies that have successfully implemented Conga CLM have achieved the following business objectives:
360-degree
view of the entire contract cycle for an entertainment company
45%
improvement in contracting accuracy for an insurance company.
43%
improvement in contract compliance for a software company.
30%
reduction in contracting time for a mobile games company.
The Current State of CLM
Modern CLM solutions, such as Conga CLM are highly advanced and AI-powered solutions that offer a range of features and functionalities to transform the way contracts are managed.
These solutions include:
- A central repository that provides a bird-eye view of the entire lifecycle in one place, including negotiations, versions, approvals, and metrics.
- The ability to use natural language and metadata, including Boolean operators, enables users to quickly find the documents. According to this summary report, 62% of the users struggle to find and access previously approved contracts.
- Visualization of the agreement hierarchy, including parent agreements (like MSAs), child agreements (like SOWs), and related agreements (like NDAs) helps users easily manage and understand a customer's agreement history.
- Advanced analytics that provide real-time insights into contract performance and risk.
- AI-powered contract review to identify risks and opportunities for revenue growth.
- Integration with other solutions like CRM and ERP ensure access to real-time data when drafting agreements.
With increasing regulatory scrutiny and growing complexity of contracts, a robust CLM solution is the need of the hour.
The Future of CLM
The global size of the CLM market valued at $1.07 billion in 2024 is expected to be $3.46 billion by the end of 2034. As technology continues to evolve, CLM solutions will become even more sophisticated.
Emerging trends in CLM include:
- Integration of GenAI is expected to further transform and optimize contracting efficiency and accelerate review cycle times. This report suggests that about 50% of the surveyed companies identify contracting inefficiencies are slowing down revenue recognition and resulting in business losses. Advanced technologies can help bridge these gaps and improve user experience.
- AI tools are expected to analyze a customer's historical data and identify opportunities that empower businesses and strengthen customer relationships.
- New trends are expected to focus on mobile-friendly solutions, eSignatures, and a shift toward cloud-based CLM solutions.
Conclusion
Effective leadership is not just about setting vision, mission, and roadmaps; it is also about taking bold decisions, adapting to market changes, and using technology to forward company goals. While not all contracts are the same, implementing CLM software solutions can enhance effectiveness and bring contracting efficiency to the fore.
From a manual, administrative function to being a part of business strategy highlights the value of CLM. Whether you are looking to cut down administrative overheads, accelerate cycle time, or comply with different standards while minimizing risk, this solution can be a differentiator. The benefits of the solution are clear and loud, and if you are looking to integrate CLM into your operations, Forsys can be your trusted partner.
As a strategic Conga partner, Forsys has the expertise and experience in delivering seamless CLM services and transforming your business. Talk to our experts for a free demo.