The Unrealized Value Of Contract Lifecycle Management


This year, the Legal Department Operations survey asked respondents to rate their maturity in various areas of operation, including Contract Lifecycle Management (CLM) technology.

Among those respondents who used CLM tech (just over 80 percent said they did), half put their maturity at either a 1 or 2 on a scale of 1-5. Conversely, less than 1 percent of respondents who use CLM technology consider themselves power-users, rating themselves 5 out of 5 for maturity.

In other words, while many legal departments have adopted CLM, many are just beginning to leverage the technology in their practices. Some departments are in their infancy, using CLM technology solely as an electronic repository post-execution.  More mature departments will use CLM for pre-execution activities, like template management, clause libraries, and automated approval workflows.

Another indicator of CLM maturity is found within the survey in response to questions about the collection and utilization of metrics.  Asked which contract management metrics departments track with their CLM, the most common response is “contract volume by customer, partner, program type, and geography.”

This is important data to gather as a starting point for a company. But it is very basic information and telling of the unrealized potential of CLM in today’s legal departments.

In truth, this is totally to be expected with new technology, especially when that technology handles something as sweeping and complex as managing contracts across highly matrixed, global enterprises.

Contracts are language-based and unstructured, meaning they do not lend themselves to straightforward data analysis the way, say, external legal spend does. On account of this challenge, early CLM systems were little more than a repository to store and share contracts across the enterprise.

However, today’s contract management software, leveraging the power of artificial intelligence and cloud computing, can do much, much more.

Best-in-class CLM technology can extract contract data and metadata at scale to give enterprises deeper and wider views of their contract landscape. This means business can be done faster, risk can be reduced, and operations can be optimized.

But it doesn’t happen overnight. To fulfill their goals regarding CLM maturity and use of CLM data, legal department operation professionals should take a “crawl, walk, run” approach to enterprise contract management.

Such a progression might look something like this:

Crawl: A common early step for legal departments adopting CLM is to measure contract volume to get a comprehensive baseline for what your contract landscape looks like. How many contracts are touched by your legal department? The survey suggests that many legal departments are already at this stage, but if you are part of the 20 percent not yet using CLM technology, this is a good early project to start on.

Walk: With contracts digitized and quantified, legal departments can start to measure things like contract turnaround time and delays in approval and contract value. With this data, LDOs can identify bottlenecks, revise workflows and measure improvements over time. For instance, armed with this type of information, high-value contracts can get automatically routed for review to the pertinent attorney or subject matter expert; executives gain instant insights into the company’s most important contractual relationships; and risk can be more quickly surfaced and addressed.

Run: Finally, legal departments can begin to mine contract clauses for a global understanding of how contracts are deviating from standard terms and how the company is doing at fulfilling obligations and extracting maximum value from their contracts. At this point companies can leverage the technology to reduce litigation and improve outcomes — thereby becoming a true, strategic partner in the business.

Contracts form the foundation of commerce, governing every dollar in and out of the enterprise. Legal department operations professionals can accelerate, protect, and optimize their businesses with mature, robust contract lifecycle management technology.

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