Contract Lifecycle Management (CLM) -- Sneak Peek of Supplier Landscape

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By: Suchismita Dhal -- Customer Success Lead

09 February, 2020

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Contracting activities are an integral part of every business, and more inextricably so for procurement. Contract management is a time consuming, manual process in most organizations. Procurement executives are constantly challenged by issues related to process efficiency, transparency, quality, and compliance. To that end, digitalization of processes could open up a lot of opportunities. Industry leaders have already understood the significance of effectively managing contracts and started leveraging Contract Lifecycle Management (CLM) solutions to spot opportunities and forestall inefficiencies.

Why Has CLM Become Essential for Organizations?

CLM is a thoughtful combination of people, process, and technology to ensure organizations get the best out of their contracts. Many organizations have a legacy contract management system in place, which can document and manage contracts with a spreadsheet. However, when the volume and complexity of contracts increase, it becomes cumbersome, even impossible at times, to get the most out of contracts. CLM tools can automate numerous activities, and provide contract analytics; compliance tracker and performance metrics; an automated review, approval, and renewal process; and standardized clauses and terms for contracts. The efficiencies introduced by an automated CLM solution are numerous. The systems make contract information reportable and actionable by showing contract dates, monetary values, terms, clauses, and obligations at a glance. Furthermore, they provide a platform for smart contracts that allow tasks to be automatically created and assigned to contract managers based on changing information. In a nutshell, if an organization desires to decrease cycle-times; reduce risks; and increase profits, productivity, and efficiency in contract management to get the needed advantage to meet their business goals, then it is about time that they consider an approach that moves beyond contract management and towards CLM.

What Does It Take to Get a CLM Solution Implemented? Key Things to Consider When Adopting a CLM Solution

When organizations look to adopt a CLM solution, they not only need to put in a lot of effort in terms of time and support but also have to share security-sensitive material with the solution provider. To select the most capable and secure software, the organization should evaluate the solution provider by its strengths in different functionalities and how well they can integrate the information.

Data migration and onboarding

 

  • Data transfer during the implementation phase—when existing contract data is transferred to a CLM solution—is a riskier affair. It is important to consider data security and accuracy during document migration and onboarding.
  • Many solution providers need to take utter care and offer streamlined onboarding services to their clients to ensure that all data is correctly entered into the new system.

Connectivity

  • Companies mostly focus on improving and streamlining processes between contract management and sourcing, as well as other “source to-settle” processes. If the CLM solution is offered as a standalone feature, the solution provider should have advanced application integration capabilities to ensure that the solution can properly integrate with all the client’s existing systems to ensure contract management efficiency.

Accessibility

  • The company may demand that only certain users have access to certain contracts or that users may have restricted access to certain contracts. Hence, it is necessary to utilize a role-based access control system that lets the organization define who has control over which data, specific to contracts.

Customization

  • Customization to meet the organization’s unique business structures and requirements is key. It requires the extensive collaboration among the software developer, legal department, and contract management administrators to create customized templates, clause libraries, approval workflows, and system control to establish a successful CLM solution.

Compliance

Focus

  • For many organizations, the ability for different departments to leverage and control the CLM system is extremely important, especially for legal and finance departments.  
  • It is always recommended to have this functionality included in the CLM. Providers often collaborate closely with an organization’s legal department during implementation to build any unique requirements into the system, such as contract templates and clause libraries.


Best Practices in Managing Contracts with Leading CLM Software Providers

Small to mid-size companies usually prefer deploying buy-side CLM tools with access to all department functions such as sourcing and procurement, legal, finance, and IT. However, mid to large size companies prefer deploying the enterprise-wide (sell-side and buy-side) CLM tools. In this set up, the buyer-side CLM tool holds the repository with respect to vendor master data, and the sell-side CLM tool holds the repository of customer master data. Integration of the sell-side and the buy-side in a CLM system would reduce legal risks thanks to transparency.

The global CLM software market has many vendors. All leading players in the market are offering the CLM software worldwide, which makes the supply market very competitive. This offers a unique opportunity to both customers and vendors. Customers can have easy access to the latest products/solutions, and vendors can explore new markets for product innovation and development. The prominent CLM market players based on high market visibility, high market penetration, and strong market momentum are Apttus, Agiloft, SAP, CLM Matrix, SciQuest (Currently Jaggaer), Coupa Software Inc. (Exari), GEP Smart, Determine (Corcentric, LLC), Icertis, Infor, Ivalua Inc, Oracle Corporation, Revitas (Model N), SpringCM, Symfact, and Zycus Inc. 

Due to the increasing demand, the larger market players are looking for strategic acquisitions, mergers, and collaborations to further enhance the capabilities of their software and expand their customer base. The supplier landscape has changed (e.g., IBM’s withdrawal and Model N’s acquisition of Revitas, Coupa’s acquisition of CLM leader Exari), so has customers’ adoption of CLM and user experience design in solutions. The CLM vendors are deploying more advanced technologies, such as AI and advanced analytics, on digitized data to transform contracts from static documents into live contracts that are anticipated to interact with surrounding systems, humans, and other contracts. These vendors are investing mostly in research and development to enhance the capabilities of their CLM software to cater to complex business needs and decision-making solutions for their clients.

