2021 CONTRACT TECH BUYER’S GUIDE

A free contract tech buyers guide to help you determine your needs, navigate the crowded contract tech market, and make buying decisions that increase attorneys’ productivity and improve deal making processes.

FORWARD

Contracts are the lifeline of commercial enterprises and also the most common challenge faced by growing and established companies, alike. As business becomes more complex and faster paced, contracts need to keep up. The only way to keep pace and scale is to apply technology to the contract management function. The right tech solution will help expedite contract creation, negotiation, execution, and overall management across several departments simultaneously. As the variety of contract management related systems expands, choosing the right solution becomes increasingly difficult.

During my time in-house, I was responsible for managing global contracting processes and the technology associated with them; specifically I deployed a global enterprise repository. Now I work with corporate legal teams who are selecting contract management systems and preparing to change their contracting processes. I know first-hand the challenges associated with evaluating, choosing, and deploying technology solutions, while minimizing impact on current business momentum and meeting unique requirements of a complex matrixed business.

This guide is a follow-on to the Legal Tech Buyer’s Guide, focusing in depth on Contract Lifecycle Management (CLM) systems and technologies designed for specific functions within the CLM. It is impossible to create a complete list of all the technologies on the market as new entrants appear regularly and categorization of the solutions continues to evolve. This guide is intended to create some clarity in a complex area of LegalTech, and assist readers on their contracting journeys.

About Lucy Bassli

Lucy BassliLucy began her career in private practice including as an associate at Davis Wright Tremaine, then spent 13 years at Microsoft, rising to Assistant General Counsel, Legal Operations and Contracting. She was responsible for the legal support of all global procurement and managing Microsoft’s global contract repository. Her experience as Deputy General Counsel at Snowflake, a high growth tech company, informed her founding of a modern law firm and legal operations consultancy, InnoLaw Group PLLC which specializes in contracting efficiencies.

RAISING THE BAR WITH CONTRACT SOLUTIONS

OLD Challenges

Contracts are the currency of every organization, but they have become more complicated over time. Gaps, omissions, and ambiguities are commonplace, despite best efforts to anticipate every scenario. Contracts have also become more complex as the risk and compliance environment has changed. CCPA, GDPR, and many other regulations have introduced new challenges, and the risk associated with noncompliance has increased.

Prior to signature, creating contracts from scratch is highly inefficient, and negotiating special clauses typically requires excessive input and business discussions. After signature, legal departments face a continual challenge locating contractual obligations, especially over time and across organization changes. These problems compound at high volume, and deviating from established practices introduces both legal and systemic risk. Maintaining standard terms and consistent negotiation positions becomes impossible as business grows and complexity rises.

In addition, challenges in managing contract process are heightened by increased business speed, making it difficult to monitor and have transparency of every contract. Companies typically lose between 5% to 40% of value on a given deal due to inefficient processes. It is not hard to see why; no two workflows are the same. They vary across organizations, even in the same industry; and across departments within the same company.

NEW Challenges

LegalTech contract solutions offer a fast track to resolving these challenges and many more while systemizing efficiencies and the delivery of higher quality legal services. McKinsey estimates that at least 23% of a lawyer’s job can be automated, and the Corporate Legal Operations Consortium’s (CLOC) 2019 State of the Industry Survey indicates that 45% of corporate legal teams are actively exploring how to use these solutions.

Contract solutions can be rapidly implemented at scale and have a potent role to play in shaping a modern operating model for legal teams. They bring the benefits of reducing risk while increasing the speed and accuracy of routine legal functions. For example, Gartner predicts that the degree of manual effort required for the pre-signature contract review process will be halved in enterprises that adopt contract solutions.

An additional benefit is that contract solutions keep high-value legal work in-house. Lawyers have more direct control, continue to grow their institutional knowledge, and have customization options over the performance and quality of services delivered to the business.

CONTRACT TECH LANDSCAPE

This image is a sample of the solutions on the market and is not intended to be a complete listing.

A PRIMER ON CLMS

Which is it: CLM or CMS?

To be precise, Contract Lifecycle Management (CLM) is the term for the overall function of contracts from initiation to post-execution obligation management; it is the entire process and workflow of getting a contract done. A contract management system (CMS) is a software that is used to automate this process. Over time, however, the two terms have become synonymous. For the purposes of this guide, we will use CLMS in reference to technology solutions used to automate the entire lifecycle.

What is a CLM System exactly?

It is a piece of technology that enables organizations to automate most of the workflows of the contracting lifecycle. It enables control and visibility into their contract process from start to end by automating contract creation, routing, signature, storage and management of key obligations. An effective deployment of a CLMs can lead to significant cost savings, enhanced risk management capabilities, and efficiencies. Many legal teams have adopted CLMS as an essential tool for keeping track of contracting volumes and to gain insights into their documents. A CLMS can be especially helpful for automating administration, assisting with compliance, monitoring risk, reporting, and audit. This of CLMS as the contract: it gets the contract to where it needs to go.

