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Design and Build an Effective Contract Lifecycle Management Process

Mitigate risk and drive value through robust best practices for contract lifecycle management.

  • Your vendor contracts are unorganized and held in various cabinets and network shares. There is no consolidated list or view of all the agreements, and some are misplaced or lost as coworkers leave.
  • The contract process takes a long time to complete. Coworkers are unsure who should be reviewing and approving them.
  • You are concerned that you are not getting favorable terms with your vendors and not complying with your agreement commitments.
  • You are unsure what risks your organization could be exposed to in your IT vendor contacts. These could be financial, legal, or security risks and/or compliance requirements.

Our Advice

Critical Insight

  • Focus on what’s best for you. There are two phases to CLM. All stages within those phases are important, but choose to improve the phase that can be most beneficial to your organization in the short term. However, be sure to include reviewing risk and monitoring compliance.
  • Educate yourself. Understand the stages of CLM and how each step can rely on the previous one, like a stepping-stone model to success.
  • Consider the overall picture. Contract lifecycle management is the sum of many processes designed to manage contracts end to end while reducing corporate risk, improving financial savings, and managing agreement obligations. It can take time to get CLM organized and working efficiently, but then it will show its ROI and continuously improve.

Impact and Result

  • Understand how to identify and mitigate risk to save the organization time and money.
  • Gain the knowledge required to implement a CLM that will be beneficial to all business units.
  • Achieve measurable savings in contract time processing, financial risk avoidance, and dollar savings.
  • Effectively review, store, manage, comply with, and renew agreements with a collaborative process


Design and Build an Effective Contract Lifecycle Management Process Research & Tools

Start here – read the Executive Brief

Read our concise Executive Brief to find out how a contract management system will save money and time and mitigate contract risk, review Info-Tech’s methodology, and understand the four ways we can support you in completing this project.

1. Master the operational framework of contract lifecycle management.

Understand how the basic operational framework of CLM will ensure cost savings, improved collaboration, and constant CLM improvement.

2. Understand the ten stages of contract lifecycle management.

Understand the two phases of CLM and the ten stages that make up the entire process.


Workshop: Design and Build an Effective Contract Lifecycle Management Process

Workshops offer an easy way to accelerate your project. If you are unable to do the project yourself, and a Guided Implementation isn't enough, we offer low-cost delivery of our project workshops. We take you through every phase of your project and ensure that you have a roadmap in place to complete your project successfully.

Module 1: Review Your CLM Process and Learn the Basics

The Purpose

  • Identify current CLM processes.
  • Learn the CLM operational framework.

Key Benefits Achieved

  • Documented overview of current processes and stakeholders.

Activities

Outputs

1.1

Review and capture your current process.

  • Existing CLM Process Worksheet
1.2

Identify current stakeholders.

1.3

Learn the operational framework of CLM.

1.4

Identify current process gaps.

Module 2: Learn More and Plan

The Purpose

  • Dive into the two phases of CLM and the ten stages of a robust system.

Key Benefits Achieved

  • A deep understanding of the required components/stages of a CLM system.

Activities

Outputs

2.1

Understand the two phases of CLM.

2.2

Learn the ten stages of CLM.

2.3

Assess your CLM maturity state.

  • CLM Maturity Assessment
2.4

Identify and assign stakeholders.

  • CLM RASCI Diagram

Design and Build an Effective Contract Lifecycle Management Process

Mitigate risk and drive value through robust best practices for contract lifecycle management.

Our understanding of the problem

This Research Is Designed For:

  • The CIO who depends on numerous key vendors for services
  • The CIO or Project Manager who wants to maximize the value delivered by vendors
  • The Director or Manager of an existing IT procurement or vendor management team
  • The Contracts Manager or Legal Counsel whose IT department holds responsibility for contracts, negotiation, and administration

This Research Will Help You:

  • Implement and streamline the contract management process, policies, and procedures
  • Baseline and benchmark existing contract processes
  • Understand the importance and value of contract lifecycle management (CLM)
  • Minimize risk, save time, and maximize savings with vendor contracts

This Research Will Also Assist

  • IT Service Managers
  • IT Procurement
  • Contract teams
  • Finance and Legal departments
  • Senior IT leadership

This Research Will Help Them

  • Understand the required components of a CLM
  • Establish the current CLM maturity level
  • Implement a new CLM process
  • Improve on an existing or disparate process

ANALYST PERSPECTIVE

"Contract lifecycle management (CLM) is a vital process for small and enterprise organizations alike. Research shows that all organizations can benefit from a contract management process, whether they have as few as 25 contracts or especially if they have contracts numbering in the hundreds.

A CLM system will:

  • Save valuable time in the entire cycle of contract/agreement processes.
  • Save the organization money, both hard and soft dollars.
  • Mitigate risk to the organization.
  • Avoid loss of revenue.

If you’re not managing your contracts, you aren’t capitalizing on your investment with your vendors and are potentially exposing your organization to contract and monetary risk."

- Ted Walker
Principal Research Advisor, Vendor Management Practice
Info-Tech Research Group

Executive Summary

Situation

  • Most organizations have vendor overload and even worse, no defined process to manage the associated contracts and agreements. To manage contracts, some vendor management offices (VMOs) use a shared network drive to store the contracts and a spreadsheet to catalog and manage them. Yet other less-mature VMOs may just rely on a file cabinet in Procurement and a reminder in someone’s calendar about renewals. These disparate processes likely cost your organization time spent finding, managing, and renewing contracts, not to mention potential increases in vendor costs and risk and the inability to track contract obligations.

