Even if you have only the slightest legal tech curated LinkedIn feed, no doubt you have noticed a rising tide of contract lifecycle management (CLM) related content this year. Everything from new and developing vendors, VC investment, reports and surveys, tips and tricks. In fact, according to MGI Research, the CLM market is growing at a rate of 35% year over year. I predict that it will not be slowing down any time soon. So, it begs the question – where did all this discussion start and why now?
Unquestionably, COVID-19 bears an enormous responsibility for the acceleration of this phenomenon. Remote working has put urgent pressure on organisations for cloud-based, mobile and accessible information, to have collaboration and video-conferencing tools such as Teams, and to implement electronic signature software for contract execution. COVID-19 aside, I have identified six reasons why we’ve seen exponential growth in contract lifecycle management.
1. Statistics, surveys and reports
There seems to be a wave of recent reports, surveys and statistics creating a bit of FOMO for legal teams about what best practice looks like. Perhaps the fear is well-founded–it not only raises questions about what a legal team should be doing or what technology one should be buying. It also raises questions about whether a lawyer adequately discharges their legal duty to the organisation if they don’t have adequate systems and tech in place.
If you’re working in a large organisation, you’d certainly be asking yourself:
Are we in the 49% who lack a defined process for storing contracts after execution? or
Should we be concerned we might be placed among the other 90% who face challenges trying to locate contracts: and
Are 71% of our contracts not monitored for deviations from standard terms (EY Law, 2021).
With the outcomes from this survey pointing to the need for CLM across the board, there is no wonder why CLM has piqued legal teams’ interest. It is results like these that brings into sharp focus that an excel spreadsheet is no longer sufficient to manage their professional responsibilities as an in-house lawyer.
With the cost of inefficient contract management recently estimated to be more than 9% of total annual revenue (WCC), legal teams have a great starting point to build a business case for their CLM.
2. The swell of legal operations theory
The last 5 years have seen the growth of legal operations from theory to practice. Legal operations roles were previously scarce and hard to justify, but in 2021, not only has the role of legal operations established itself as a critical part of the legal team, but the theory sitting behind it has been almost universally accepted.
There is a growing understanding around the need for structured data, the benefits of optimising legal processes such as through lean efficiency theory and the power of business intelligence reporting.
This knowledge and awareness have decreased the need to educate the legal market on why technology is critical to the legal team strategy–thanks in no small part to organisations like CLOC and CLOC Core 12. This solves half the battle for any CLM vendor–the market already understands why they need CLM. The “what’s in it for me?” question is already answered, resulting in an easier-to-make business case and quicker sales cycles.
3. The rise of the new in-house lawyer
The T-shaped lawyer, Delta Lawyer and now the O-Shaped Lawyer—a new generation of lawyers have created skilled legal teams whose focus is not solely on the traditional role of lawyering.
This generation is reaching roles in mid-senior level positions, focusing on tech and innovation upskilling, and tech-savvy or trustworthy digital natives. They understand technology and data, have a digital mindset and have the confidence to tinker in technology and drive change in their organisations.
At the same time, we’re noticing a top-down push from the C-suite requiring legal teams to capture, analyse and report on data. This demand to meet the organisational need for structured data calls for a new skill set housed in the minds of legal engineers, legal data analysts and legal designers. This data is locked within the commercial contracts and deals done by the business. It just makes sense that the first port of call for unlocking this data is through a contract lifecycle management system.
4. Alignment with organisational digital strategy
As a Microsoft implementation partner, we consistently hear that organisations face group-wide challenges for automation, collaboration and productivity. When the legal team’s digital strategy is aligned to the organisation as a whole, there is a shared business case, shared resources, and a consistent approach with less internal friction.
As organisations move from on-premise solutions to the cloud and migrate from shared drives to SharePoint, a legal team requirement for a cloud-based document, knowledge or contract management system can fit seamlessly into this overall strategy.
Although seen as a cost centre, the legal team can justify their need for legal technology to ensure they’re aligned with the business’s overall goals. The need for organisation-wide cloud-based technology has reduced previous barriers that legal teams once had related to data security or the challenge in building a business case for single-purpose legal tech solutions.
Naturally, when there’s organisation-wide digital transformation, it is easier for legal to make a case for a cloud-based CLM.
5. Digital contracting technology crossing the chasm
Electronic signature and automation technology are no longer for early adopters. Due to the prevalence, accessibility and affordability of legal tech products on the market (and the momentary statutory relaxation of execution requirements), this type of technology has become mainstream and is an essential tool for any legal department.
We’re conscious there is much noise. A lot of this noise comes from hype, buzzwords, new products, and new solutions looking for a problem to solve rather than the other way around. However, we want you to know, some of this noise is genuine “change-making” innovation–and the next generation of digital contracting is one of those areas.
We are excited by the potential for smart contracts, blockchain and AI to change the way deals are negotiated and managed is so significant that a focus on ensuring that the right contracting data and architecture is in place now is foundational. Forward-facing companies realise this and invest in CLM technology as a critical part of their innovation and transformation strategy.
6. Tightened regulatory framework
Legal teams face a strict regulatory framework heightened by the awareness of the impact of privacy and security on risk and compliance. For instance, the impact of the GDPR has meant that any Australian organisation doing business with the EU/UK needs to ensure that they have the systems and infrastructure in place to monitor and ensure that personal data is gathered legally and under strict conditions. An ideal CLM solution helps by automating the reporting requirements, and it provides the oversight needed by compliance professionals to respond quickly and dynamically to incidents.
The Modern Slavery Act 2018 (Cth) also requires large Australian entities to have the reporting capability to annually report on the risks of modern slavery in their supply chains. These supply chains are directly linked with their contracts. Companies that don’t have the frameworks and tools in place for compliance and risk mitigation face even more significant consequences in the form of financial penalties and reputational damage. This in and of itself justifies the costs of a CLM and where the cost of doing nothing becomes a key part of the equation.
Barhead creates Consensus
Even before Covid-19 changed the way companies do business, Gartner predicted that 90% of global enterprises and 50% of midsize organisations would have CLM solutions in place by 2023. The market certainly seems to think that this will continue with funding announcements in CLM technology almost monthly and is said to be worth over $20 billion.
Barhead is so passionate about accelerating our customers’ businesses by bringing Microsoft solutions to life that we have created Consensus – a CLM solution built entirely on the Microsoft stack. It offers end-to-end contract lifecycle and matter management with the added benefits of Microsoft’s data security, seamless integrations with core Microsoft 365 apps like Word and Outlook and holistic oversight of data for BI reporting.
We think that the growth of CLM will continue exponentially as organisations focus on proactive future-proofing initiatives and technology. Satya Nadella, CEO, Microsoft opened Microsoft’s Inspire conference in July 2021 by saying “We’re going through the greatest structural transformation in our economy in a generation”. Given that contracts are the lifeblood of an organisation, it is no wonder that 2021 onwards is a great year for CLM.
To learn more about Consensus, click the Consensus button below or subscribe to our newsletters.
About the Author
Amanda is Barhead’s Engagement Manager for Legal Technology Solutions. She is a Geeky Guru for CLI’s Legalpreneurs Lab and Committee member Woman of Australian Legal Technology (WALTA). Amanda thrives on the opportunity to create technology solutions for legal teams. She brings 15 years of experience in legal and consulting roles and has a focus in knowledge management, change management, transformation, legal operations and innovation, automation and a variety of no-code legal technology platforms.
Consensus — an end-to-end contract and matter management platform built on the Microsoft Cloud — is developed for legal, procurement and contracting teams and provides an automated and integrated workflow across documents, data, contracts and matters.