By Andy Wishart, CLM Futurist & CPO at Agiloft.
The CLM market has taken off like a rocket, fuelled by global shocks, including the pandemic and the global supply chain crisis.
These stark reminders that the world is full of risk have caused every GC, CFO, CRO, and procurement leader to scour their legacy contracts and take steps to build risk mitigation into their business relationships and the contracts that govern them.
As a result, digitally agile General Counsels are rising to the top and ‘Tweet shift’* contract nimbleness has become a business-critical requirement. At the same time, bad contract processes now have the potential to sink NPS scores, and process automation and the efficiencies on offer have been identified as having the potential to fill revenue gaps caused by slowing global growth.
2022 is also seeing the rise of the contract operations pro and the beginning of a talent war to secure their services. ALSPs, consulting firms, technology vendors, and GCs are all vying for the best and brightest talent with the right experience. Not only that, but the enterprise is now elevating contract data into a business-critical digital asset, which provides accessible and actionable insight that can be shared outside the legal department’s silo. To take advantage of the insights on offer, in-house counsel is demanding that their contract management software integrates with the other tools their partner departments are using daily. Enabling them to make their contract data and the insights it offers part and parcel of how their organisation does business today.
Here are six reasons why I believe we have reached the tipping point for CLM adoption in the enterprise:
1. Tweet Shift Contract Nimbleness wins the market. We’ve just navigated through the worst of a pandemic, which still lingers and continues to shape business practices worldwide. We are all watching the devastating situation in the Ukraine. We’ve just watched the world’s richest person buy a major corporation in a matter of days. In all those situations, organisations have been in a mad scramble to adjust—to survive, to manage risk, to cancel contracts, to shift regions, to add new suppliers, and understand ramifications and remain agile. In a single tweet, markets can change, unrest can happen, and nimbleness and agility has taken on a new dimension. In 2022, your business needs to be able to shift on a tweet.
Now that business is digital and distributed, workflows need to be accelerated. Imagine putting all your contract data, and the insights that can be derived from it, into the hands of the people responsible for managing your customer relationships. Suddenly they can better deliver on your commitments, make your customers happier, and alert you to potential risks and disruption. Or how about giving your procurement teams, who manage hundreds, if not thousands, of your suppliers the ability to automate the management of those buy and sell-side commitments. With supply chain disruptions wreaking havoc, those teams can use that intel to inform their procure-to-pay process and ensure payments are made on time to keep operations moving.
2. General Counsels who embrace automation are rising to the top – those who haven’t are getting left behind. It’s happened to other leadership roles and the GC is no different. The best digital hunter wins. CROs and CMOs who don’t have a world-class tech stack to hunt, nurture, track and analyze every step of their prospects’ journey, from cold to sold, lose out to the competition. A new breed of executive, GCs included, must now demonstrate their appetite and ability to understand deeply how technology can deliver value for their business and then fight for the right budgets and resources to invest in those solutions, or they simply will not hold onto their roles.
As automation has swept through operations, sales, marketing, and other critical functions, legal is one of the last bastions to be automated – and the age and expectation of instant visibility into a corporation’s risk and contractual obligations has dawned. Legal pros who fail to push for and embrace digital transformation, which has accelerated from years to months in the pandemic, face an existential threat. By contrast, the legal leaders who ‘embrace the cyborg’ and couple their legal knowledge with the efficiency and intelligence today’s legal automation solutions offer, are the only leaders who will advance in today’s market.
3. Bad Contract Processes sink net promoter scores (NPS). Insider info says one major corporation had a negative NPS, which was bad enough – but an estimated 10 points of its NPS deficit was driven by a burdensome, frustrating, non-automated contract process that created a poor customer process. Essentially, no one can do business with anyone without a contract. At the same time, nearly all corporations are judged by their NPS score – customers choose vendors according to their NPS score and investors make investments based on them. If your contract process is not streamlined, simplified and world-class, you’re behind before you get started and your NPS scores will show it.
