By Richa Kaul, ContractPodAi Chief Strategy Officer
With the nature of legal work evolving quickly, at least one thing is abundantly clear: the use of legal technology will only continue to grow. It is no overstatement to say that all companies will have to go through some form of legal digital transformation in the coming years.
They will invariably need to adopt and implement legal tech solutions like AI-based contract lifecycle management (CLM) systems. Naturally, though, technological change does not happen automatically for legal and other departments. They need to meet this opportunity with a strategic mindset: an awareness and a plan of action.
In previous articles, I offered a way to think about and categorise the fast-growing CLM landscape, and properly assess the different CLM solutions. Once you have a handle on the landscape and different solutions in the market, the final step is determining which legal tech platform is the right fit for your legal team and company based on your objectives and strategy.
Generally speaking, that assessment should be informed by the current state of your contract management and your overall business profile. You should consider key business dimensions, like company size, geographic footprint, and industry, as well as the growth trajectory of your business.
Your Current State of Contract Management
To define which CLM system you really need for your business, you first need to determine the present state of your day-to-day contracting. A proper contract management assessment reveals where you can improve your process to meet best business practices.
The following key categories in end-to-end contract management can serve as the initial framework with which to evaluate your current state:
- Contract digitisation: What is the current level of digitisation and organisation of your contract records today?
- Contract generation: Do you have adequate ‘self-service contract desk’ support to help optimise legal workload and more efficiently respond to business requests?
- Obligation management: Are you tracking and analysing your key obligations and contract terms?
- Workflow and approvals: Is your contract process streamlined and automated to minimise manual effort from already overstretched legal teams?
- Collaboration and redlining: Do you have an integrated, familiar platform for redlining and version audits, which remove the need for email version management?
- Contract review: Is the legal team supported in their contract review, or do they have to do this fully manually?
- Contract searchability: Is there an easy way to instantly retrieve specific contracts and/or search your full contract repository?
- Analytics and reporting: Do you have holistic visibility into your contracts to generate actionable insights and inform business decisions?
This contract management assessment helps you see the gaps in your contract management process, to then determine the type of CLM solution you need to bridge those gaps. In addition or in parallel to this assessment, there are four key dimensions you can consider to further inform the right CLM vendor for your legal team and company:
Size of Your Business
On average, small- and medium-sized enterprises — with up to a few hundred million dollars in annual revenue — choose operational value CLM players costing up to $30,000. Operational value CLM players are those that help to organize contracts, within a single digital repository, and optimize the contracting process through basic automated workflows. (To learn more, read the previous article, ‘How Legal Teams Should Assess Different Contract Management Solutions.’)
Analytical value CLM players tend to be the most popular selection among companies that have annual revenue from a few hundred million dollars to $1 billion. Analytical systems are marked by their ability to produce actionable insights by way of analysis of contractual data.
Larger enterprises like international companies, with more than $1 billion, typically select strategic value CLM players. Strategic solutions deliver both operational and analytical value, as they offer more advanced artificial intelligence, risk scorecarding, and search — to help increase compliance and reduce business risk.
Often, both medium- and large-sized enterprises begin their search eyeing an operational CLM solution, before leveling up. To prevent multiple searches and implementations, it is wise to consider the benefits of a CLM player that has more functionality than you need at present. You can always use a subset of a broader solution’s features to start with — and negotiate a lower price, as a result.
As mentioned above, the majority of international companies require strategic-level CLM systems. From a functionality standpoint, these systems are more equipped to support legal teams and companies around the world. They offer foreign language support, including a foreign language software interface, on-demand legal document translation, and advanced search of foreign language agreements in your native language, not to mention actual implementation or customer support in different languages.
This only increases the international adoption of the legal tech tool — and the collaboration between international legal teams.
These days, companies share common themes with respect to their contracting complexity. For instance, sales-side contracts are less complex when it comes to review time because they are on the company’s own paper.
Additionally, there are industry-level trends in contract complexity levels. Some industries — like oil and gas, or professional services — often have significant variability and complexity in their ‘standard’ customer contracts. This warrants a more strategic CLM system, which has more advanced and cognitive artificial intelligence. This type of system has an increased threshold for complexity, and maintains AI efficacy and precision.
Meanwhile, there are other industries like software, in which sales agreements may be higher in volume but standardized. In this case, an operational or analytical level solution may meet a company’s individual needs.
Growth Trajectory of Your Business
The last key business dimension to consider is the growth trajectory of your own business. Companies that have stable revenue and growth levels can better predict their volume of work and related contracting needs. They are better able to plan and budget their legal spend against those, as a result. Assuming they do not have other dimensions that require deeper CLM support — like those mentioned above — they could be supported by an operational solution.
On the other hand, higher-growth companies tend to struggle to meet their own legal needs, from a prioritization and resourcing perspective. They would more likely benefit from an analytical or strategic solution, which offers a greater level of organization and assistance.
Ultimately, by fully understanding the current state of your contract management — and taking into consideration all the particulars of your business — you can confidently determine the ideal CLM solution for your legal team and company.
With legal digital transformation taking hold rather quickly — and with legal technology budgets expected to increase three times over to support it — more than half of all legal tasks will soon be supported by some form of technology automation, according to Gartner.
It is incredibly essential, then, that in-house legal teams undergo some degree of legal digital transformation — now and in the foreseeable future.
About the author:
Richa Kaul is the Chief Strategy Officer at ContractPodAi. Prior to joining ContractPodAi, Richa Kaul was a Managing Director at the Virginia Economic Development Partnership, leading the growth of the technology and professional services sectors across the state of Virginia. Previously, she was a management consultant at McKinsey & Company, supporting companies in their digitisation best practices. Read her most recent white paper, How to Choose a Contract Management Solution.
[ Artificial Lawyer is proud to bring you this sponsored thought leadership article by ContractPodAi. ]