Deep dive

Demystifying contract lifecycle management: A deep dive for in-house legal departments

March 13, 2024
Streamline AI

Table of Contents

Contracts are crucial for all business transactions, but managing them effectively can be complex and time-consuming, especially as business transaction volumes grow. Contract Lifecycle Management (CLM) solutions streamline contract management, improve visibility, mitigate risks, facilitate better collaboration, and provide valuable contract insights to drive better business outcomes. In this Streamline AI deep dive, we answer common questions to help you make informed decisions about CLM for your organization.

What are the lifecycle stages of a contract?

Contracts go through several key stages:

  1. Contract creation (drafting/generation): This stage involves creating contracts from scratch or using templates. Companies primarily use Microsoft Word documents and PDFs for contract files, so software solutions for document generation focus on enabling custom Word and PDF creation.
  2. Contract negotiation: Before signing, contracts go through the negotiation stage with counterparties to reach a mutual agreement. Legal teams on both sides meticulously track document changes throughout the negotiation process through redlines, comments, and draft versions. This ensures better clarity and agreement on all contract terms, ensuring the final document accurately reflects the negotiated terms. Some CLM tools have built-in track changes and redline version comparison functionality.
  3. Contract approval: As organizations expand, the contract approval process can become increasingly complex, often requiring inputs and approvals from various business functions. CLM software can help automate and track the review process to ensure that every needed approval is gathered correctly. 
  4. Contract execution: The contract execution stage marks the critical moment where agreements are finalized, and legally binding commitments are established between parties. This phase has evolved significantly with the advent of electronic signature (eSignature) solutions such as DocuSign and the integration of these eSignature solutions within CLM solutions. The embedded functionality makes it possible to kick off eSignature requests directly from the CLM platform, creating additional operational efficiency, reducing human error, and ensuring that signatures are tracked correctly.
  5. Contract storage and management: Once a contract is executed, it’s important to not only have the ability to store the contract where it’s easily accessible and searchable. Some CLMs integrate with existing cloud storage solutions such as Google Drive and Microsoft SharePoint, while other CLMs have their own cloud storage solution. A strong CLM system is able to store (and certain AI-enriched solutions automatically abstract) contract metadata, so it’s possible to have a contract abstract at your fingertips without needing to read through the contract again. Keep in mind that it’s also important to be able to access the context behind the contract (i.e., where the request came from, which approvals were gathered, etc.). Some CLM tools also offer contract expiration and renewal reminders, which are incredibly helpful for sales and vendor agreements.
  6. Contract analytics: This final stage of the contracting lifecycle involves drawing data-based insights from the contract and contracting process. This might include the time spent at each step of the review and approval process or the ability to track non-standard terms. These data-based insights help with reporting in-house legal impact and strengthen strategic decision-making and resource allocation.

Understanding these stages is fundamental in identifying which areas require significant enhancement, how CLM solutions can tackle these challenges, and pinpointing the vendors best equipped to address the most challenging stages.

What is CLM software?

CLM software is a digital technology solution designed to manage an organization’s contracts throughout all stages of their lifecycle. This software streamlines and automates the digital contracting process, from contract creation and negotiation to execution, management, and renewals. It centralizes data, enhances workflows, ensures transparency, and promotes compliance within organizations. By digitizing the entire contracting process, CLM software aims to improve speed, security, compliance, and overall efficiency in managing contracts.

The primary goal of CLM software is to address the challenges associated with manual contract management processes by providing a unified workspace for managing contracts from initiation to renewal. While smaller organizations and startups can manage the CLM process manually, as a company scales and contracting volume increases, a digital CLM software solution helps in-house legal teams scale efficiently, mitigate risk, and better ensure compliance. CLM software helps these larger organizations reduce friction in contract workflows

Key features of CLM software platforms often include:

