Learn More About Contract Lifecycle Management (CLM) Software
What is Contract Lifecycle Management (CLM) Software?
Contract lifecycle management (CLM) software assists businesses in every stage of the contract lifecycle by streamlining the process from creation to post-signature activities, including obligation tracking, contract resolution, and contract compliance management. These tools assist organizations in ensuring that internal and external stakeholders are knowledgeable and uphold their contractual obligations by storing all contract data in a centralized repository, providing a medium to collaborate and communicate.
CLM tools differ from traditional contract management software. CLM solutions allow users to manage activities after contract execution, including performance and contract compliance, obligation tracking, and dispute resolutions. CLM products provide features to notify parties of upcoming contract milestones to help streamline the contract renewal process and inform appropriate parties of contract performance.
Various departments in an organization are users of CLM solutions, as contracts are inherent to many business operations. CLM tools typically integrate with various software, including CRM software, e-signature software, accounting software, proposal software, and CPQ software.
What are the Common Features of Contract Lifecycle Management (CLM) Software?
The following are some core features of CLM software:
Contract creation and templates: Contracts are naturally nuanced and require standardized language and specific clauses. CLM tools allow organizations to create contracts and templates to streamline the creation process and ensure uniformity throughout the documents. This feature enables non-legal professionals to create basic contracts with confidence, ensuring that the required language is provided and correct.
Contract editing: A key feature of CLM solutions is contract redlining, or the ability to edit contracts and compare multiple versions. Contract editing can be done internally and externally and is vital in contract management as it provides an audit trail that highlights the changes between contract iterations.
Contract database: This feature helps store contracts in a central repository with native search capabilities. Organizations can increase efficiency by digitally searching through contracts rather than manually.
Notifications and reminders: CLM tools offer features to schedule reminders for users and notify them of upcoming contract milestones, such as contract renewal or expiry. This assists users in meeting contractual deadlines and ensures contracts are completed on time. Additionally, this feature ensures that businesses know and take the necessary action to renew contracts or communicate proposed changes or amendments to future contract iterations.
Integrations or APIs: Another core feature of CLM solutions is its ability to integrate with key business systems, such as CRM software to associate contracts with customer accounts and CPQ software to pull calculated quote information into the contract.
Advance contract analytics: CLM tools leverage analytics to optimize contract management with this feature. This provides businesses insight into the contract creation and delivery process and assists in identifying bottlenecks and ways to improve the efficiency of the process.
Report and dashboards: CLM solutions leverage contract data to provide standard and ad hoc reports of contract statuses and timelines, with the ability to monitor live overviews of contract activities.
Contract approvals: Streamline processes for contract approvals to integrate workflows across departments logically with this software solution. This increases the efficiency of each stage of the CLM process, easily coordinating with appropriate stakeholders and ensuring standards are met.
What are the Benefits of Contract Lifecycle Management (CLM) Software?
CLM software offers various benefits to organizations, including:
Increased collaboration: CLM solutions provide a digital medium for users to collaborate, revise, and review contracts with internal and external stakeholders. This expedites the entire contract process, particularly the internal review and contract negotiation stage.
Enhanced automation: A key benefit of CLM tools is the ability to streamline workflows for each stage of the contract management process to minimize manual tasks and ensure appropriate procedures are followed. Automation can be used to notify users and track key contract data, such as expiration or renewal dates and streamline contract workflows to minimize contract cycle time.
Audit trail: Due to the sensitive nature of contracts and the financial and legal risk associated with contracts, organizations need to have an audit trail of all contract activities to ensure contract compliance. CLM tools provide an audit trail to easily track all edits or revisions made to a contract and keep accurate accounting compliance records.
Performance tracking: An essential benefit of CLM software solutions is easily assessing contract performance regarding obligations and compliance. These tools provide stakeholders with a centralized dashboard to efficiently track how a contract performs to ensure maximum value is received and avoid potential revenue leakage.
Increased self service: The ability to provide contract templates is a significant benefit to non-legal professionals. It allows them to create agreements or contracts with confidence and avoid the bottleneck of legal professionals drafting the initial contract. This lets legal teams focus on higher priority items and allows other non-legal groups to perform the necessary work to begin the contract process.
Who Uses Contract Lifecycle Management (CLM) Software?
Contracts are an essential aspect of business operations, and as such, the stakeholders who utilize CLM tools are broad and can vary based on unique business needs and processes. Below are a few examples of business groups that likely regularly use CLM solutions.
Legal teams: CLM software enables legal professionals to streamline the contract management process by creating templates for non-legal colleagues, providing a contract repository, tracking obligations, and ensuring compliance. These tools also provide legal teams reminders and notifications of contract renewals and expirations, which is vital as most legal teams are responsible for managing a plethora of contracts simultaneously.
Sales teams: CLM tools enable sales teams to share contracts securely, collaborate with internal and external parties, and get contracts signed. CLM tools assist sales teams in streamlining the process of signing contracts and mitigating risks associated with inaccurate information as information is typically integrated from CRM, CPQ, or e-signature solutions. In addition to mitigating risk, this can expedite the contract signing process and help establish good relationships with customers.
HR teams: HR professionals can leverage CLM solutions to quickly replicate contracts or agreements using the pre-created contract templates, streamlining hiring processes.