Complication

  • Contract lifecycle management (CLM) is not an IT buzzword, and it’s rarely on the top-ten list of CIO concerns in most annual surveys. Until a VMO gets to a level of maturity that can fully develop a CLM and afford the time and costs of doing so, there can be several challenges to developing even the basic processes required to store, manage, and renew IT vendor contracts. As is always an issue in IT, budget is one of the biggest obstacles in implementing a standard CLM process. Until senior leadership realizes that a CLM process can save time, money, and risk, getting mindshare and funding commitment will remain a challenge.

Resolution

  • Understand the immediate benefits of a CLM process – even a basic CLM implementation can provide significant cost savings to the organization; reduce time spent on creating, negotiating, and renewing contracts; and help identify and mitigate risks within your vendor contracts.
  • Budgets don’t always need to be a barrier to a standard CLM process. However, a robust CLM system can provide significant savings to the organization.

Info-Tech Insight

  • If you aren’t managing your contracts, you aren’t capitalizing on your investments.
  • Even a basic CLM process with efficient procedures will provide savings and benefits.
  • Not having a CLM process may be costing your organization money, time, and exposure to unmitigated risk.

What you can gain from this blueprint

Why Create a CLM

  • Improved contract organization
  • Centralized and manageable storage/archives
  • Improved vendor compliance
  • Risk mitigation
  • Reduced potential loss of revenue

Knowledge Gained

  • Understanding of the value and importance of a CLM
  • How CLM can impact many departments within the organization
  • Who should be involved in the CLM steps and processes
  • Why a CLM is important to your organization
  • How to save time and money by maximizing IT vendor contracts
  • How basic CLM policies and procedures can be implemented without costly software expenditure

The Outcome

  • A foundation for a CLM with best-practice processes
  • Reduced exposure to potential risks within vendor contracts
  • Maximized savings with primary vendors
  • Vendor compliance and corporate governance
  • Collaboration, transparency, and integration with business units

Contract management: A case study

CASE STUDY
Industry Finance and Banking
Source Apttus

FIS Global

The Challenge

FIS’ business groups were isolated across the organization and used different agreements, making contract creation a long, difficult, and manual process.

  • Customers frustrated by slow and complicated contracting process
  • Manual contract creation and approval processes
  • Sensitive contract data that lacked secure storage
  • Multiple agreements managed across divisions
  • Lack of central repository for past contracts
  • Inconsistent and inaccessible

The Solution: Automating and Streamlining the Contract Management Process

A robust CLM system solved FIS’ various contract management needs while also providing a solution that could expand into full quote-to cash in the future.

  • Contract lifecycle management (CLM)
  • Intelligent workflow approvals (IWA)
  • X-Author for Excel

Customer Results

  • 75% cycle time reduction
  • $1M saved in admin costs per year
  • 49% increase in sales proposal volume
  • Automation on one standard platform and solution
  • 55% stronger compliance management
  • Easy maintenance for various templates
  • Ability to quickly absorb new contracts and processes via FIS’s ongoing acquisitions

Track the impact of CLM with these metrics

Dollars Saved

Upfront dollars saved

  • Potential dollars saved from avoiding unfavorable terms and conditions
  • Incentives that encourage the vendor to act in the customer’s best interest
  • Secured commitments to provide specified products and services at firm prices
  • Cost savings related to audits, penalties, and back support
  • Savings from discounts found

Time Saved

Time saved, which can be done in several areas

  • Defined and automated approval flow process
  • Preapproved contract templates with corporate terms
  • Reduced negotiation times
  • Locate contracts in minutes

Pitfalls Avoided

Number of pitfalls found and avoided, such as

  • Auto-renewal
  • Inconsistencies between sections and documents
  • Security and data not being deleted upon termination
  • Improper licensing

The numbers are compelling

71%

of companies can’t locate up to 10% of their contracts.

Source: TechnologyAdvice, 2019

9.2%

of companies’ annual revenue is lost because of poor contract management practices.

Source: IACCM, 2019

60%

still track contracts in shared drives or email folders.

Source: “State of Contract Management,” SpringCM, 2018

CLM blueprint objectives

  • To provide a best-practice process for managing IT vendor contract lifecycles through a framework that organizes from the core, analyzes each step in the cycle, has collaboration and governance attached to each step, and integrates with established vendor management practices within your organization.
  • CLM doesn’t have to be an expensive managed database system in the cloud with fancy dashboards. As long as you have a defined process that has the framework steps and is followed by the organization, this will provide basic CLM and save the organization time and money over a short period of time.
  • This blueprint will not delve into the many vendors or providers of CLM solutions and their methodologies. However, we will discuss briefly how to use our framework and contract stages in evaluating a potential solution that you may be considering.

Info-Tech offers various levels of support to best suit your needs

DIY Toolkit

"Our team has already made this critical project a priority, and we have the time and capability, but some guidance along the way would be helpful.”

Guided Implementation

“Our team knows that we need to fix a process, but we need assistance to determine where to focus. Some check-ins along the way would help keep us on track."

Workshop

"We need to hit the ground running and get this project kicked off immediately. Our team has the ability to take this over once we get a framework and strategy in place."

Consulting

"Our team does not have the time or the knowledge to take this project on. We need assistance through the entirety of this project."