  • Centralized repository: Ability to store all contracts in one source of truth — a secure, digital repository for easy access and reference.
  • Automated workflows: Built-in automation makes it easy to streamline contract creation, review, and approval routing and processes, reducing manual effort and minimizing errors. Standardized automation flows ensure that no steps are missed.
  • Collaboration tools: Features that facilitate communication and collaboration among stakeholders involved in the digital contracting process through features such as tagged comments, internal-only comments, and email and email thread ingestion.
  • Contract generation and/or template management: Some CLM tools make it possible for business stakeholders or in-house counsel to fill out an intake form and automatically generate the first draft of the contract, while others provide standardized contract templates to ensure consistency with approved contract forms and reduce the time spent drafting contracts.
  • Risk management: CLM software can identify and mitigate potential contract risks through automated tracking and alerts for key dates, milestones, and compliance requirements. In-house counsel can reduce risk with built-in contract negotiation playbooks and a clause library of primary and fallback positions. 
  • Reporting and analytics: Some solutions offer real-time insights into contract performance, contract properties, and the time spent at each negotiation, review, or approval step, which helps organizations make data-driven decisions and identify areas for improvement.

By implementing CLM software, in-house legal times can improve contract turnaround times by streamlining the contract lifecycle, giving in-house counsel time to focus on high-value tasks rather than spending hours each day on manual paperwork.

What’s the difference between CLM and matter management software?

Natter management software focuses on managing all legal matters and requests, while CLM is specifically designed to manage the lifecycle of contracts. Both of these systems can work together to provide a more comprehensive solution for managing legal operations.

CLM software is focused on streamlining and automating the processes involved in creating, executing, and managing contracts, from contract creation and drafting to negotiation, approval, and post-execution management, including the renewal and termination processes. Matter management software centralizes all legal matter-related data, allowing legal counsel to easily access and organize information, track deadlines, and collaborate with legal team members and business stakeholders. Matter management software for in-house legal often includes features such as file and document management, comments, and reporting. By streamlining processes and providing a comprehensive view of each legal matter, matter management software enables legal teams to work more efficiently, improve internal client service, and make data-driven decisions. Ultimately, this technology helps legal departments optimize their operations, reduce administrative burdens, and focus on delivering high-quality legal services.

Together, CLM and matter management software enhance resource allocation, risk management, and strategic planning, offering legal teams a comprehensive toolkit for managing their operations more effectively and efficiently.

What are the benefits of CLM software?

CLM software streamlines the entire contract management process, from contract generation to renewal, providing several benefits:

  • Increased efficiency: CLM tools automate manual tasks, such as contract generation and routing to the appropriate signatories, reducing human error, speeding up the contracting process, streamlining workflows, and minimizing manual data entry. This frees up administrative burdens and allows legal teams to focus on more strategic work, improving overall productivity.
  • Enhanced visibility: CLM tools provide a centralized repository for all contracts, making them easily searchable and accessible. Users can track contract status, upcoming deadlines, and key metrics in real time, ensuring better organization and control.
  • Better collaboration: CLM solutions facilitate collaboration among legal and cross-functional stakeholders, enabling seamless communication and negotiation. Some CLM tools offer the ability to leave and respond to tagged comments on contract drafts, making it easier to collaborate within the legal team and work more efficiently with other departments, such as sales and procurement.
  • Contract insights: Some CLM software solutions offer analytics and reporting capabilities, giving legal departments insights into contract insights, such as total contract value, termination, renewal, notification requirements, and more, aiding legal departments in data-driven decision-making.
  • Improved risk management: CLM tools help identify and mitigate potential risks by providing insights into contract terms, obligations, and compliance requirements. This helps ensure adherence to legal and regulatory standards and minimizes company risk.

Overall, CLM software helps organizations and in-house legal teams manage their contracts more effectively, reduce costs, minimize risks, and drive better business outcomes.

When is the right time to adopt a CLM solution?

The right time to adopt a Contract Lifecycle Management (CLM) solution depends on various factors within an organization. Some common triggers for adopting a CLM solution are:

  • Company growth: If your company is experiencing rapid growth and the legal team needs to manage an increasing contract workload without expanding headcount or outside counsel spend, it might be the right time to adopt a CLM solution to automate contracting tasks and work more efficiently.
  • Due diligence events: If your organization is preparing for events such as an IPO or M&A where due diligence is crucial, having a centralized repository for contracts can make contract information retrieval easier and streamline reporting processes.
  • Repetitive work: When teams are spending too much time on manual, repetitive tasks that could be automated, a CLM solution can improve efficiency and productivity.
  • Contracting challenges: If your organization faces issues like scattered contracts and disorganized storage on computer desktops and cloud storage, lack of visibility into contract scope or terminations and renewals, or difficulty extracting key data from contracts, implementing a CLM solution can address those challenges.