The figure below displays the benefits, captured through surveys conducted with over 200 executive-level respondents from top companies worldwide. The surveys were conducted by IACCM - The Global Contract Management Association, for standalone CLM tools offered by major players such as Apttus, Icertis, etc.

The table below displays an assessment of the leading CLM vendors.

Specialist/standalone CLM players are recommended to clients who are seeking specific (digital signature) or automation features for better business process outcomes and decision-making. For clients who require simple functionalities and already have strict manual contract compliance in place, S2C CLM players (suite players) are more suitable, as these companies do not expect compliance functionality from the software.

Some companies have deployed a mix of tool and procurement outsourcing service providers for the source-to-pay process. However, there is a gradual shift towards reduction in the number of modules sourced from different providers mainly due to integration issues. SAP Ariba is commonly adopted for modules where organization suppliers have easy on-boarding processes. Companies are aiming for a maximum of two to three service providers, if not a single suite. The modules which require niche expertise and are solely managed by organization stakeholders, such as Spend Analysis, CLM is either maintained in-house or outsourced to a standalone player.

Both best-of-breed (standalones) and full suite applications have their benefits and pain points. Some of the pros and cons are captured in the table below.

Particulars Best-of-Breed (Standalones) CLM Module Full Suite
Benefits/Pros
  • Robust and deepest functionality.

For example: Offers a more intensive artificial intelligence-enabled CLM module, which ensures the digitization of legacy contracts, import of third-party contracts, analysis of past negotiation history, etc.

  • Regular/periodic enhancements made to the features of the standalone CLM module.
  • Offers the highest level of compatibility with the company’s unique operations/business process.
  • Offers a high degree of integration within modules, which allows for seamless data flow.
  • Easy-to-use, consistent user interface.
  • Only one/two software vendors to manage.
  • Opportunity for a huge discount if companies choose a software bundle from a single supplier.
Pain Points/Cons
  • Requires the use of middleware/integrators among modules.
  • A high degree of customization required in each module integrated to the standalone CLM module to ensure consistent user interface.
  • Not all modules are best in class.
  • In most cases, updates/upgrades are made to the modules only once a year.

Source: Beroe Analysis

Below are some successful case studies on CLM solution implementations.

Given all the above, why have some companies not been able to capture the value as expected? Many organizations implement a CLM solution as a pilot exercise, mostly for a portion of their business or a specific business function.5 This is where the holistic concept of CLM fails because of data inconsistencies, workflow incoherence, and process inefficiencies among different functions of the same organization. Again, many document management systems and shared drives do not support complete contract reporting and analytics. Majority of the best in class companies were observed using S2C CLM Suite providers to ensure seamless integration in place. However, companies are gradually moving towards the best-of-breed model, especially to ensure better contract compliance and automation features provided by the CLM process and tools.

The figure below lists the key points to consider when selecting a CLM solution vendor.

Conclusion:

Dedicated CLM systems can assist organizations in contract management by establishing a centralized and authoritative repository/database of contracts, amendments, and renewals of contracts. For organizations that manage hundreds to thousands of contracts or complex agreements, a comprehensive approach through CLM will pave the way to more control and risk mitigation, and increase the value attained with contracts. However, it is important to choose these solutions based on an organization’s unique goals; time for realization; budget; and the targeted level of value, security, or compliance. Although many leading organizations around the world have already been investing in automated CLM tools, the overall level of adoption is still relatively modest. It is expected that the pace of innovation and adoption in this area will accelerate in the near future. Driven by digital transformation initiatives, the market will experience more advanced integration between CLM and other core enterprise systems such as CRM, CPQ, billing, procurement and supply chain management, etc. As there is no one-fits-all solution, organizations with competitive goals should further explore the advantages of contract management tools and technologies, and find the right fit that matches their unique requirements.

References:

  1. PayStream CLM Report, (2016, Feb ), https://www.jaggaer.com/wp-content/uploads/2016/02/resources_JAGGAER_PayStream_CLM_Report2016.pdf
  2. Cobblestone Website (2019, Feb), How Contract Management & Contract Lifecycle Management Differs, https://www.cobblestonesoftware.com/blog/how-contract-management-contract-lifecycle-management-differs
  3. OJARD, B. (2017, May), 5 Reasons Why You Should Implement Contract Lifecycle Management, https://customerfx.com/article/5-reasons-why-you-should-implement-contract-lifecycle-management
  4. Bernadette B(2019, May), Icertis, The 5 Ws of Enterprise Contract Management for Legal Ops, https://www.icertis.com/blog/the-5-ws-of-enterprise-contract-management-for-legal-ops/

 

 




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