Diagnostics and consistent frameworks used throughout all four options

Design and Build an Effective CLM Process – project overview

1. Master the Operational Framework

2. Understand the Ten Stages of CLM

Best-Practice Toolkit

1.1 Understand the operational framework components.

1.2 Review your current framework.

1.3 Create a plan to implement or enhance existing processes.

2.1 Understand the ten stages of CLM.

2.2 Review and document your current processes.

2.3 Review RASCI chart and assign internal ownership.

2.4 Create an improvement plan.

2.5 Track changes for measurable ROI.

Guided Implementations
  • Review existing processes.
  • Understand what CLM is and why the framework is essential.
  • Create an implementation or improvement plan.
  • Review the ten stages of CLM.
  • Complete CLM Maturity Assessment.
  • Create a plan to target improvement.
  • Track progress to measure savings.
Onsite Workshop

Module 1: Review and Learn the Basics

  • Review and capture your current processes.
  • Learn the basic operational framework of contract management.

Module 2 Results:

  • Understand the ten stages of effective CLM.
  • Create an improvement or implementation plan.
Phase 1 Outcome:
  • A full understanding of what makes a comprehensive contract management system.
Phase 2 Outcome:
  • A full understanding of your current CLM processes and where to focus your efforts for improvement or implementation.

Workshop overview

Contact your account representative or email Workshops@InfoTech.com for more information.

Workshop Day 1 Workshop Day 2
Activities

Task – Review and Learn the Basics

Task – Learn More and Plan

1.1 Review and capture your current process.

1.2 Identify current stakeholders.

1.3 Learn the operational framework of contract lifecycle management.

1.4 Identify current process gaps.

2.1 Understand the two phases of CLM.

2.2 Learn the ten stages of CLM.

2.3 Assess your CLM maturity.

2.4 Identify and assign stakeholders.

2.5 Discuss ROI.

2.6 Summarize and next steps.

Deliverables
  1. Internal interviews with business units
  2. Existing CLM Process Worksheet
  1. CLM Maturity Assessment
  2. RASCI Diagram
  3. Improvement Action Plan

PHASE 1

Master the Operational Framework of Contract Lifecycle Management

Design and Build an Effective CLM Process

Phase 1: Master the Operational Framework of Contract Lifecycle Management

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of
2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

Guided Implementation 1: Master the Operational Framework of Contract Lifecycle Management
Proposed Time to Completion: 1-4 weeks

Step 1.1: Document your Current CLM Process

Step 1.2: Read and Understand the Operational Framework

Step 1.3: Review Solution Options

Start with an analyst kick-off call:

  • Understand what your current process(es) is for each stage
  • Do a probative review of any current processes
  • Interview stakeholders for input

Review findings with analyst:

  • Discuss the importance of the framework as the core of your plan
  • Review the gaps in your existing process
  • Understand how to prioritize next steps towards a CLM

Finalize phase deliverable:

  • Establish ownership of the framework
  • Prioritize improvement areas or map out how your new CLM will look

Then complete these activities…

  • Document the details of your process for each stage of CLM

With these tools & templates:

  • Existing CLM Process Worksheet

Phase 1 Results:

  • A full understanding of what makes a comprehensive contract management system.

What Is Contract Lifecycle Management?

  • Every contract has a lifecycle, from creation to time and usage to expiration. Organizations using a legacy or manual contract management process usually ask, “What is contract lifecycle management and how will it benefit my business?”
  • Contract lifecycle management (CLM) creates a process that manages each contract or agreement. CLM eases the challenges of managing hundreds or even thousands of important business and IT contracts that affect the day-to-day business and could expose the organization to vendor risk.
  • Managing a few contracts is quite easy, but as the number of contracts grows, managing each step for each contract becomes increasingly difficult. Ultimately, it will get to a point where managing contracts properly becomes very difficult or seemingly impossible.

That’s where contract lifecycle management (CLM) comes in.

CLM can save money and improve revenue by:

  • Improving accuracy and decreasing errors through standardized contract templates and approved terms and conditions that will reduce repetitive tasks.
  • Securing contracts and processes through centralized software storage, minimizing risk of lost or misplaced contracts due to changes in physical assets like hard drives, network shares, and file cabinets.
  • Using policies and procedures that standardize, organize, track, and optimize IT contracts, eliminating time spent on creation, approvals, errors, and vendor compliance.
  • Reducing the organization’s exposure to risks and liability.
  • Having contracts renewed on time without penalties and with the most favorable terms for the business.

The Operational Framework of Contract Lifecycle Management

Four Components of the Operational Framework

  1. Organization
  2. Analysis
  3. Collaboration and Governance
  4. Integration/Vendor Management
  • By organizing at the core of the process and then analyzing each stage, you will maximize each step of the CLM process and ensure long-term contract management for the organization.
  • Collaboration and governance as overarching policies for the system will provide accountability to stakeholders and business units.
  • Integration and vendor management are encompassing features in a well-developed CLM that add visibility, additional value, and savings to the entire organization.

Info-Tech Best Practice

Putting a contract manager in place to manage the CLM project will accelerate the improvements and provide faster returns to the organizations. Reference Info-Tech’s Contract Manager Job Description template as needed.

The operational framework is key to the success, return on investment (ROI), cost savings, and customer satisfaction of a CLM process.

This image depicts Info-Tech's Operational Framework.  It consists of a series of five concentric circles, with each circle a different colour.  On the outer circle, is the word Integration.  The next outermost circle has the words Collaboration and Governance.  The next circle has no words, the next circle has the word Analysis, and the very centre circle has the word Organization.

