Historically, contract lifecycle management (CLM) vendors have provided narrow solutions to support only one of two sides of a business: Either for procurement teams that manage contracts with suppliers and are typically integrated with back-office systems of record like enterprise resource planning; or for the sell-side, focusing on sales agreements and working with front-office systems of record like customer relationship management systems.
But as digital technologies have evolved, organizations and the tools they use have had to mature as well. Certain outdated approaches—like these either-or CLMs—don’t cut it anymore. Today, holistic CLM solutions are needed.
Challenges of a legacy contract lifecycle management solution
Limited use cases
In our increasingly connected and digital world, using multiple, departmental CLM systems to run a business are no longer a viable option. This is, in part, due to the intense specialization that limits the possible use cases those CLM systems can address. For example, a buy-side CLM system can help procurement negotiate prices with vendors but can’t help HR hammer out the details of a new employee’s contract and salary. Similarly, while a sell-side CLM system can effectively manage client contracts, it does little to help a legal department ensure the compliance of those contracts. In addition, because specialized products generally cater to the larger enterprise market, they tend to be expensive and difficult for small or mid-size organizations to implement.
Increased total cost
These legacy systems can reduce an organization’s profitability too. Research from the International Association of Contract and Commercial Management found that ineffective contract lifecycle management can cost businesses up to 9.2% of their revenue. These losses increase the total cost of ownership and decrease the expected business benefits. Because sales, legal, and service departments are not connected through one system, everything is slowed. Different departments must wait for contract reviews or hunt down contracts when necessary, resulting in delayed deals and a loss of revenue that could have been avoided had a cross-departmental CLM system been in place.
Poor customer experience
There’s another somewhat hidden side effect of these outdated offerings: poor customer service. A Forrester study commissioned by DocuSign, found “45% of firms feel their inefficient, manual agreement processes have yielded poor customer experiences.” Collaborating via error-prone, manual tools creates a lack of responsiveness, unclear terms of negotiation, and slowdowns that can damage relationships with customers and ultimately lead to a loss of business.
The benefits of switching to a centralized, enterprise-wide CLM system
Today’s CLM solutions must meet higher standards. Fortunately, enterprise-wide options now allow employees and customers to centralize, connect, and automate agreement processes across every department. This streamlined approach increases visibility across an organization. The legal, sales, customer, and even human resources departments have access to each and every part of a contract lifecycle and can work together to break down silos, streamline work processes, and increase compliance at the portfolio level.
Standardized version control
Modern CLM software must provide streamlined configurations that allow enterprises to quickly implement new workflows and maintain them even as contracts hop from sales to customer and legal teams and then through to completion. And, since it’s typical for a contract to go through several edits and iterations before sending for signature, organizations require solutions to monitor multiple versions of a document. This way, they can maintain a single understanding of what changes were made and who made them.
And last but perhaps most important, businesses today need an enterprise-wide CLM system that helps them remain compliant and secure. In most contract lifecycles, agreements are strewn across many departments, applications, and teams with varying levels of security and control — a reality that can put many organizations and their contracts at risk of data breaches and privacy leaks. The right CLM software organizes contracts into a protected and searchable central repository with customizable document permissions. Legal operations can monitor contracts to eliminate missed commitments, manage contract expiration, and perform deep analysis on contract performance. This capability shifts compliance from management to a governance model to handle complex contractual obligations. The new compliance model increases alignment and allows both parties to collaborate and correct one another easily, making non-compliance and mistakes less likely in the long run.
A new class of CLM systems is emerging that doesn’t focus solely on buy-side or sell-side but instead operates as an ‘all-sides’ product that connects an organization’s vendors, customers and internal departments like legal or human resources through one holistic system that supports all steps within the contract lifecycle, including automating contract generation. This stage of the process is the most labor-intensive and error-prone. It requires copying and pasting information from other contracts, teams, and customer data into one new document. But preconfigured templates and conditional logic can auto-populate contracts with legally approved language and accurate customer data—all with the simple click of a button.
A powerful workflow engine also allows organizations to design complex agreement processes. With an easy-to-use drag-and-drop interface, organizations can automate actions like crisp handoffs while providing transparency as to where a contract sits in a lifecycle. Companies can be sure that everything is accomplished efficiently—all while remaining compliant.
Products that offer automation, easier collaboration, and strategies for compliance, are a far cry from the siloed buy- or sell-side offerings that used to dominate the market. Now, businesses—especially small and mid-size ones—can set themselves up for a profitable, digital-first future.