What is a DMS and what is the difference between this system and a CLMS?

A Document Management System (DMS) is designed to house and maintain all sorts of documents. Yes, they can store contracts, but will not have the workflows that a CLMS has, designed to manage the “cradle to grave” of a contract. Also, the various inputs are not intended to cater to contracts, so the data collected on documents is quite generic. For DMS, think robust filing system. For CLMS, think automating an entire process.

Are all CLMS created equal?

While most CLMS have common basic features, there are distinctions to be made where strengths are obvious in certain functionality, while weaknesses appear in others. Also, given the significant investments in CLMS, new entrants have product roadmaps influenced in different ways, directing resource allocations. Some focus on breadth and depth of functionality, while others are more bare bones, enabling rapid deployment. Some are flexible and configurable; others are “out-of-the-box” simple.

How do I know what features to look for in a CLMS?

The right choice depends on your requirements and the core problem you are trying to solve. Identify your top pain points in the contracting process today, and list those related requirements on the top of your features list. See the next sections for details.

Is a CLMS enough or do I also need other dedicated solutions?

It depends. CLMS often include “light” versions of various functions, such as Drafting or Analytics. Purpose-built solutions typically provide deeper functionality, and so it might make sense to augment your CLMS with a point solution. The following pages have guidance on how to assess whether additional solutions are warranted. See Section 3 for suggestions and practical guidance on point solutions.
CONTRACT LIFECYCCLE MANGEMENT

DESCRIPTION

CLMS is a solution that automates and administers the workflow through which a contract is created, negotiated, signed, and stored. It enables the movement of the contract from phase to phase, captures key data points about that process, and often extracts agreement terms post execution.

This solution is usually procured to help with process improvement and removing friction in the contracting lifecycle. CLMS is very useful for sharing contract status across the departments and stakeholders and creating transparency to answer the most common question (e.g., “Has the contract been signed?” “Is it still with Legal?“). CLMS have dashboards and robust search capabilities across all the phases.

Legal teams often struggle to locate executed contracts and this is a big challenge they seek to solve by implementing a CLMS for repository purposes. Other priority problems are managing the intake of request for contracting help from their business counterparts. Leaders look to CLMS to monitor their contracting work volumes and gather insights about the types of contracts coming into the legal department.Other features valued by the entire enterprise are transparency into the status of the contract and ability to manage obligations within the contract after it is signed. The CLMS brings value to both the law department and its corporate business partners. Details of CLMS phases are provided in the next pages.

PHASES OF THE CLMS

Each of these phases has a role for the legal department to play. Depending on the division of roles and responsibilities for aspects of the contracting process, the activities across the phases may be handled by different departments, but still must be completed by someone at the enterprise. Below is a description of the phases, regardless of whether automated or manual.

REQUEST

Also commonly referred to as “intake,” the contract request process is core to initiating a new contract. It is  the way in which the legal team is informed that a contract is needed. Traditionally, legal teams rely on email and instant messaging apps to request new contracts. However, using automation for handling requests creates transparency and visibility that can’t be accomplished through email. Intake of contract requests in a system enables the capture of key data points (how many, what kind, from whom, etc.) that help law departments demonstrate value and capture resourcing needs.

CREATE

During this phase, the contract is generated by the legal team. Usually it is crafted from prior samples or relevant templates. Often a manual painstaking process, attorneys search for relevant clauses inside other contracts they’ve worked on previously and combine the necessary terms into an appropriate starting template. Over time, the legal team creates some templates for easy starting points, and then access to those templates becomes a focus for CLMS solutions. In progressive companies, legal teams empower internal business units to create their own contracts by accessing locked templates to send to the counterparty or by inserting basic information into a system that generates a template.

NEGOTIATE

This phase relies heaviest on the legal team and contains the highest potential for delays. It includes the exchange of versions of the contract containing edits, recommended changes, and inputs from a number of other stakeholders from both parties. Contract versions are typically exchanged through email, and inputs are sought through email. CLMS offers a platform to interact without resorting to email as a way to track all of the exchanges and versions.

At the conclusion of the negotiation phase, and sometimes as part of it, approvals for certain aspects of the contracts are sought from various stakeholders. Tracking approvals can be a challenge of the negotiation phase, and many CLM systems focus on the mechanism to create audit trails for approvals and automate the routing for approvals based on predefined criteria established by the user.