1. Organization

  • Every enterprise needs to organize its contract documents and data in a central repository so that everyone knows where to find the golden source of contractual truth.
  • This includes:
    • A repository for storing and organizing contract documents.
    • A data dictionary for describing the terms and conditions in a consistent, normalized way.
    • A database for persistent data storage.
    • An object model that tracks changes to the contract and its prevailing terms over time.

Info-Tech Insight

Paper is still alive and doing very well at slowing down the many stages of the contract process.

2. Analysis

Most organizations analyze their contracts in two ways:

  • First, they use reporting, search, and analytics to reveal risky and toxic terms so that appropriate operational strategies can be implemented to eliminate, mitigate, or transfer the risk.
  • Second, they use process analytics to reveal bottlenecks and points of friction as contracts are created, approved, and negotiated.

3. Collaboration

  • Throughout the contract lifecycle, teams must collaborate on tasks both pre-execution and post-execution.
  • This includes document collaboration among several different departments across an enterprise.
  • The challenge is to make the collaboration smooth and transparent to avoid costly mistakes.
  • For some contracting tasks, especially in regulated industries, a high degree of control is required.
  • In these scenarios, the organization must implement controlled systems that restrict access to certain types of data and processes backed up with robust audit trails.

4. Integration

  • For complete visibility into operational responsibilities, relationships, and risk, an organization must integrate its golden contract data with other systems of record.
  • An enterprise contracts platform must therefore provide a rich set of APIs and connectors so that information can be pushed into or pulled from systems for enterprise resource planning (ERP), customer relationship management (CRM), supplier relationship management (SRM), document management, etc.

This is the ultimate goal of a robust contract management system!

Member Activity: Document Current CLM Processes

1.1 Completion Time: 1-5 days

Goal: Document your existing CLM processes (if any) and who owns them, who manages them, etc.

Instructions

Interview internal business unit decision makers, stakeholders, Finance, Legal, CIO, VMO, Sales, and/or Procurement to understand what’s currently in place.

  1. Use the Existing CLM Process Worksheet to capture and document current CLM processes.
  2. Establish what processes, procedures, policies, and workflows, if any, are in place for pre-execution (Phase 1) contract stages.
  3. Do the same for post-execution (Phase 2) stages.
  4. Use this worksheet as reference for assessments and as a benchmark for improvement review six to 12 months later.
This image contains a screenshot of Info-Tech's Existing CLM Process Discovery Worksheet

INPUT

  • Internal information from all CLM stakeholders

OUTPUT

  • A summary of processes and owners currently in place

Materials

  • Existing CLM processes from interviews

Participants

  • Finance, Legal, CIO, VMO, Sales, Procurement

PHASE 2

Understand the Ten Stages of Contract Lifecycle Management

Design and Build an Effective CLM Process

Phase 1: Master the Operational Framework of Contract Lifecycle Management

Call 1-888-670-8889 or email GuidedImplementations@InfoTech.com for more information.

Complete these steps on your own, or call us to complete a guided implementation. A guided implementation is a series of
2-3 advisory calls that help you execute each phase of a project. They are included in most advisory memberships.

Guided Implementation 2: Understand the Ten Stages of Contract Lifecycle Management

Proposed Time to Completion: 1-10 weeks

Step 2.1: Assess CLM Maturity

Step 2.2: Complete a RASCI Diagram

Start with an analyst kick-off call:

  • Review the importance of assessing the maturity of your current CLM processes
  • Discuss interview process for internal stakeholders
  • Use data from the Existing CLM Process Worksheet

Review findings with analyst:

  • Review your maturity results
  • Identify stages that require immediate improvement
  • Prioritize improvement or implementation of process

Then complete these activities…

  • Work through the maturity assessment process
  • Answer the questions in the assessment tool
  • Review the summary tab to learn where to focus improvement efforts

Then complete these activities…

  • Using maturity assessment and existing process data, establish ownership for each process stage
  • Fill in the RASCI Chart based on internal review or existing processes

With these tools & templates:

  • CLM Maturity Assessment Tool

With these tools & templates:

  • CLM RASCI Diagram

Phase 2 Results & Insights:

  • A full understanding of your current CLM process and where improvement is required
  • A mapping of stakeholders for each stage of the CLM process

The Ten Stages of Contract Lifecycle Management

There are ten key stages of contract lifecycle management.

The steps are divided into two phases, pre-execution and post-execution.

    Pre-Execution (Phase 1)

  1. Request
  2. Create
  3. Review Risk
  4. Approve
  5. Negotiate
  6. Sign
  7. Post-Execution (Phase 2)

  8. Capture
  9. Manage
  10. Monitor Compliance
  11. Optimize

Ten Process Stages Within the CLM Framework

This image contains the CLM framework from earlier in the presentation, with the addition of the following ten steps: 1. Request; 2. Create Contract; 3. Review Risk; 4. Approve; 5. Negotiate; 6. Sign; 7. Capture; 8. Manage; 9. Monitor Compliance; 10. Optimize.

Stage 1: Request or Initiate

Contract lifecycle management begins with the contract requesting process, where one party requests for or initiates the contracting process and subsequently uses that information for drafting or authoring the contract document. This is usually the first step in CLM.

Requests for contracts can come from various sources:

  • Business units within the organization
  • Vendors presenting their contract, including renewal agreements
  • System- or process-generated requests for renewal or extension

At this stage, you need to validate if a non-disclosure agreement (NDA) is currently in place with the other party or is required before moving forward. At times, adequate NDA components could be included within the contract or agreement to satisfy corporate confidentiality requirements.

