October 30 by Zack Alspaugh
Recently Andrew Bartels, Forrester Research Group VP and Principal Analyst, identified Contract Lifecycle Management (CLM) software as an enterprise must have as the year moves towards a close. “Demand for CLM software is clearly growing, with revenues of CLM vendors projected to rise by 16% in 2014 and 12% in 2015.”
Yet, contract management solutions aren’t new. In fact, they have been available for decades. So why the sudden spike in interest?
Two critical factors have reshaped the Legal landscape – cloud computing and the Internet of Customers.
Traditionally, CLM was primarily a licensed, on-premise solution which lacked the speed and maneuverability necessary to match the constantly changing business and legal needs of most enterprises. As a result, Legal departments were falling behind, struggling with unarticulated requirements, an inability to meet customer needs and a dependency on IT to keep the solution afloat, making CLM a source of frustration and complexity. As one attorney joked at a recent legal conference, “I didn’t have gray hair before I started implementing contract management solutions.” Cloud computing has changed all that, making deployment easier, updates automatic and user adoption much higher.
There was also a general hesitance in the past around putting firms’ contracts in the cloud. Now that Salesforce and other platform providers have proven that the cloud offers airtight security, such concerns are no longer present. Software-as-a-service (SaaS) subscriptions for CLM solutions are growing in demand, especially for sell-side contracts, helping drive double-digit growth rates in the category.
A second stimulant pulling enterprises towards adopting contract management solutions is a changing relationship between customers and companies, which Salesforce CEO Marc Benioff dubbed the Internet of Customers. It’s a buyer’s market, forcing companies to re-imagine the way they manage the customer lifecycle by providing a highly personalized and interactive two-way relationship.
At the heart of that lifecycle is contract management. More than 80% of transactions are tied to a contract – and these critical documents outline who is paying you, what amount they’re paying you, how long they’ll be paying you, what their obligatons are – the list goes on. Armed with insight into your contracts, Legal is empowered to make better business decisions, and simplify operations across finance, sales and executive teams.
But when a Legal is inefficient in managing contracts it has a noticeable outward effect on the rest of the company, including a direct impact on customer relationships, Days Sales Outstanding (DSOs), top- and bottom-line revenue and company liability. In a recent benchmark survey of legal and contracting professionals, respondents lacking automated contract management revealed the following challenges:
- 61% admitted they’re not easy to do business with
- 60% stated they’re not viewed as being responsive
- 57% don’t understand their customers’/partners’ needs
- 62% are not quick to follow up with commitments
- 69% don’t have a standard selling process
These should be alarming numbers, regardless of your role within the company. It’s a customer-driven world and speed, convenience and efficiency mean everything. To address these challenges, enterprises are putting a greater focus on Contract Lifecycle Management.
Follow the link for the full Survey Report Contract Management Flaws that are Submarining your Business. For more information on the value of CLM software, download the Forrester Market Overview.