Legal tech for contract management is everywhere. You cannot attend a legal conference or open your inbox without running into a sales pitch. In fact, Gartner predicts legal technology spending will increase to 12% of in-house budgets by 2025, a threefold increase from 2020 levels.
Legal tech is a very broad term that encompasses a range of functionality. So, for the purposes of this article, I would define legal tech as the latest generation of automated software, typically SaaS-based tools, that seek to improve accuracy and optimize key processes in the legal services workflow. For growth-stage GCs looking to scale their function, a contract lifecycle management system (CLMS) is the most common and recommended place to start introducing legal tech in their organization.
There are so many new CLMS tools cropping up every day, and the distinctions among them are seemingly so opaque, that selecting a solution can feel daunting. Trust me, my team and I spent several months evaluating multiple CLMS, and recently completed the successful implementation of a new CLMS that has been very well-adopted by my organization.
In this article, I offer five tips and some general thoughts based on my experience for other growth-stage general counsel about to embark on this process or considering a replacement for their current vendor.
Audit your Workflow
Every CLMS has made a choice about how to position themselves in the market. Your challenge is to find the one whose core functionality most closely matches your needs. How best to do this?
Start by examining how a contract travels from proposal to execution in your organization. Outline each step and stakeholder in the workflow and note any bottlenecks you have experienced. Knowing where your pain points are will help you identify how a CLMS can help you and your team.
For example, if your executed contracts are sitting in an Outlook subfolder, waiting to be filed when you have free time, you may need a better contracts repository. If your sales team is constantly asking for a particular template, or using the wrong templates, or making changes to templates that you later have to undo, you may need a better intake form. If you are tracking key terms and renewal dates in a spreadsheet, please hang up and dial 9-1-1. Most CLMS providers offer at least a basic repository with full-text data extraction that will quickly transform that workflow.
Prioritize the Pain Points
After you highlight all the bottlenecks, prioritize the three to five ones that are most impactful to your workflow. Where do you see the most friction? What causes the most consternation, occurs with greatest frequency, or distracts you the most? Perhaps your business clients keep complaining about the turnaround time. Or maybe the signature process is constantly slowing down final execution. If so, those are your pain points. Each of them has a corresponding solution, which together represent the core feature set you need to find in the market.
But remember, not all pain points require a tech solution. If it takes too long for your NDA to get through legal review, perhaps the most effective solution is to train your sales team to push your template rather than accept third party templates. Or maybe you should make your template more balanced to reduce back and forth or create a playbook with alternate clauses. Make sure the pain point is best solved with technology before finalizing your list.
Research and Demo
There is no substitute for performing diligent research and watching a lot of demos. You know your own organization and preferences best. During my vendor selection process, I researched 17 CLM vendors, watched 11 demos, and shortlisted two CLMS providers. I tracked each option in a spreadsheet so I could easily compare functionality, features, and pricing. Knowing my organization, workflow, and pain points enabled me to approach demos with clear objectives and shortlist my options. The tool I selected may or may not be the best option for every single thing, but it was the best option for the things that most mattered to us. As a result, its impact to our team and organization was immediate and tangible.
Getting demos without having your pain points documented is a bad idea, because a good vendor can then convince you that whatever their tool does well is what you really need. Not doing your research just makes it more likely you will be dazzled by cool functionality that has very little value for your organization. It’s like grocery shopping while hungry and without a list – you somehow end up bringing home a box of Oreos.
Sell it to Leadership
If you need to convince the CEO or CFO to pay for a CLM tool, either in the budgeting process or outside it, here are a few things to keep in mind. This spend may reside in your budget but pitching it as a legal tool makes it look like your “toy.” The CEO already expects you to be perfect, so solving for yourself rarely garners much support.
Pitch it as a “revenue amplifier” instead. Because that’s just what it is. According to the World CC, poor contract management leads to contract value leakage which can cost a company about 9.2% of its revenue. If you are a growth-stage organization, the leakage is probably even higher, as is the potential benefit.
So in your budget pitch, focus on how a CLM tool will help the sales team bring in more revenue and let your wish list items tag along for the ride. For example: “This tool enables self-service contract templates which will speed up turnaround times and get us to a deal quicker,” or “Proactively flagging renewal dates to the sales team will enable them to manage customer retention and drive upsell opportunities.” Highlighting these benefits will allow you to articulate the best case for this spend.
Bringing your stakeholders into the evaluation and decision-making process is also very helpful. CLM in particular should not be viewed as a purely legal tool. For example, I invited Finance, Ops, Tech and Sales to join me in the demos of my shortlisted vendors. I wanted them to hear the pitches firsthand and appreciate the possibilities of a CLM solution for their departments. Making Finance a part of the process also makes it much easier to get final approval later in the process, because they actually understand what you are asking for and why.
Some CLM vendors may also be willing to provide you with influential data points and decks that you can use.
Negotiate for What You Need
Do not hesitate to haggle. The CLMS marketplace is crowded and competitive, with vendors racing to sign up new customers. Smart negotiation will yield results. In addition to asking for a discounted price (without agreeing to multi-year terms), consider asking a vendor to provide additional integrations, uploading of historical contracts, more users, etc., at a discount or for free.
It is also worthwhile thinking through how a pricing model could create perverse incentives in your particular organization. Pricing can be by user, by contract, or some hybrid, with additional fees for integrations or support services. A user-based pricing model could subtly discourage your organization from widely adopting the tool. A contract-based model could cause your organization to use the tool selectively. Make the subconscious nudges conscious, so you can ensure they work in your organization’s favor.
Due to the numerosity of vendors, the CLMS marketplace appears to be consolidating around a strategy to offer the most comprehensive, all-in-one solution that encompasses as much of the contract lifecycle as possible. This strategy makes superficial sense. In a world of finite budgets, the idea of paying for a single, all-in-one solution is attractive. Based on my experience, I question whether a single tool can be great at intake, templates, drafting and editing, redlining and version control, approvals, e-signatures, contract management, and compliance tracking. More likely, it will be great at one or two things, and frustrating at everything else. My long-term bet is on companies who have a focused product strategy, are advised by lawyers and contract experts, have a deep understanding of the contracting workflow, and have worked hard to make their UI simple, clean, and flexible.
Current CLMS are utilizing data modeling and pattern-matching technology marketed as “AI-based” or “AI-driven.” This claim, while technically accurate, is currently so overcooked in actual execution, it is approaching “baldness cure.” Vendors need to acknowledge that the effort to train their data models and strengthen the accuracy of their machine learning algorithms is improving, but still in its adolescence and in need of manual human intervention. I would also advise GCs to adjust their expectations and timelines accordingly; as many frustrated contract teams can attest, we are not on the verge of Skynet here.
The buzz around legal tech is animated by a belief that our industry is finally ripe for innovation. It is true that lawyers do a lot of paper pushing that serves as the grout between the bricks of substantive transactional workflow, and legal tech can free up time and resources for more value-based lawyering. In growth-stage companies, however, GC’s may still be maturing the internal processes needed to crest the steep adoption curve that implementing new technology requires. I would suggest making sure you are able to dedicate the time and effort it will require to implement CLMS, train your users, and evangelize adoption by the rest of your organization. After all, the best legal tech is the one everyone actually uses.