For legal departments that don't require extensive CLM functionality and don't have the luxury of longer implementation timelines and significant budget, Streamline AI can be a more a cost-effective solution that encompasses core elements of CLM and more. The platform provides a comprehensive suite of features, including legal request intake and triage for all legal request types (sales contracts, marketing compliance, vendor agreements, employment questions, and more), workflow automation for approvals and reviews, matter management with an audit trail and file storage, and comprehensive legal metrics reporting across all request types. Streamline AI delivers these benefits without the steep costs or lengthy implementation times often associated with traditional CLM systems. Moreover, when an organization is ready to adopt a more robust CLM solution, Streamline AI seamlessly integrates with leading CLM platforms like Ironclad. This integration allows business stakeholders to submit legal request tickets through Streamline AI, and if the request involves a contract, Streamline AI automatically initiates the contracting workflow within Ironclad, ensuring a smooth transition and efficient process.

What is the best CLM software?

The “best” CLM depends on your organization’s specific needs, goals, and budget. CLM solutions can carry a hefty price tag; the initial cost is just one part of the total investment. Legal departments must also account for the time and resources required for implementation; sometimes, implementation can take months. Is your team equipped with the necessary resources and can dedicate the time needed for a successful CLM rollout?

For many, especially those looking to balance functionality with cost-effectiveness and swift deployment, an intake and matter management platform like Streamline AI can be an excellent fit. Streamline AI offers the essentials of CLM — legal request intake, workflow automation, matter management, contracts, document, and file storage, and legal metrics reporting — without the hefty price tag or long implementation times often associated with CLM systems. Plus, when the time is right to adopt a CLM solution, Streamline AI is complementary and integrates with CLM solutions such as Ironclad. Business stakeholders can submit legal requests in Streamline AI, and if it’s a contract request, Streamline AI then kicks off the contracting workflow with Ironclad.

Choosing the right CLM solution is a strategic decision that can significantly impact your legal team’s productivity and your organization’s bottom line. By understanding your needs, evaluating options carefully, and considering other solutions like Streamline AI, you can find a CLM solution that not only meets but exceeds your expectations, ensuring your contracts are managed efficiently, compliantly, and effectively.

How to build the business case for a CLM solution

Many companies, especially legal teams, face a lot of pressure when it comes to winning the budget for software. You’ll need to build a compelling business case to secure buy-in and budget for a CLM solution. 

First, identify the need. Take a good look at your current processes. Where do things seem to lag? Where does confusion often arise? By pinpointing these areas, you can quickly identify where CLM software can make a difference. Do you need a full-fledged CLM solution, or would a legal request intake, matter management, and metrics reporting solution like Streamline AI suffice? How much time, money, and resources are feasible to invest at your team and organization’s stage?

Next, by researching CLM software options that meet your in-house legal team’s needs, focusing on real-world feedback from similar organizations through testimonials and forums like TechGC, CLOC, and other in-house legal and legal operations communities for insights.

Ensure the chosen software aligns with your organization’s identified pain points and goals, such as supporting faster legal responses, smoother deal closures, and improved risk management to drive progress.

Engage key legal and business stakeholders early in the process, involving them in product demos and discussions to foster a collaborative approach and potentially find ways to split the budget for the software, since the benefits have impact beyond just Legal.

Conduct a cost-benefit analysis to understand the investment’s return, calculating the ROI by comparing the manual process costs against the software’s cost. Consider factors beyond mere financial savings, such as:

  • Time and cost savings from streamlined contracting processes
  • Reduced risk and improved compliance
  • Increased visibility and control over contracts
  • Better collaboration and communication with other departments

Now, it’s time to make your business case on paper. Use Streamline AI’s business case template to effortlessly convert your research into a compelling argument for securing the necessary budget.

