Why CLM’s Impact Matters to All of the Legal Tech Sector

The adoption of Contract Lifecycle Management (CLM) software by corporates is going to have a major and long-term positive impact on the whole of the legal tech sector. Here is why.


Despite the surge in news about CLM companies, the fact that CLOC’s Global Institute event is taking place, and the ever-increasing discussions about legal ops, if you don’t work mostly with inhouse legal teams you might feel that it doesn’t have much to do with you.

Maybe you work at a legal tech company that mostly serves law firms, or perhaps you work in an IT team at a firm serving primarily the needs of your lawyers?

‘So what if companies manage their contracts more efficiently?’ you may well ask, ‘How does that affect me?’

The answer is simple, but how it might play out is complex.

The Clients

First, the simple part. Where does all legal work ultimately come from? (This is not a trick question.)

Answer: the clients.

So, if we start with this foundation then we can perhaps also say that anything that substantively changes how the clients think about how they address their legal needs may – eventually – have some impact on how they look to external advisers for input.

Is CLM trying to change how the clients think? Some companies are indeed actively trying to do that, others are just trying to help tackle the obvious challenge of a business relying upon these rather awkward, unstructured things called ‘contracts’ in order to operate; to know how much money they are owed and owe; to know what risks they face; to know if they are in compliance with laws and regulations; and a dozen other important aspects of commercial life – and also to help speed up the creation, negotiation and storage of them once they have been agreed to.

While the accounts team and the CFO have been on top of many of the company’s financial metrics and the structured data related to it for decades, and have used plenty of software to make sense of all those numbers to help create new value for the business……

…..the legal, risk, compliance and what we can call ‘commercial agreement’ side of things (which also feed into the financial metrics), have not had such luck.

The technology gods have been slow to provide their bounty to those who must shepherd these multiple pieces of unstructured data, all shaped to fit the form of A4 pieces of paper, (whether digital or real paper). And that has left inhouse legal teams and those who depend upon them internally at a disadvantage.

But now change is here. As explored yesterday the CLM companies will likely face some significant market segmentation pressures, but what they have on offer will likely get adopted. Why? Simply put, timing is everything, and this is the time for this type of change.

Great. But why does it matter to anyone else other than inhouse legal teams, contract teams and the parts of the business, e.g. procurement, sales and accounts, who want to share in this unstructured data bounty for their own department’s benefit?

It matters because if the clients, en masse and at scale, really start to engage with the processes of how contracts are made, negotiated, stored, and get on top of legal data and how it can be used in the legal team e.g. to create standards, to help the rest of the business by creating new value e.g. understanding negotiating positions better which speeds deals and saves the company money, and if they start to grapple with workflows and automated decision trees – which are a core part of many CLM implementations – and more…….then the way corporates think about legal will inevitably change – and tech will be an integral part of this transformation.

If CLM implementations act as a catalyst for the clients to think through how legal needs are met, how software – along with better processes and better allocation of talent – can change things for the better, then it’s logical to extrapolate that how they engage with external advisers may change as well.

How Much Will It Change?

One challenge faced by inhouse teams engaging with law firms in any discussion about legal tech and innovation has in the past been their lack of their own hands-on experience.

It’s hard to push a supplier to do things in a new way when you don’t really have any real working knowledge of what you are discussing. (E.g. try talking to a builder when you cannot really describe what it is you want them to do.)

But, that will change. Slowly, yes, but it will change. If you work in a company where as much inefficiency around contracting has been stripped away as possible, where workflows have been mapped and made visible to all so that they can be improved, where the idea of collecting and analysing legal data is seen as standard, then when you sit down with an external lawyer and ask: ‘How will you do this project for us?’ you will be in a much stronger position to drive a better outcome.

Now, this change will be slow. It also won’t automatically filter through to the most complex and high-risk needs – at least not right away. But where there are obviously areas where efficiency can be brought to bear – and that covers a lot of work that commercial law firms do – then there is a higher probability that clients steeped in the experience of a post-CLM implementation environment (especially a modern one with all the many capabilities such platforms have) will ask for work to be done in a better way, or at least parts of it.

 How Does This Help Legal Tech?

Now the final part. If the clients are more savvy about how their own work is done and are engaging with the law firms in a more meaningful way about process, data, workflows, efficiency and things like transaction speed and cost, then law firms will have to look even more to legal tech solutions, (as well as improving their own processes and developing new or better talent to help).

Law firms that want to keep their clients happy and worry that they might get fired, which is most but not all of them, will have to increase their investments in how they perform their work. I.e. delivery will become ever more important.

Some of the larger firms are already travelling down this road – but it’s still early days across the market as a whole. Looked at from a distance it seems that we are in the mid-1980s of personal computing when it comes to the impact of legal tech – even now. And for Artificial Lawyer that is an exciting prospect, i.e. even after all this time, and when the first legal tech company started in the 1950s, we are just beginning the journey of real change.

And, last point: perhaps the reason sector-wide change has been so slow is because the most important person in the room – the client – has rarely been part of the discussion, or at least not in a way where they are as knowledgeable as perhaps they’d like to be when it comes to really improving legal services delivery. No wonder market evolution is super-incremental when those who hold all the money and all the power (i.e. the clients) are not – and perhaps could not be in the past – really engaged with the subject in hand.

But, that is changing and CLM is playing a key role in this. So too legal ops and other legal tech providers to the inhouse world, as well as other enterprise software companies that have an impact on the corporate legal teams.

So, for these reasons, and even if you are not involved in these kinds of products, we should cheer CLM companies on and wish them every success, as their success will be a benefit to the market as a whole.

By Richard Tromans, Founder, Artificial Lawyer, May 2022