Finance teams: CLM software helps finance teams to track contract obligations and performance, identify lost revenue, and find cost-saving opportunities. CLM solutions also notify finance teams of upcoming contract expirations and renewals to ensure that teams do not miss renewals or potential revenue opportunities.
Software Related to Contract Lifecycle Management (CLM) Software
Related solutions that can be used together with CLM software include:
E-signature software: E-signature, also known as electronic signature software, allows users to securely collect signatures on digital documents, eliminating the need for physical copies and allowing users to sign in real time. E-signature solutions and CLM tools commonly integrate to expedite the signing process while ensuring security and compliance with industry standards and regulations.
CRM software: CLM software typically integrates with CRM software to increase visibility across multiple business units in a company. This integration also allows sales teams to associate contracts with a particular account in a central database to understand the contractual aspect of a client relationship fully.
CPQ software: CPQ, or configure, price, quote software, commonly integrates with CLM tools to pull in quote and pricing data. The integration between these software reduces the risk of manual error and ensures that pricing information is consistent with company policies.
Proposal software: Proposal software assists in generating request for proposals (RFPs) for sales operations. These tools typically integrate with CRM and CPQ software to automate data retrieval. Proposal software often integrates with CLM products as the proposal is finalized and moves to the next stage of the contract process.
Contract analytics software: Contract analytics software often integrates with CLM solutions to retrieve and analyze contract data. Contract analytics tools use artificial intelligence (AI) or machine learning (ML) to eliminate duplicates and extract key contract data such as keywords, payment terms, or obligations.
Challenges with Contract Lifecycle Management (CLM) Software
CLM products can come with its own set of challenges. A few of them are listed below.
Security: Contracts are extremely sensitive as they may contain financial information, personally identifiable information (PII), or other contract data that are a key target during data breaches. Ensuring security is of utmost importance when leveraging a CLM tool, and businesses should be aware of industry standards in terms of security, implementation, and operations. As most CLM tools are cloud based, companies may not be able to control and secure the cloud environment independently. Additionally, as contracts are frequently collaborated on throughout multiple business units, ensuring that they are worked on in a secure environment is essential.
Compliance requirements: As CLM solutions manage each stage of the contract process, it is pivotal that businesses understand the various standards and regulations that they must adhere to, which may be dependent on industry and location.
Complex integrations: CLM tools often integrate with various systems, leading to cumbersome integrations. Businesses selecting CLM tools should ensure that the chosen tool can integrate into their existing IT infrastructure and understand the detailed processes for ensuring its compatibility and workflows. Companies should also be aware of the required workflows for their CLM software as it may conflict with existing business processes and require internal adjustments.
Accessibility and adoption: A challenge that some organizations face when leveraging a CLM tool is adequate accessibility. CLMs manage the entire contract process, from presignature to post-contract execution. Thus, it is crucial to ensure that all relevant business units access the system and have appropriate controls. For CLM products to be most effective, they need to be widely adopted across the organization, as without user adoption, the system cannot perform to its full capabilities.
How to Buy Contract Lifecycle Management (CLM) Software
Requirements Gathering (RFI/RFP) for Contract Lifecycle Management (CLM) Software
Requirements gathering for CLM tools is critical to ensure that the business is leveraging a product that meets its needs. To do so, companies must evaluate the software based on their critical needs, as provided below.
Compare Contract Lifecycle Management (CLM) Products
Create a long list
Long lists are created by eliminating software solutions that do not provide critical functionality. To make a long list for a CLM product, a buyer should assess the essential functions and analyze which products provide the necessary functionality. CLM software provides functions throughout the entire contract lifecycle ranging from contract creation and templatization to reporting and analytics. A typical long list should not contain more than 10 products unless there are many similar options. In this case, buyers should consider a product’s ability to integrate with existing software, scalability, customization, mobile accessibility, and any relevant industry regulations or standards to eliminate products.
Create a short list
From the long list of CLM vendors, it is helpful to narrow down the list and develop a shorter list of contenders, preferably no more than three to five. With this in hand, businesses can produce a matrix to compare the various offerings' features, compatibility, and pricing.
Conduct demos
To ensure the comparison is thoroughgoing, the user should try a demo or free trial for each software solution on the shortlist with the same use cases and criteria. This will allow the business to evaluate like for like and see how each product stacks up against the competition.
Selection of Contract Lifecycle Management Software
Choose a selection team
CLM software impacts a variety of business units within an organization, highlighting the importance of selecting a critical selection team. It is vital to consider input and qualification criteria from each business unit member that will leverage the software, as needs and use cases can vary. The selection committee for a CLM tool may consist of a member from each department intended to leverage the software, such as a legal representative, HR employee, sales leader, and IT professional to ensure software compatibility. The selection committee will be responsible for assessing each use case of the software and ensuring compliance with organizational and industry standards.
Negotiation
When negotiating a software contract, it is critical first to ensure that the software will meet industry regulations and standards and provide a secure medium to manage the entire contract lifecycle. This is imperative as the cost of CLM tools can vary tremendously. The price depends on the size of the business, the amount of storage needed, and the number of licenses, among other factors. Additionally, since CLM products extend across multiple business units, buyers should also determine if they need assistance implementing or integrating with other business support systems. Lastly, businesses should consider the contract duration that is most appropriate for their needs to negotiate longer-term contracts better.
Final decision
Buyers should make the final decision based on all the information gathered previously. Businesses should rank their needs in order of importance and select the tool that meets their most critical needs first, then assess which software best fits their business needs.
