What is contract lifecycle management?

Why is contract lifecycle management important?

Contracts can be complex, dense and difficult to follow. This is especially true in vertical markets, where a contract is often highly specialized and industry-specific.

An effective CLM system breaks down a contract into its basic elements and offers multiple advantages to manual processing in streamlining contract processes:

• Costs, bottlenecks and delays are reduced, as well as miscommunication.
• All important information, from process steps to contract milestones, is stored.
• Improved contract visibility and transparency ensure accountability among all parties.
• Compliance audits, alerts and analytics deliver regulatory adherence and more effective risk management.
• All contract process steps are documented in case of dispute.
• Potential contract disputes are quickly identified, mitigating, if not eliminating, problems that include litigation.
• Automation handles repetitive tasks and frees skilled personnel to focus on their core competency.
• Real-time data on contract performance underpins informed business decisions.

Stages of contract management

Owing to differences in regulatory requirements, industry and other factors, every contract differs. For the most part, they follow a common set of steps:

• Contract initiation. The initiator conducts a needs assessment to identify the parties involved, their goals and expectations.
• Contract creation and negotiation. This initial draft of the contract features review and edits by all involved parties.
• Contract approval. Stakeholders give their approval after a thorough legal review by all parties involved.
• Contract execution. When processing begins, the terms are initiated and executed through delivery of goods, services or other promised products.
• Contract monitoring and auditing. This ongoing process evaluates the contract, determining whether its execution meets performance goals and all agreed-to steps. Discrepancies or deviations from the agreement are, of course, corrected as necessary.
• Contract renewal or termination. At some point in the contract, the contractee determines its course, deciding to renew or terminate. Negotiations sometimes occur mid-contract if adjustments are needed and both parties want to continue the relationship. If the contract is not renewed, ensure proper termination procedures are followed.
• Renegotiation of terms. If the contract is to be renewed or is still not completed, any unsatisfied stakeholder may request a review of the process and renegotiation of terms to adjust the contract.
• Post-contract review. The contract holder conducts a thorough analysis of the entire process and documents lessons learned. This is a chance for all stakeholders to improve future contract management interactions.

Examples of CLM software

CLM software is worth the investment. Two decades of real-world applications indicate that automating contract management speeds up sales negotiation cycles, cuts inaccurate payments and improves operating and processing costs related to contract management. Naturally, there is a significant market for this software. According to a report by Research and Markets, the global contract lifecycle management software market was $2.1 billion in 2023 and is projected to reach $5.2 billion by 2032.

Though many software packages are available, the same significant features and functions are found in most CLM software products, such as the following:

• Centralized contract repositories.
• Workflow automation.
• Electronic signatures.
• Version control.
• Collaboration tools.
• Automated alerts and reminders.
• Reporting and analytics capabilities.

Here are some of the top CLM software packages rated by Gartner:

• Icertis Contract Management. Audit history and compliance tools are among its wide range of CLM offerings. It also integrates into all major enterprise resource planning, customer relationship management and spend management systems.
• SirionLabs CLM. SirionLabs delivers functionality in nine areas, including metadata extraction, intelligent apps, key performance indicator modeling and the ability to model complex financial information and structures within a contract.
• DocuSign CLM. DocuSign is well-known in CLM circles with more than one million paid customers. It serves top Fortune 500 companies in tech, finance and healthcare, as well as thousands of federal, state and local government agencies thanks to its support for FedRAMP Moderate Impact Level for both eSignature and CLM.
• SAP Ariba. Ariba develops core templates and standardized terms to ensure repeatable and consistent conditions, helping both buyers and suppliers save time and minimize errors. It also facilitates the swift and straightforward creation of contracts using pre-approved templates and clauses.
• Conga Contracts. It specializes in end-to-end CLM solutions built within Salesforce. Its features include contract lifecycle automation and management, process automation, workflows, transactional contract execution and AI-powered data extraction for risk tracking and managing opportunities.
• Salesforce Revenue Cloud. This platform offers a suite of tools and features to streamline revenue operations, CLM among them.
• LinkSquares. It uses AI to extract insights from contract data, automatically pulling key terms, clauses and data points from contracts. It also helps identify hidden risks and liabilities within a contract, identifies market trends and best practices for negotiating better terms and monitors contracts for regulatory compliance.

Other notable CLM software packages include Oneflow, PandaDoc, Evisort, Contract Logix, Ironclad CLM, CobbleStone Contract Insight and Agiloft Contract Management Suite.

Benefits of contract lifecycle management software

CLM software wouldn't be a multibillion-dollar market if it didn't deliver a range of benefits to organizations of all sizes. Here are some of the key advantages:

• Improved efficiency. The automation of manual tasks reduces errors and speeds up processes, including the approval process, while creating a repository to store all contracts.
• Better compliance. Audit trails and records of all actions taken on the contract ensure compliance. The software also tracks changes to contracts, as well as alerts users to upcoming deadlines and renewals.
• Increased visibility. Real-time visibility into contract status, performance and risks, supported by reports and dashboards to track key metrics and identify trends, enables data-driven decision-making based on clear information.
• Cost reduction. Automated efficiencies, improved negotiations for better terms and identifying and mitigating risks are among CLM's direct and indirect financial benefits.
• Improved collaboration. Centralized platforms make it easier for teams and stakeholders to collaborate, while version control ensures everyone works from the same contract and messaging speeds teams' communication.
• Nimbler risk management. Risk assessment determines potential risks associated with the contract, provides risk mitigation strategies and ensures compliance with legal and regulatory requirements.