Stage 1: Request or Initiate

Stage Input

  • Information about what the contract needs to contain, such as critical dates, term length, coverage, milestones, etc.
  • Some organizations require that justification and budget approval be provided at this stage.
  • Request could come from a vendor as a pre-created contract.
  • Best practices recommend that a contract request form or template is used to standardize all required information.

Stage Output

  • Completed request form, stored or posted with all details required to move forward to risk review and contract creation.
  • Possible audit trails.

Stage 2: Create Contract

  • At the creation or drafting stage, the document is created, generated, or provided by the vendor. The document will contain all clauses, scope, terms and conditions, and pricing as required.
  • In some cases, a vendor-presented contract that is already prepared will go through an internal review or redlining process by the business unit and/or Legal.
  • Both internal and external review and redlining are included in this stage.
  • Also at this stage, the approvers and signing authorities are identified and added to the contract. In addition, some audit trail features may be added.

Info-Tech Best Practice

For a comprehensive list of terms and conditions, see our Software Terms & Conditions Evaluation Tool within Master Contract Review and Negotiation for Software Agreements.

Stage 2: Create Contract

Stage Input

  • Contract request form, risk review/assessment.
  • Vendor- or contractor-provided contract/agreement, either soft copy, electronic form, or more frequently, “clickwrap” web-posted document.
  • Could also include a renewal notification from a vendor or from the CLM system or admin.

Stage Output

  • Completed draft contract or agreement, typically in a Microsoft Word or Adobe PDF format with audit trail or comment tracking.
  • Redlined document for additional revision and or acceptance.
  • Amendment or addendum to existing contract.

Stage 3: Review Risk 1 of 2

The importance of risk review can not be understated. The contract or agreement must be reviewed by several stakeholders who can identify risks to the organization within the contract.

Three important definitions:

  1. Risk is the potential for a negative outcome. A risk is crossing the street while wearing headphones and selecting the next track to play on your smartphone. A negative outcome is getting hit by an oncoming person who, unremarkably, was doing something similar at the same time.
  2. Risk mitigation is about taking the steps necessary to minimize both the likelihood of a risk occurring – look around both before and while crossing the street – and its impact if it does occur – fall if you must, but save the smartphone!
  3. Contract risk is about any number of situations that can cause a contract to fail, from trivially – the supplier delivers needed goods late – to catastrophically – the supplier goes out of business without having delivered your long-delayed orders.

Stage 3: Review Risk 2 of 2

  • Contracts must be reviewed for business terms and conditions, potential risk situations from a financial or legal perspective, business commitments or obligations, and any operational concerns.
  • Mitigating contract risk requires a good understanding of what contracts are in place, how important they are to the success of the organization, and what data they contain.

Collectively, this is known as contract visibility.

  • Risk avoidance and mitigation are also a key component in the ROI of a CLM system and should be tracked for analysis.
  • Risk-identifying forms or templates can be used to maintain consistency with corporate standards.

Stage 3: Review Risk

Stage Input

  • All details of the proposed contract so that a proper risk analysis can be done as well as appropriate review with stakeholders, including:
    • Finance
    • Legal
    • Procurement
    • Security
    • Line-of-business owner
    • IT stakeholders

Stage Output

  • A list of identified concerns that could expose the business unit or organization.
  • Recommendations to minimize or eliminate identified risks.

Stage 4: Approve

The approval stage can be a short process if policies and procedures are already in place. Most organizations will have defined delegation of authority or approval authority depending on risk, value of the contract, and other corporate considerations.

  • Defined approval levels should be known within the organization and can be applied to the approval workflow, expediting the approval of drafted terms, conditions, changes, and cost/spend within the contract internally.
  • Tracking and flexibility needs to considered in the approval process.
  • Gates need to be in place to ensure that a required approver has approved the contract before it moves to the next approver.
  • Flexibility is needed in some situations for ad hoc approval tasks and should include audit trail as required.
  • Approvers can include business units, Finance, Legal, Security, and C-level leaders

Stage 4: Approve

Stage Input

  • Complete draft contract with all terms and conditions (T&Cs) and approval trail.
  • Amendment or addendum to existing contract.

Stage Output

  • Approved draft contract ready to move to the next step of negotiating with the vendor.
  • Approved amendment or addendum to existing or renewal agreement.

Stage 5: Negotiate

  • At this stage, there should be an approved draft of the contract that can be presented to the other party or vendor for review.
  • Typically organizations will negotiate their larger deals for terms and conditions with the goal of balancing the contractual allocation of risk with the importance of the vendor or agreement and its value to the business.
  • Several people on either side are typically involved and will discuss legal and commercial terms of the contract. Throughout the process, negotiators may leverage a variety of tools, including playbooks with preferred and fallback positions, clause libraries, document redlines and comparisons, and issue lists.
  • Audit trails or tracking of changes and acceptances is an important part of this stage. Tracking will avoid duplication and lost or missed changes and will speed up the entire process.
  • A final, clean document is created at this point and readied for execution.

Stage 5: Negotiate

Stage Input

  • Approved draft contract ready to move to the next step of negotiating with the vendor.
  • Approved amendment or addendum to existing or renewal agreement.

Stage Output

  • A finalized and approved contract or amendment with agreed-upon terms and conditions ready for signatures.

Info-Tech Insight

Saving the different versions of a contract during negotiations will save time, provide reassurance of agreed terms as you move through the process, and provide reference for future negotiations with the vendor.

