Are you considering a CLM (Contract Lifecycle Management) system?

By Gregg Spivack

Director of Client Services, NPI

May 27, 2015

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We’re in the business of optimizing the business terms of contracts here at NPI – so when our clients bring us in to review a contract lifecycle management (CLM) purchase or renewal, we come to the table with a unique perspective. The success of these CLM initiatives goes well beyond getting the best price or terms, and in many cases we’ve used our expertise to help clients navigate the less tangible aspects of executing a successful CLM implementation.

It’s important to note that CLM is still a new concept to many of our clients and we’re only recently seeing an uptick in transaction reviews for this IT niche.

Surprisingly, the sales team is often the main driver supporting a CLM implementation. Long sales cycles, delays due to document turns, missing documents and inefficient sales processes all contribute to delays in revenue – a problem that sales teams abhor. Sales operations frequently kicks off the search for a CLM solution, and sees it through quote, signoff, contract, invoice and payment. Vendors such as Model M, Selectica and Apttus are key players.

Once the sales side turns to a solution to efficiently manage all their order documentation traffic, rules and complexity, others take notice such as legal and contracts admin departments. The number of users is significantly less in these departments, but the need to enforce terms and capture documents exists. Other benefits include version control, transparency to the contracting process, enforced approvals, maverick elimination, and establishment of a contract repository. The right CLM solution will help turn contract spaghetti into structured data.

The three typical high-level phases of a CLM implementation are:

1) Get a contracts repository where you can begin to abstract out all the contract elements. It is an affordable way to start the process with minimal process changes required.

2) Start out by managing your most highly requested contracts in the CLM system. Think of high volume, low negotiation documents such as NDAs.

3) Add in highly negotiable contracts where there are more turns and approvals. Tackle lifecycle, workflow and version control issues at this point.

While some firms don't make it to phase 3, there's value each step of the way. There’s no need to employ an all-or-nothing approach. As for sourcing a CLM solution, here are a few best practices to remember:

Always conduct an RFI. Not only is it a sound sourcing practice, it helps the internal team to outline and prioritize their users’ needs and evaluate functionality accordingly. Invite the “big guys” and the “little guys” (at least five vendors) and start with the basic needs/functionality requirements and pricing. From there, consider setting up a Goldilocks scenario where you bring a lower price point option, mid-range and higher-end option to the RFP phase.

Invite an incumbent. If you have an incumbent vendor in the house that claims CLM functionality, include them in the RFI phase. It fosters a stronger partnership with the vendor as well as applies added pressure on non-incumbents to respond competitively.

Gather back-door references. The vendor will provide you with handpicked references, but it’s wise to find your own. Go to a User Group, scour LinkedIn and/or reach out to your peers to find past customers for vendors being evaluated. Connect with them and interview them on their experiences.

Get to know the vendor beyond the sales team. Who will you deal with during the implementation? It probably won’t be the salesperson that has been sitting at negotiation table. Get to know the vendor’s implementation/professional services resources before you sign a contract. Any head start you can have on developing those relationships early will drive a more successful implementation down the road.