What Is Contract Management?
Today’s chronically understaffed in-house legal teams, charged with managing contracts and mitigating related business risks, are often unable to keep pace. Rather than looking out for the best interests of the business — negotiating better deals, keeping ahead of agreement renewals or spotlighting risky contract clauses — they spend inordinate cycles on paper chasing, signature tracking and redline review.
In-house legal teams are being asked to do more with less, identifying and implementing the right tools, techniques and technology can mean the difference between unmanageable backlogs and efficient operations.
Enter contract management: “the management of contracts made with customers, vendors, partners, or employees,” according to Wikipedia. This encompasses creating, managing, sharing and archiving business contracts, and, as we’ll see, should allow in-house legal and its business users to automate management processes while extracting business intelligence from those contracts.
First, a brief history of contract management
Contract management and contract management systems (CMS) started gaining traction in the early 2000s. Prior, in-house legal teams cobbled together their own ad-hoc management solutions — such as email chains and spreadsheets — or used complex database management systems to manage their contracts.
Because legal teams historically had contracts scattered all over the place — in filing cabinets, on local drives and elsewhere — this decentralization exposed companies to significant risks. That’s why, in the early days, contract management tended to focus only on the post-execution piece of the puzzle, i.e., storage of agreements in one centralized place.
However, contracts were still viewed as static documents requiring a static solution, which often turned out to be a “file-and-forget” solution, i.e., a one-way trip to the archives. The logical answer was the contract database. As anyone who works with contracts knows, contracts are living documents — think upcoming renewal dates, force majeure clauses, the impact of changing state and federal regulations — requiring living solutions.
Contract Lifecycle Management solutions and their limitations
With this in mind, the next generation of contract management added an important word to the mix — lifecycle. Known as contract lifecycle management (CLM) solutions, these products acknowledged that contracts impact their business well before and after they’ve been archived.
Renewals are a prime example: How can companies manage and remain up-to-date on their obligations if they’re not sure when contracts are up for renewal?
CLM solutions added features such as automated notifications to deal with this use case. They also introduced pre-execution features, including contract generation and authoring. Still, CLM tools were designed as database-first, meaning any automated workflow components they introduced were clunky and took months, if not years, to implement.
To this day, legacy contract management and CLM solutions are best used for only post-execution database management, i.e., storage.
CLM tools are not designed to solve the expensive and painful problem of how to get a contract made in the first place. Never mind streamlining and automating rote, repeatable work so that in-house legal professionals can spend their time negotiating deals, collaborating on terms, spotting risk and acting as strategic partners to the organization.
Taking up this challenge, the next evolution of contract management technology is marrying the power of contract process automation with agreement management. Enter the digital contracting platform.
Digital contracting is the future for in-house Legal
One study by IACCM found that even a low-risk contract costs an average of $6,900 to process.
Costs for a mid-complexity contract averages $21,300, and high-complexity contracts run into hundreds of thousands of dollars. And these costs are rising.
To transform Legal from cost center to business center, forward-thinking businesses are looking to contract management workflows — standardized processes for shepherding contracts through various approvals and systems efficiently. Unfortunately, without modern tools, workflows involve many manual steps. For example, a typical workflow for a legal team may involve word processing software for drafting contracts and redlines, email for collaboration and negotiation, and a CLM for tracking.
Hallmarks of modern digital contract management, workflow technologies stem from the need to shepherd digital contracts across functions, organizations and systems. These tools deliver key efficiency and business-driving features, from a single platform, including:
- Document creation
- Automated approvals triggered by predefined conditions
- Contract repository
- Integrations with contract-adjacent systems like Salesforce
Giving users visibility into every step of the contract management process, digital contract management platforms are also:
- Cloud-native and data-driven through every step of the contract management process
- Designed to enable real-time collaboration and negotiation
- Capable of synching with all other systems and business users who need to consume contract information
- Built around core concepts of usability to help ensure businesses can onboard quickly and give teams powerful tools they want to use
The result is contract management that coordinates and connects every person, every step and every system relevant to contracts — establishing a digital contracts hub for businesses. In effect, this is helping a new breed of senior counsel and legal operations professionals escape their siloed, informational black boxes to become data-driven doers who can illuminate contract metadata (e.g., renewals or force majeure clauses) and process data (e.g., time and cost to process contracts) to advance business priorities.
What will distinguish in-house leaders from laggards in this new world? How they use contract data.
Successful legal teams will be those who harness contract data to protect their businesses, save money and provide business-critical insights. In the process, they will uplevel their own value to the organization by becoming trusted business advisers.
How Ironclad delivers value in the modern legal world
What if every business could fast track their contracts — NDAs, BPAs, MSAs, influencer agreements — from creation to redlines to signature sign-off to archiving, so they can focus less on paperwork and more on legal work? And all from a single platform, without relying on multiple, disconnected systems, including static storage archives?
From making to managing to storing, a digital contacting platform like Ironclad can streamline and automate every part of the contract management process, going beyond what simple storage databases or legacy CLM systems can offer.
“Going digital” and automating the entire contract management process not only mitigates business risk by quickly spotlighting risky clauses but also prevents rogue contracting by eliminating the use of outdated or unapproved templates that leave businesses open to liabilities.
Ironclad, for example, enables legal teams to:
- Implement contract workflows to automate agreement creation, providing self-serve contract management for business users in any department
- Bake data collection into the contracting process, so that contracts become a source of business intelligence
- Centralize contract storage to create a single source of truth for business that is easily accessible and searchable
- Power remote collaboration and negotiation, across teams and business users
- Work strategically by prioritizing team requests
“Contracts must first catch up to the pace of business, then evolve far enough ahead to lead the way to the future,” says Ironclad CEO Jason Boehmig. “They should be intelligent, automatic, and easy to use by both humans and computers. Contracts should be connected to the people and systems that need them, instead of buried in discarded emails and cluttered folders.”
Closing arguments for modern contract management
Until recently, contract management platforms and contract management techniques have been narrowly focused on pre- or post-contract legal needs like storage — to the detriment of the business. Modern businesses and enterprises today require tools that support the entire contract management lifecycle — for in-house Legal and legal operations as well as other departments like Sales and Finance who create or manage contracts. In this world, contact management can no longer be viewed as a lateral, static, one-way process. Instead, contracting must operate as the hub connecting and driving other business units.
From making to managing to storing, a robust contract management system should automate and streamline all contracts, from the simplest to the most complex, facilitating collaboration and negotiation for all contract stakeholders — even as they work remotely.
Unlike legacy CLM and contract management solutions, digital contract management (and the digital contracts it keeps) answers that need, engaging its business users with a modern, intuitive solution. In the process, in-house Legal can go from manual, black-box contracts to data-rich contracting, collaboration and negotiation thanks to:
- Fast tracking the entire contract process, including negotiation, review and approval
- Enabling departments to launch their own contracting with confidence
- Being able to keep pace with the speed of business
In short, contract management efficiency can free legal counsel and legal ops teams from rote, repetitive, time-consuming activity in favor of becoming trusted, strategic business advisors to the organization.