Stage 6: Sign or Execute

  • At this stage in the process, all the heavy lifting in a contract’s creation is complete. Now it’s signature time.
  • To finalize the agreement, both parties need to the sign the final document. This can be done by an in-person wet ink signature or by what is becoming more prevalent, digital signature through an e-signature process.
  • Once complete, the final executed documents are exchanged or received electronically and then retained by each party.

Stage 6: Sign or Execute

Stage Input

  • A finalized and approved contract or amendment with agreed-upon terms and conditions ready for signatures.

Stage Output

  • An executed contract or amendment ready to move to the next stage of CLM, capturing in the repository.

Info-Tech Best Practice

Process flow provisions should made for potential rejection of the contract by signatories, looping the contract back to the appropriate stage for rework or revision.

Stage 7: Capture in Database/Repository 1 of 2

  • This is one of the most important stages of a CLM process. Executed agreements need to be stored in a single manageable, searchable, reportable, and centralized repository.
  • All documents should to be captured electronically, reviewed for accuracy, and then posted to the CLM repository.
  • The repository can be in various formats depending on the maturity, robustness, and budget of the CLM program.

Most repositories are some type of database:

  • An off-the-shelf product
  • A PaaS cloud-based solution
  • A homegrown, internally developed database
  • An add-on module to your ERP system

Stage 7: Capture in Database/Repository 2 of 2

Several important features of an electronic repository should be considered:

  • Consistent metadata tagging of clauses, terms, conditions, dates, etc.
  • Centralized summary view of all contracts
  • Controlled access for those who need to review and manage the contracts

Establishing an effective repository will be key to providing measurable value to the organization and saving large amounts of time for the business unit.

Info-Tech Insight

Planning for future needs by investing a little more money into a better, more robust repository could pay bigger dividends to the VMO and organization while providing a higher ROI over time as advanced functionality is deployed.

Stage 8: Manage

  • Once an agreement is captured in the repository, it needs to be managed from both an operational and a commitment perspective.
  • Through a summary view or master list, contracts need to be operationally managed for end dates and renewals, vendor performance, discounts, and rebates.
  • Managing contracts for commitment and compliance will ensure all contract requirements, rights, service-level agreements (SLAs), and terms are fulfilled. This will eliminate the high costs of missed SLAs, potential breaches, or missed renewals.
  • Managing contracts can be improved by adding metadata to the records that allow for easier search and retrieval of contracts or even proactive notification.
  • The repository management features can and should be available to business stakeholders, or reporting from a CLM admin can also alert stakeholders to renewals, pricing, SLAs, etc.
  • Also important to this stage is reporting. This can be done by an admin or via a self-serve feature for stakeholders, or it could even be automated.

Stage 9: Monitor Compliance 1 of 2

  • At this stage, the contracts or agreements need to be monitored for the polices within them and the purpose for which they were signed.
  • This is referred to as obligation management and is a key step to providing savings to the organization and mitigating risk.
  • Many contracts contain commitments by each party. These can include but are not limited to SLAs, service uptime targets, user counts, pricing threshold discounts and rebates, renewal notices to vendors, and training requirements.
  • All of these obligations within the contracts should be summarized and monitored to ensure that all commitments are delivered on. Managing obligations will mitigate risks, maximize savings and rebates to the organization, and minimize the potential for a breach within the contract.

Stage 9: Monitor Compliance 2 of 2

  • Monitoring and measuring vendor commitments and performance will also be a key factor in maximizing the benefits of the contract through vendor accountability.
  • Also included in this stage is renewal and/or disposition of the contract. If renewal is due, it should go back to the business unit for submission to the Stage 1: Request process. If the business unit is not going to renew the contract, the contract must be tagged and archived for future reference.

Stage 10: Optimize

  • The goal of this stage is to improve the other stages of the process as well as evaluate how each stage is integrating with the core operational framework processes.
  • With more data and improved insight into contractual terms and performance, a business can optimize its portfolio for better value, greater savings, and lower-risk outcomes.
  • For high-performance contract teams, the goal is a continuous feedback loop between the contract portfolio and business performance. If, for example, the data shows that certain negotiation issues consume a large chunk of time but yield no measurable difference in risk or performance, you may tweak the playbook to remedy those issues quickly.

Additional optimization tactics:

  • Streamlining contract renewals with auto-renew
  • Predefined risk review process or template, continuous review/improvement of negotiation playbook
  • Better automation or flow of approval process
  • Better signature delegation process if required
  • Improving repository search with metadata tagging
  • Automating renewal tracking or notice process
  • Tracking the time a contract spends in each stage

Establish Your Current CLM Maturity Position

  • Sometimes organizations have a well-defined pre-execution process but have a poor post-signature process.
  • Identifying your current processes or lack thereof will provide you with a starting point in developing a plan for your CLM. It’s possible that most of the stages are there and just need some improvements, or maybe some are missing and need to be implemented.
  • It’s not unusual for organizations to have a manual pre-execution process and an automated backend repository with compliance and renewal notices features.

Info-Tech Best Practice

Use the CLM Maturity Assessment Tool to outline where your organization is at each stage of the process.

Member Activity: Assess Current CLM Maturity

2.1 Completion Time 1-2 days

Goal: Identify and measure your existing CLM processes, if any, and provide a maturity value to each stage. The resulting scores will provide a maturity assessment of your CLM.

