The Importance of Contract Management Software
Today’s corporate environment demands that legal teams deliver value-driven, transparent, and cost-effective legal services. This compels legal departments to seek ways to improve their processes, often through technology. One area that is often ripe for improvement is contract management.
Why is contract management important?
Every business sector relies on contracts to govern and guide their activities. Legal professionals are expected to be stewards of well-defined processes that can manage the murky, complicated waters of getting contracts in place, dealing with disputes, and ending them.
According to a PwC study, the average Fortune 1000 company manages anywhere from 20,000 to 40,000 active contracts. AÂ survey from ALM and Bloomberg Law found that contracts-related tasks represent at least half of the daily work of more than 4 in 10 corporate counsel (43%).
Companies must embrace digital transformation to strengthen their approach to contract management. By embracing contract management software, organizations can achieve better oversight, improve productivity, and fully realize the potential of their contracts.
[Read our Buyer’s Guide to Contract Management Software for a more in-depth look at contract management software options so you can better align your organizational needs with the capabilities of various solutions.]
What is contract management software (CMS)?
CMS solutions are designed to automate and streamline the contract management process. These powerful tools offer a unified platform for legal and business teams to create, negotiate, sign, renew, and report on business contracts by automating the manual work traditionally involved in a contract workflow.
CLM vs. CMS
Contract lifecycle management (CLM) is often mistakenly used to describe the technology that automates some or all aspects of the contract lifecycle. However, CLM is a function, not a type of technology. The term CLM refers to the combination of processes that enable legal teams and businesses to efficiently manage all stages of contracting. So, you can’t buy CLM.
Contract management software (CMS) refers to the wide array of technology solutions you can buy to automate some or all aspects of the contract management process.
CRM vs. CMS
Customer/client relationship management platforms (CRMs) are designed to help businesses manage their interactions and relationships with customers. They typically include a variety of features and functionalities aimed at organizing customer data, streamlining communication, and optimizing customer engagement.
In a law firm setting, CRMs help optimize client interactions, enhance client satisfaction, and ultimately drive business growth by retaining existing clients and acquiring new ones.
While some CRMs offer functionality to generate and sign agreements with clients, legal departments should not rely on CRMs for contract management. Contract management software (CMS) is specifically designed for managing contracts, including drafting tools, approval workflows, version control, compliance management, and analytics.
What are they key functions of contract management software?
Contract management software provides a centralized platform for storing and managing all contract-related documents and data, enabling legal teams to gain visibility into the entire contract lifecycle and make informed decisions. The right CMS enables legal departments to become more efficient, strategic, and proactive in managing their organization’s contracts and legal obligations.
By investing in a dedicated CMS, legal teams can leverage contract data to identify cost-savings opportunities, mitigate risks, and improve negotiation outcomes. This, in turn, can help organizations strengthen relationships and achieve business objectives more effectively.
What are the benefits of contract management software?
The right contract management solution can increase operational efficiency, help cost savings, reduce risk, enhance compliance, and improve relationships with partners, suppliers, and clients.
Consider these statistics:
- An automated contract management system can speed up negotiations by 50%, reduce payment errors by 75 to 90%, and lower the cost of managing contracts by 10 to 30%, according to Goldman Sachs.
- AI-based contract analytics solutions can reduce the manual effort needed for contract review by 50%, according to Gartner.
- Using intelligent contract analytics, companies achieve a 60% reduction in contract management costs, according to Deloitte.
When contracts are managed poorly – slow drafting and negotiation processes, inefficient storage and retrieval systems, limited oversight mechanisms, and poor communication – the result can have significant impacts on your business.
Beyond loss of revenue and operational inefficiencies, poor contract management puts your organization at risk of several other potential complications, such as regulatory penalties, security breaches, and reputational damages.
Ignoring the need to invest in CMS solutions is a risk that businesses can no longer afford to take. The old ways of relying on manual tasks and disjointed systems are no longer sustainable.
[Read our complete Buyer’s Guide to Contract Management Software to get actionable insights to help you select and implement the most effective solution for your team.]
Understanding the contract management software market
Navigating the contract management software landscape can be an overwhelming journey for buyers. The market is crowded with solutions, each boasting a unique mix of features and capabilities aimed at optimizing different facets of contract management.
These factors make it especially difficult to cut through the noise and choose the solution that makes the most sense for your organization.
Within the world of CMS vendors, there are two distinct categories of solutions:
- Focused contract management software
- Enterprise contract management software
Focused CMS
Focused CMS is specifically designed to help legal teams solve their most pressing CLM challenges, including things such as organizing, tracking, and reporting on contracts. These solutions are ideal for legal teams at small to medium-sized organizations or legal teams at larger organizations looking to improve specific areas of their CLM process quickly and affordably.
Because these solutions are not intended to address all areas of the CLM process across an organization, they are often easier to implement and adopt than the alternative, enterprise CMS.
Enterprise CMS
Enterprise CMS systems – also referred to as CLM Systems (CLMS), full lifecycle, or end-to-end software – are designed to handle every aspect of the CLM process across an organization. These solutions can be ideal for large organizations with higher contract volumes, complicated contracting workflows, and significant resources.
While these solutions deliver the most functionality and features to solve complex contracting challenges for every department, they require significant time and financial investments to get started. Be prepared for a lengthy implementation and adoption process before all your users are ready to jump into the system.
Is your legal department ready for contract management software?
Ready for contract management software but don’t know where to start? Register for our four-part webinar series: A Buyer’s Guide to Successful Contract Management Automation. Each webinar covers a key stage of the buyer’s journey – from planning to implementation – with expert tips, actionable insights, and practical guidance to help you become a smarter buyer.
The right tool can keep your legal department’s contract management process on track. Bloomberg Law Contract Solutions can help solve in-house counsel’s most pressing workflow challenges, with minimal time and resources needed to onboard, implement, and use. Our platform combines the latest in AI-powered legal technology with workflow tools to provide a competitive edge to help attorneys be more productive and efficient.
Request a demo to see how Contract Solutions simplifies and streamlines contract workflows for in-house legal teams.