The Hard Thing About CLM: Why Organizations Need Radically Simple Solutions

Valu of CLM Forrester stat
At a time when companies are required to do more with less, contract management technology is becoming increasingly more expensive and taking an alarming amount of time to deploy while failing to deliver on key business goals.

The current economic climate is steeped in uncertainties, forcing many businesses to cut budgets and reduce headcount. These operational decisions are impacting legal departments of all sizes and requiring many contracting professionals and in-house counsel teams to do more with less. Unfortunately, the Contract Lifecycle Management (CLM) landscape is trending toward high-priced contract management technology that takes months to deploy and offers minimal alignment with strategic business goals. 

CLM decision-makers are all yearning for the same thing: a radically simple solution that enables them to drive business critical outcomes. With fewer dollars to invest in technology, businesses want CLM solutions that deliver value beyond the legal department – giving procurement, sales and finance teams more visibility into contract data. 

To help organizations maximize the value of their contract management systems, Pramata commissioned Forrester Consulting to survey CLM decision-makers on the challenges businesses currently face when it comes to contract management technology. Here’s what we learned. 

The Unfulfilled Promise of CLM Technology

We all know what happens when a contract management solution fails to deliver – too much time is spent on wasted efforts and lost opportunities. The study found that the most common CLM challenges center on three primary issues: contract management solutions are too expensive, take too long to implement and onboard users, and, in the end, fail to deliver on promises made by the vendor. 

In fact, solution capabilities – or lack thereof – were among the most common challenges listed in the study. More than a third of the survey respondents cited complicated workflows, inaccurate/unreliable contract metadata, and poor search functions as major challenges experienced with their current CLM solution. Even more eye-opening was the number of respondents who said their existing CLM technology cost too much. 

Alla Valente, senior analyst at Forrester, joined me as a guest speaker during a recent ALM | webcast to discuss the study’s findings.

“43% say that their CLM solution is too expensive. The way I read that [stat from the Forrester Consulting study] is 43% of those individuals are not getting strategic value from their CLM which is why the cost seems to be too high. But we can’t overlook the 39% who said CLM solutions just take too long to deploy. This is a problem,” she said on a recent webcast hosted by Pramata. 

As Alla made clear during our conversation, because technology purchases are often based on an immediate need, implementation and adoption must move quickly to realize the entire vision of the solution. 

If a CLM solution takes too long to implement, it negatively impacts the technology’s “ time to value” – adoption rates taper off as users disengage. In the end, the project ends up going off the rails with the contract management solution looking very different than what was promised. 

Business Goals: Revenue Protection and Renewal Management

When asked about their organization’s critical contract management goals, study participants listed revenue protection, renewal management, and contract acceleration. Nearly 20% ranked revenue protection as their top contract management goal, but less than half of the participants said their current CLM solution supports revenue protection. Only a quarter of the survey participants claimed that their CLM provides excellent support for contract renewal management processes. 

Both of these goals are directly tied to crucial business needs: finding and driving financial opportunities for the entire organization. Everyone from large-scale legal departments to one-person in-house counsel teams need complete visibility into contract data to build a contract management program focused on comprehensive revenue protection measures and contract renewal capabilities. 

And yet, lack of visibility seems to be a running theme across the CLM landscape. The study  findings make clear that this lack of visibility translates to contracting teams spending more time fielding questions about contract terms, having to put more effort into searching for critical contract information, and, ultimately, taking longer to renew contracts – moving them further away from Contract MVP status. 

The High Cost of Ineffective CLM Systems

Poor contract management systems create a domino effect: Organizations lack a global view of contract effectiveness which leads to the inability to measure contract value. Financial opportunities are lost as the rest of the business all but gives up on a CLM solution that fails to deliver on its promises. 

More than 70% of the survey respondents report there is a greater scrutiny placed on technology investments and 69% said that their organization is likely to cut technology budgets across the board. But it’s not all doom and gloom: 86% of the survey participants agreed that contract management technology is strategically important to the entire organization. The catch is that CLM decision-makers must demonstrate how contract management technology delivers measurable value, enabling in-house counsel teams to drive business critical outcomes beyond the legal department. 

“Contract Management becomes not just something that legal or procurement teams can use, but also something that benefits sales, technology, security and risk management teams,” said Alla during the webcast. “Effective CLM technology benefits the customer experience and also helps to bolster the reputation of the organization as a whole. When an organization’s CLM program aligns to critical business priorities, it can unlock a lot of value.” 

To hear more of my discussion featuring Alla and the challenges companies face when implementing CLM solutions, watch the full webcast on demand at: The Future of CLM: Realizing the Full Strategic Value of a CLM Solution. During our conversation, we lay out the primary CLM challenges identified in the study and share our insights on what it all means for in-house counsel teams and the contract management industry at large.  

This blog post is the second in a three-part series covering the Forrester Consulting study commissioned on behalf of Pramata: “Are you Maximizing The Strategic Value Of Your Contracts? How Leveraging Your Contract Lifecycle Management Technology Drives Organizational Awareness and Holistic Business Value.” 

Check back next week when we identify key CLM opportunities revealed in the Forrester Consulting study. And if you haven’t already, be sure to read the first blog post in this series:  The Future of CLM: How In-House Counsel Teams Can Maximize the Strategic Value of Contract Management Programs

Source: A commissioned study conducted by Forrester Consulting on behalf of Pramata, December 2022

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