Shakespeare, in Romeo and Juliet, said that “a rose by any other name would smell as sweet.” But if you label it “a tulip,” you risk missing out on that part of the plant’s appeal altogether.
Names matter. Especially in business. If you consider “contract management” to be a “legal tech” initiative for the law department, you risk missing out on the broader benefits of looking at contracts as an important source for key enterprise data that informs the company about their commercial relationships.
In fact, according to a new IAACM blog by Tim Cummins, CEO of the International Association for Contract & Commercial Management: Legal Tech: Use With Caution, according to IACCM research, “while there are some very successful instances of [contract management automation] implementations led by the Legal function, in general systems selected by Law Departments were especially prone to failure – in fact more than 40% more likely to be underperforming.”
Part of the reason may be due to simple mislabeling. “Contract management software takes many forms, but is tending to be bundled into the overarching category of ‘Legal Tech,’” Tim notes. “This is misleading and problematic. In a corporate environment, lawyers are just one group amongst many on whom successful contracts depend.” Legal operations account for less than 5 percent of the overall workflow around creating and managing contracts, he adds. “By branding what is quite obviously business technology as ‘Legal Tech’, we simply undermine broader business understanding and adoption.”
Not that there’s anything wrong with “Legal Tech” moniker per se, especially when applied to software for law firms. But as Tim points out, “in-house Law departments are not separate and independent businesses. They need technology that integrates them into the business, not that separates them from it.” These are really important insights. Pramata knows this, from first-hand experience working with big enterprise contract management initiatives led by corporate legal departments.
Of course, nobody is saying that successful contract management implementations can’t start with the legal department. They certainly can. In fact, an effective solution should be flexible enough to start from any point where it’s needed by users. We’ve seen successful legal-led initiatives over and over; you can read here about how aluminum products manufacturer Novelis leveraged a legal compliance initiative to drive a wide-ranging digital transformation.
Still, there’s a lot to be said for taking a broad, inter-departmental view right from the start. For sure, the right platform can help legal teams identify potentially non-compliant or risky terms in agreements – but it can also help finance and billing departments recapture revenue from customer purchase commitments. (Read how health care distribution leader McKesson did both here.) A contract management platform can help legal improve drafting and version control, but the potentially more significant benefits can come from helping sales ops teams improve retention of at-risk revenue, increase active selling time, enhance customer service, and … well, it’s a long list.
So, let’s call a rose a rose. In fact, since I’m talking about labels and what they signify, I’ll just add that the term “contract management software” itself is a bit restrictive, and may lead companies towards solutions that are unnecessarily limited in scope. Businesses should be thinking more broadly, in terms of a platform that can provide insights into all of their commercial relationships, with contractual agreements as one important domain of that universe. If you didn’t know it, that’s what Pramata does!