Instructions

  1. Use the Existing CLM Process Worksheet to document current CLM processes.
  2. Using the CLM worksheet info, answer the questions in the CLM Maturity Assessment Tool.
  3. Review the results and scores on Tab 3 to see where you need to focus your initial improvements.
  4. Save the initial assessment for future reference and reassess in six to 12 months to measure progress.

This image contains a screenshot from Info-Tech's CLM Maturity Assessment Tool.

INPUT

  • Internal information from all CLM stakeholders

OUTPUT

  • A summary of processes and owners currently in place in the organization

Materials

  • Existing CLM processes from interviews

Participants

  • Finance, Legal, CIO, VMO, Sales, Procurement

Member Activity: Complete RASCI Chart

2.2 Completion Time 2-6 hours

Goal: Identify who in your organization is primarily accountable and involved in each stage of the CLM process.

Instructions

Engage internal business unit decision makers, stakeholders, Finance, Legal, CIO, VMO, Sales, and Procurement as required to validate who should be involved in each stage.

  1. Using the information collected from internal reviews, assign a level in the CLM RASCI Diagram to each team member.
  2. Use the resulting RASCI diagram to guide you through developing or improving your CLM stages.

This image contains a screenshot from Info-Tech's CLM RASCI Diagram.

INPUT

  • Internal interview information

OUTPUT

  • Understanding of who is involved in each CLM stage

Materials

  • Interview data
  • RASCI Diagram

Participants

  • Finance, Legal, CIO, VMO, Sales, Procurement

Applying CLM Framework and Stages to Your Organization

  • Understand what CLM process you currently do or do not have in place.
  • Review implementation options: automated, semi-automated, and manual solutions.
  • If you are improving an existing process, focus on one phase at a time, perfect it, and then move to the other phase. This can also be driven by budget and time.
  • Create a plan to start with and then move to automating or semi-automating the stages.
  • Building onto or enhancing an existing system or processes can be a cost-effective method to produce near-term measurable savings
  • Focus on one phase at a time, then move on to the other phase.
  • While reviewing implementation of or improvements to CLM stages, be sure to track or calculate the potential time and cost savings and risk mitigation. This will help in any required business case for a CLM.

CLM: An ROI Discussion 1 of 2

  • ROI can be easier to quantify and measure in larger organizations with larger CLM, but ROI metrics can be obtained regardless of the company or CLM size.
  • Organizations recognize their ROI through gains in efficiency across the entire business as well as within individual departments involved in the contracting process. They also do so by reducing the risk associated with decentralized and insecure storage of and access to their contracts, failure to comply with terms of their contracts, and missing deadlines associated with contracts.

Just a few of the factors to consider within your own organization include:

  • The number of people inside and outside your company that touch your contracts.
  • The number of hours spent weekly, monthly, and annually managing contracts.
  • Potential efficiencies gained in better managing those contracts.
  • The total number of contracts that exist at any given time.
  • The average value and total value of those contract types.
  • The potential risk of being in breach of any of those contracts.
  • The number of places contracts are stored.
  • The level of security that exists to prevent unauthorized access.
  • The potential impact of unauthorized access to your sensitive contract data.

CLM: An ROI Discussion 2 of 2

Decision-Maker Apprehensions

Decision-maker concerns arise from a common misunderstanding – that is, a fundamental failure to appreciate the true source of contract management value. This misunderstanding goes back many years to the time when analysts first started to take an interest in contract management and its automation. Their limited experience (primarily in retail and manufacturing sectors) led them to think of contract management as essentially an administrative function, primarily focused on procurement of goods. In such environments, the purpose of automation is focused on internal efficiency, augmented by the possibility of savings from reduced errors (e.g. failing to spot a renewal or expiry date) or compliance (ensuring use of standard terms).

Today’s CLM systems and processes can provide ROI in several areas in the business.

Info-Tech Insight

Research on ROI of CLM software shows significant hard cost savings to an organization. For example, a $10 million company with 300 contracts valued at $3 million could realize savings of $83,400 and avoid up to $460,000 in lost revenues. (Derived from: ACCDocket, 2018)

Additional Considerations 1 of 2

Who should own and/or manage the CLM process within an organization? Legal, VMO, business unit, Sales?

This is an often-discussed question. Research suggests that there is no definitive answer, as there are several variables.

Organizations needs to review what makes the best business sense for them based on several considerations and then decide where CLM belongs.

  • Business unit budgets and time management
  • Available Administration personnel and time
  • IT resources
  • Security and access concerns
  • Best fit based on organizational structure

35% of law professionals feel contract management is a legal responsibility, while 45% feel it’s a business responsibility and a final 20% are unsure where it belongs. (Source: “10 Eye-Popping Contract Management Statistics,” Apttus, 2018)

Additional Considerations 2 of 2

What type of CLM software or platform should we use?

This too is a difficult question to answer definitively. Again, there are several variables to consider. As well, several solutions are available, and this is not a one-size-fits-all scenario.

As with who should own the CLM process, organizations must review the various CLM software solutions available that will meet their current and future needs and then ask, “What do we need the system to do?”

  • Do you build a “homegrown” solution?
  • Should it be an add-on module to the current ERP or CRM system?
  • Is on-premises more suitable?
  • Is an adequate off-the-shelf (OTS) solution available?
  • What about the many cloud offerings?
  • Is there a basic system to start with that can expand as you grow?

Info-Tech Insight

When considering what type of solution to choose, prioritize what needs to been done or improved. Sometimes solutions can be deployed in phases as an “add-on” type modules.

Summary of Accomplishment

Knowledge Gained

  • Documented current CLM process
  • Core operational framework to build a CLM process on
  • Understanding of best practices required for a sustainable CLM

Processes Optimized

  • Internal RASCI process identified
  • Existing internal stage improvements
  • Internal review process for risk mitigation

Deliverables Completed

  • Existing CLM Processes Worksheet
  • CLM Maturity Assessment
  • CLM RASCI Chart
  • CLM improvement plan

Project Step Summary

Client Project: CLM Assessment and Improvement Plan

  1. Set your goals – what do you want to achieve in your CLM project?
  2. Assess your organization’s current CLM position in relation to CLM best practices and stages.
  3. Map your organization’s RASCI structure for CLM.
  4. Identify opportunities for stage improvements or target all low stage assessments.
  5. Prioritize improvement processes.
  6. Track ROI metrics.
  7. Develop a CLM implementation or improvement plan.

Info-Tech Insight

This project can fit your organization’s schedule:

  • Do-it-yourself with your team.
  • Remote delivery (Info-Tech Guided Implementation).

CLM Blueprint Summary and Conclusion

  • Contract management is a vital component of a responsible VMO that will benefit all business units in an organization, save time and money, and reduce risk exposure.
  • A basic well-deployed and well-managed CLM will provide ROI in the short term.
  • Setting an improvement plan with concise improvements and potential cost savings based on process improvements will help your business case for CLM get approval and leadership buy-in.
  • Educating and aligning all business units and stakeholders to any changes to CLM processes will ensure that cost savings and ROI are achieved.
  • When evaluating a CLM software solution, use the operational framework and the ten process stages in this blueprint as a reference guide for CLM vendor functionality and selection.

Related Info-Tech Research

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Bibliography

Burla, Daniel. “The Must Know Of Transition to Dynamics 365 on Premise.” Sherweb, 14 April 2017. Web.

Anand, Vishal, “Strategic Considerations in Implementing an End-to-End Contract Lifecycle Management Solution.” DWF Mindcrest, 20 Aug. 2016. Web.

Alspaugh, Zach. “10 Eye-Popping Contract Management Statistics from the General Counsel’s Technology Report.” Apttus, 23 Nov. 2018. Web.

Bishop, Randy. “Contract Management is not just a cost center.” ContractSafe, 9 Sept. 2019. Web.

Bryce, Ian. “Contract Management KPIs - Measuring What Matters.” Gatekeeper, 2 May 2019. Web.

Busch, Jason. “Contract Lifecycle Management 101.” Determine. 4 Jan. 2018. Web.

“Contract Management Software Buyer's Guide.” TechnologyAdvice, 5 Aug. 2019. Web.

Dunne, Michael. “Analysts Predict that 2019 will be a Big Year for Contract Lifecycle Management.” Apttus, 19 Nov. 2018. Web.

“FIS Case Study.” Apttus, n.d. Web.

Gutwein, Katie. “3 Takeaways from the 2018 State of Contract Management Report.” SpringCM, 2018. Web.

“IACCM 2019 Benchmark Report.” IAACM, 4 Sept. 2019. Web.

Linsley, Rod. “How Proverbial Wisdom Can Help Improve Contract Risk Mitigation.” Gatekeeper, 2 Aug. 2019. Web.

Mars, Scott. “Contract Management Data Extraction.” Exari, 20 June 2017. Web.

Rodriquez, Elizabeth. “Global Contract Life-Cycle Management Market Statistics and Trends 2019.” Business Tech Hub, 17 June 2017. Web.

“State of Contract Management Report.” SpringCM, 2018. Web.

Teninbaum, Gabriel, and Arthur Raguette. “Realizing ROI from Contract Management Technology.” ACCDocket.com, 29 Jan. 2018. Web.

Wagner, Thomas. “Strategic Report on Contract Life cycle Management Software Market with Top Key Players- IBM Emptoris, Icertis, SAP, Apttus, CLM Matrix, Oracle, Infor, Newgen Software, Zycus, Symfact, Contract Logix, Coupa Software.” Market Research, 21 June 2019. Web.

“What is Your Contract Lifecycle Management (CLM) Persona?” Spend Matters, 19 Oct. 2017. Web.

About Info-Tech

Info-Tech Research Group is the world’s fastest-growing information technology research and advisory company, proudly serving over 30,000 IT professionals.

We produce unbiased and highly relevant research to help CIOs and IT leaders make strategic, timely, and well-informed decisions. We partner closely with IT teams to provide everything they need, from actionable tools to analyst guidance, ensuring they deliver measurable results for their organizations.

What Is a Blueprint?

A blueprint is designed to be a roadmap, containing a methodology and the tools and templates you need to solve your IT problems.

Each blueprint can be accompanied by a Guided Implementation that provides you access to our world-class analysts to help you get through the project.

Need Extra Help?
Speak With An Analyst

Get the help you need in this 2-phase advisory process. You'll receive 7 touchpoints with our researchers, all included in your membership.

Guided Implementation #1 - Master the Operational Framework of Contract Lifecycle Management
  • Call #1 - Review existing processes.
  • Call #2 - Understand what CLM is and why the framework is essential.
  • Call #3 - Create an implementation or improvement plan.

Guided Implementation #2 - Understand the Ten Stages of Contract Lifecycle Management
  • Call #1 - Review the ten stages of CLM.
  • Call #2 - Complete the CLM Maturity Assessment.
  • Call #3 - Create a plan to target improvement.
  • Call #4 - Track progress to measure savings.

Author

Ted Walker

Search Code: 91385
Last Revised: March 11, 2020

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