Key criteria to evaluate when considering CLM solutions

When evaluating CLM options, consider the following criteria:

  • Integration capabilities: It should play well with other software systems (e.g., Slack, Salesforce) your organization already uses. For example, Sales teams live in Salesforce and need to be able to access finalized sales contracts and associated metadata such as term start and end dates, renewal notice periods, etc., especially when it comes to engaging for renewal and upsell opportunities.
  • Customization and flexibility: The software must adapt to your unique processes and workflows, not the other way around. Look for a platform that can be tailored to your unique workflows and requirements. Change management can be hard with business stakeholders and requires a lot of additional work by legal teams. It’s important that your CLM solution is easy and intuitive for business stakeholders to use and is a legal front door that meets business stakeholders where they are. 
  • Ease of use: A user-friendly interface incentivizes high adoption rates among your team and business stakeholders. If the CLM software is more complicated to use than the current process, business stakeholders will take the easier path.
  • Implementation timeline and investment: Not many CLM tools are out-of-the-box; most require significant implementation work as well as imports of existing contract data. Understand what that timeline looks like and what that time and resource investment looks like for your legal team. Does your legal team have a dedicated point of contact that they can rely on?
  • Support and training: Quality customer support and training resources are essential for a smooth and timely implementation. What does the support SLAs look like? Who will be your main point of contact and are they a scaled or dedicated Customer Success Manager? How long will it take to be self-sufficient on the CLM tool?
  • Scalability: As your business grows, your CLM system should grow with it. Migrating off CLM systems can be expensive and time-consuming, so make sure that the CLM system can handle the increased volume of contracts as your company grows.
  • Pricing and packaging: Consider whether the pricing and packaging make sense for your organization. Is there per-seat pricing? Per-seat pricing for business users can disincentivize usage by business stakeholders and strain the legal team’s budget since, as your business headcount grows, using the CLM tool becomes more expensive. A CLM should make contract requests easier and less expensive than current processes. When it comes to cost, don’t just consider the upfront costs but the total cost of ownership. What does implementation cost, as well as ongoing support and maintenance? Is another headcount or consultant required to support the CLM tool?
  • Security: Prioritize solutions with robust security features, such as access controls and data encryption. Contracts contain sensitive information, including intellectual property, financial terms, and personal data. A breach could lead to significant legal, financial, and reputation damage to the organization. 

What are some CLM implementation best practices?

Implementing CLM software effectively requires careful planning and execution. Here are some best practices to ensure a successful CLM implementation:

  1. Clearly define the objectives: Understand what the legal teams and organization aim to achieve with the CLM system, whether it’s improving contract turnaround times, ensuring compliance, or enhancing contract visibility. 
  2. Involve key stakeholders early: Engage stakeholders from legal, sales, procurement, IT, and other key business departments early in the process. Their input can not only help define requirements and ensure the system meets everyone’s needs, but also helps foster commitment and buy-in.
  3. Ensure clear communication: Effective communication among stakeholders is crucial during a CLM deployment. Poor communication between business stakeholders, legal team members, and CLM software implementation and customer success managers can lead to misaligned expectations, missed targets, unnecessary features or customizations, and even project failure after months of impasse. Ensuring all stakeholders are on the same page is vital for successful implementation.
  4. Analyze current contract processes: Document current contract processes to identify bottlenecks and inefficiencies and make sure key stakeholders understand why changes are necessary. Use this analysis to streamline workflows and customize the CLM system accordingly.
  5. Strategize for data migration: Plan the migration of contracts and related data into the new system. This may involve cleaning and organizing data, converting document formats, and ensuring data integrity.
  6. Invest in training: Provide comprehensive training for all legal and business users to ensure they are comfortable with and activate on the new CLM system. Ongoing support and refresher training can help maximize adoption and usage.
  7. Implement in phases: Consider a phased rollout to manage the transition effectively. Start with a pilot program to test the CLM system’s viability with a smaller user group before a full-scale implementation and rollout. 
  8. Continuously monitor and adjust: After implementation, continuously monitor the CLM’s adoption, performance, and legal and business user feedback. Use this information to make necessary adjustments and optimizations.

By following these best practices, organizations can maximize the benefits of their CLM software, improving contract management efficiency, reducing risks, and enhancing overall business performance.

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