Contracts are the DNA upon which your relationships with customers are built. Recent results of Agiloft’s global enterprise study show awareness of the criticality of CLM to customer satisfaction is on the rise. With improving customer satisfaction and ease of doing business coming as a top 5 strategic priority for CLM.
4. The Efficiencies that Legal Tech offers can fill revenue gaps caused by slowing global growth. Global forces like the pandemic, war, supply bottlenecks, and inflation are expected to decelerate global growth from 5.5% to 4.1% in 2022 according to the World Bank. As companies look to not only survive, but thrive in challenging headwinds, GCs and their legal teams can confidently turn to the power of automation to improve productivity in managing their contracts. According to World Commerce & Contracting, companies using CLM can save an average of 9.2% a year in annual revenue that is typically lost to slow negotiations and missed milestones. And for larger organisations, that percentage is often 15%.
The hunger for revenue protection for legal teams is gaining ground. In a recent Agiloft global study of enterprise buyers on CLM, 65% of respondents list improving productivity as a key driver in purchasing CLM solutions with an overall goal to stop revenue leaks.
5. Legal Ops, in particular Contracts Ops, Pros take on Unicorn Status. Ten years ago, hiring a Salesforce administrator was nearly impossible. Employees who could optimize what had quickly become a system of record for companies worldwide were some of the hottest tickets in the market. With the advent of marketing automation and account-based marketing (ABM) tools, demand generation pros have become the new corporate darlings, drawing multiple offers and soaring salaries as the market scrambles to source from a talent base that is growing, but still small given these technologies have literally exploded on the scene.
That heat is moving to legal ops, specifically contracts ops. As with any technology that has the potential to transform a profession, ensuring you’re building and sourcing the right talent is key to your digital transformation, along with having the resources and talent to really put it to work for you—and to date, many don’t and are at risk. In 2021, Deloitte’s State of Legal Operations Survey found that only 35% of legal teams believe they have good tech skills.
As contract lifecycle management (CLM) establishes itself as a business-critical function in the enterprise, and legal ops teams focus on managing spend, maximizing productivity, and streamlining processes; a new breed of in-house professional is being sought to handle the processes and technology used to manage contracts. Those professionals are highly sought after, with ALSPs, consulting firms, technology vendors, and GCs all vying for the best and brightest talent with the right experience.
The automation and then management of an organisation’s contract management processes requires professionals who can understand contracts inside (the words used to negotiate them) and out (how they flow through a complex organisation). It is not something to be tacked onto a Legal Ops generalists trying to tackle so many other departmental needs. It requires dedicated, experienced professionals who can understand why legal teams review so many contracts and help them find a better path. Automation will be key, but there is a lot of pre-work to be done too. We are seeing sky-rocketing interest for pros who can help corporate law departments get ready for automation.
6. Integration speed is important – but that’s table stakes – breadth and depth is now critical. Data, when it’s trapped in your contracts and in file cabinets, holds unbelievable value for your organisation. Having a line of sight to risk and business obligations lets you and every function in your business make better, more nimble business decisions that help companies grow, sending resources in new directions and holding back in others.
Without a CLM to unlock that data, and more importantly a CLM that can share that data with other solutions in its network ecosystem, it’s difficult to actually put that contract data and the insights it offers into action. That’s why, like trapped water, CLM systems that can integrate seamlessly and widely with today’s wider enterprise solutions and let data sluice easily into those technologies are the most powerful. Sure, integration speed is important, but that’s table stakes. Today’s most powerful CLMs need to connect hundreds, not handfuls of systems, and easily let data flow throughout the organisation where it can truly help the business grow.
Note * – ‘Tweet shift’: the ability to respond as quickly as someone can tweet.
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CLOC CGI 2022 – If you are reading this in Las Vegas and are planning to attend the Corporate Legal Operations Consortium (CLOC)’s flagship event, why not come along to Agiloft’s exclusive Breakfast Briefing at the Café Americano in Caesar’s Palace on Wednesday, May 11, 7:30 a.m. – 9:00 a.m. PDT, where Andy Wishart will present his views around the future of legal operations, and explain how automation is altering the role of legal teams in enterprise organisations. You can book your place here.
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