SIGN

This is a very simple phase, but one that can quickly become the source of significant delays. Chasing people for signatures takes time and is often a tedious task burdening the legal team who take responsibility for ensuring finalization of the contract. Automating the signature process is a quick win for many legal departments. Like with approval routing, identifying signatories in an automated way creates great efficiencies.

STORE

Storage solutions enable teams to store contracts in an easily accessible Cloud-based repository. At its most basic core, it is a filing mechanism with capable search. Today’s tech options, however, are much more creative. Standard features may include Optical Character Recognition (OCR), so that even scanned contracts can be searched securely and accessed from anywhere.

There are a few storage options for contracts: CLMS, DMS, or a generic storage solution such as Dropbox, OneDrive, Google Drive or Box. A secure repository helps with easy access to prior contracts and simplified corporate auditing processes. All of these options are secure, and the main difference is the set of features that enable contract management. A generic system does nothing specific for contracts, and is intended to accommodate all sorts of files, though some of these vendors have begun offering CLM-related features in response to customer needs. A DMS can be used to store contracts, and has features designed to track versions and control access. These systems are common in law firms.

CLMS provide storage features that are specifically designed for contracts. The storage function is the most commonly sought requirement when seeking a CLMS. Most legal departments have trouble finding their executed contracts and seek a repository that goes beyond generic file storage. CLMS offer visibility into obligations and enable finding critical contract details, with text search across clauses and metadata. Advanced storage features include version control, data extraction, auto-tagging, milestone notifications, audit logs, and reporting. Generic storage solutions are typically priced by capacity (e.g., GB) as files can include other types of data, such as video or music. For contract-specific storage solutions, pricing is by number of contracts.

 

Note: Generic DMS and shared drives typically don’t support contract reporting and workflow analytics which can help organizations manage workloads, performance, and compliance.

 

ANALYTICS

Legal analytics software extracts information in contracts for various purposes such as large litigation matters or to populate CLM systems. Examples of key provisions include automatic renewals, assignment rights, governing law, and terminations. In the past, manual extraction was labor intensive and error-prone, but analytics software can extract information at a fraction of the time and cost. Advanced AI and NLP can identify relevant information based on semantics, not just by running a simple word-matching search.

Why you need it?

BENEFITS FOR LAWYERS

  • Decreases the amount of time required to create contracts and manage the process through signature
  • Houses all contracts and related documentation in a central cloud-based repository for easy access
  • Provides insights into workloads and data that can be used to explain resourcing needs or rebalance work allocation within the team
  • Increases visibility into the contracting process, enabling reporting and easier compliance activities

BENEFITS FOR THE BUSINESS

  • Reduces contract cycle time, increasing overall deal velocity
  • Catches renewal dates and  other key obligations creating lead time for the business to drive appropriate re-negotiations
  • Less dependency on specific individuals within the legal department during peak times and/or vacation season
  • Expedites audit preparation and assists with customer/vendor relationship management
  • Promotes enterprise security for documents and enhances risk management

Considerations

Before you finalize your decision and acquire a CLMS, consider the following factors to increase the likelihood of success.

An RFP, or request for proposal, is a powerful tool in the selection process for any LegalTech solution. Submitting an RFP to a CLMS vendor is increasingly common; companies submit RFPs to obtain a comprehensive technical overview of the product offering.

An RFP requires high amounts of specification in what a company wishes to purchase from a vendor and sometimes follows an RFI (a request for general information). Since an RFP is more specific and tailored to the individual customer, submitting a response to an RFP requires time and resources for both the company and the vendor.

Are there existing systems that solve part of the contracting problem and can they be integrated effectively? Or will a complete migration be needed?
What are the change management requirements to roll out CLMS across the organization? How well does it integrate into your existing workflow?
What is the business risk of deploying CLM software? Will it disrupt existing operations?
What metrics should be used to measure and prove CLMS impact? Are these metrics that stakeholders care about?
What is the expected ROI (return on investment)? Have you calculated the expected time savings and assigned a monetary value to that time?
Will legal professionals readily adopt a CLM solution or will there be resistance? How can the resistance be addressed?
Have you reviewed your contract templates and considered creating negotiation playbooks? (NDAs are a great template to start with.)
Is there clarity on who is responsible for which parts of the contracting process? Is there a legal review policy and thresholds?

Why an RFP is important to acquiring a LegalTech solution

An RFP, or request for proposal, is a powerful tool in the selection process for any LegalTech solution. Submitting an RFP to a CLMS vendor is increasingly common; companies submit RFPs to obtain a comprehensive technical overview of the product offering.

An RFP requires significant specification in what a company wishes to purchase from a vendor and sometimes follows an RFI (a request for general information). Since an RFP is more specific and tailored to the individual customer, submitting a response to an RFP requires time and resources for the vendor.

Where to start in your selection process?

Where to start in your selection process?

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