Is Your Procurement Team Ready for a CLM?

Procurement teams touch every major business function. When they slow down, so does the entire organization—whether it’s vetting new technology for IT or managing suppliers for the product team, no high-functioning organization can move forward without procurement.

But how often do you find that after you sign a contract, it disappears into the ether? It’s impossible to conduct quality supplier relationship management if you don’t have the complete picture of who your suppliers are, what deals have been made, and where opportunities are for cost-savings.

The solution to this is a contract lifecycle management tool, or CLM. CLMs centralize all of your contracts into one software that connects with your sourcing software. A great CLM will serve as more than a contract repository, though. It will allow you to search your contracts, surface insights about your positioning, and help your team move forward with deal cycles more quickly.

The question is: Is your team ready for a CLM? In this post, we’ll talk through what keeps procurement teams stuck—and what processes need to be in place to be ready for the tech that can fix it.

Why procurement teams get stuck

Contracts serve as the foundation for every business interaction, but they often get lost somewhere after they get signed. Maybe they’re trapped on someone’s individual computer, or maybe you have multiple systems of record where the final draft could live. 

This prevents teams from gaining visibility into their supplier agreements. Mills recalls spending months researching a new contract management solution for the business in his first role as procurement director. He got his manager and his team really excited about several alternatives and a six-figure savings…but there was one problem.

“What I failed to do was realize that while I was doing all of this brilliant research, the contract auto-renewed,” Tom remembers with a grimace. “That meant we had two more years with this current solution we couldn’t use.”

This forces procurement teams into reactive decision-making, working around contracts and suppliers instead of actively managing them. This makes it incredibly challenging to focus on what matters the most in your role—the relationships—because you’re stuck chasing down old agreements and doing routine admin tasks.

What CLM readiness actually means for procurement

The thing is, you can’t add a CLM on top of a broken process. “The number one thing I’ve seen people get wrong is underestimating the importance of having the right foundation in place. I think sometimes you can almost think tech is the only solution, when tech is part of the solution. I always recommend addressing the fundamentals first,” says Tom Mills from Procure Bites.  

An emphasis on relationships

Before you can add a piece of technology into your workflow, you have to make sure your process prioritizes the most important aspect of procurement: People. 

Says Mills, “When I first join an organization, I always start with my suppliers. I want to talk with them about what’s working, look at the KPIs, evaluate the SLAs, and make sure we’re both ready to develop a plan together.”

Relationships matter for your supplier management, of course. But your internal stakeholders also have to be on the same page about why procurement matters and where it exists in the process. You need to know:

• Do other teams bring procurement in at the right time? Do they understand the value that procurement provides? If not, why not?
• How do you approach other stakeholders when they do something “wrong” in the process, or bring you in too late? Is it a mad dash for your team? Do you debrief afterwards as a group to try and fix the issue?
• How do you feel the relationship is working overall with each stakeholder? Is it easy to work together, or not?

Your culture will determine how successful an implementation is, because if your people aren’t involved in the process at the right time, adding a CLM won’t solve your contracting issues.

A process that provides clear ownership across procurement, legal, IT, and finance 

That’s why a clearly delineated process is the most important element that needs to be in place before you can implement a CLM.

Yes, a CLM will help with the process by speeding up certain elements like approvals. But fundamentally, if you don’t have a defined path for a contract to move through your organization from intake to signature, you’re not ready to add the technology.

Alternatively, you may have a process, but no one follows it because it’s too convoluted or requires too many steps. Now is the time to evaluate what’s working with your process and what could be improved, not just from the perspective of your team, but all of your internal stakeholders. 

For Mills, it’s almost always an issue of when stakeholders bring procurement in to the buying decision. “One of the biggest challenges for procurement professionals in any organization is getting engagement at the very start of the decision to buy,” says Mills. “You may have a strong governance framework, but if it’s not clear to stakeholders when and where they should be using it, or how to follow the process, it’s not going to happen. You need a very simple process flow for stakeholders to follow.”

A plan for data and governance 

What makes a CLM valuable is how it can access your contract data. For example, it can tell you which suppliers negotiate more than others, or which ones have the most upcoming deadlines for re-negotiation. 

So if your contracts are all over the place, you need to find them, standardize them, and upload them for the software to be usable.

That means having a plan ahead of time for the metadata you’ll use to tag each contract as it goes into the system—a boring, but absolutely essential, piece of implementation that if you miss, will just make a CLM be another login.

You also need to have an integration plan with your other systems. For example, if your supplier management data is all in Coupa or SAP Ariba, make sure you’re choosing a CLM that can sync with those systems, and sync them in a way that makes the data usable on both sides. You may need software developer assistance to do this.

Knowing what success looks like

Procurement teams naturally obsess over metrics like approval times per function, majority spend suppliers, RFP turnaround, and overall return on investment. 

Like any new tool, you’ll need to evaluate each solution for whether or not it will help your team achieve those goals.

• Does the tool I’m buying actually address the pain points that my team talk about? What about the ones my suppliers talk about?
• How will this tool actually fit into the day-to-day life of my team today? 
• Can my team grow into the more advanced features that this tool offers?

This also means being realistic about what CLMs can do for your organization…and what they can’t. A CLM’s primary value-add to your organization is visibility. Choose a goal that’s related to this, and the downstream impact, like cost-savings.

Getting started with a CLM

Ultimately, the value of a CLM for your procurement team comes down to whether you have the basics in place. Great supplier relationships are built on a strong understanding of the facts of your agreements—and the people who made them.

“You’ve got to make a clear value assessment of the maturity of your procurement team and the maturity of your organization first, and then you can evaluate a piece of technology based on whether or not it will solve those issues,” says Mills. 

If your organization is ready to move forward with a CLM implementation, take a look at the next post in the CLM for procurement readiness series on building a readiness roadmap.

Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney.