Contract Lifecycle Management (CLM) is one of the most talked about pieces of technology in our industry.
Large organisations typically have several thousand active contracts that require oversight to ensure compliance and profitability, but with so many contracts, without good systems and procedures it is virtually impossible to manage contracts effectively.
CLM has the potential to make a significant difference to hundreds of in-house teams and their organisations, and this is reflected with more than $1bn of investment in the last 12 months.
So, why do so many legal teams find themselves struggling to demonstrate successful use of CLM to their companies and, indeed, themselves?
The reasons could be simple.
For many years legal departments have demanded tools that can address their contract challenges and automate contract tasks. The list of tasks are numerous from inception through drafting, negotiation, execution, performance and ongoing obligations management.
This area is ideal for automation because of the standardised, template-based and process-driven approach that can be used. It seems straightforward, but other issues arise.
As with much automation technology there is an initial expectation of it being a silver bullet with ‘plug in and play’ capabilities.
However, successful CLM integration requires a change in behaviour, the way teams operate and interact with one another.
There is also the matter of time and procurement costs.
The usual implementation timescale is at least 12 months and the initial cost of software is typically a minimum of £100,000. This means companies can easily run up costs of £200,000 to get set up and configured before the system is functioning. A strong case for return on investment needs to be made.
With this in mind it is easy to see why companies and their legal departments often become disillusioned with CLM as they struggle to quantify its benefits.
At its core, this has become a problem of perception and expectation and outlining these issues makes the solution clear.
Companies have to first change what success looks like from ‘fast integration and quick adoption’ to ‘improvement in performance’.
Success shouldn’t be about racing to achieve the most functionality to the most number of teams in the shortest amount of time. Focus should be on highest priority areas, low hanging opportunities and incremental roll out.
Firms and businesses should look at which parts of the process can be standardised and streamlined then create contract templates and develop playbooks.
Part of the process to choose the right CLM software must also include bringing all departments involved together. This means procurement, finance, IT and legal have to understand what each wants from the CLM software.
There should also be governance frameworks put into place so there is accountability and progress can be tracked. Clear change management and communication approaches should also be set in stone to maximise adoption.
This preparation process could take months, but it will save on cost and time as well as giving clarity to expectations to maximise chances of success.
Companies will then have to take the next step of putting into place continued improvement and engagement with the CLM software.
Data to monitor usage and continued refresher training to make users aware of all the features will be needed. This data must be followed to identify issues, blockers in the process and then prioritise the next area of automation of process change.
The data also indicates training requirements and where improvement is needed or where product development can be targeted.
If we can all address these areas, in the correct order, then it starts to become provable that CLM is making an impact. Not only that, but that CLM has the potential to build on that impact.
The soaring investment in CLM systems is impressive and signifies how much technology is becoming part of the fabric in the legal tapestry. However, it will not reach its full potential and will remain under-utilized if speed of integration and technology alone is put before process, requirements and continued improvement.
The potential for CLM is there. If we can manage expectation it can reach its full potential and we, as legal departments, can reap the rewards.
Babar Hayat is head of technology innovation and transformation at Konexo, which is the alternative legal and compliance services arm of Eversheds Sutherland.
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