How to Build the Internal Business Case for CLM Solutions

Charlene Dickey

ContractRoom

by Charlene Dickey

With so many types of software solutions competing for attention and budget, gaining buy-in for a Contract Lifecycle Management (CLM) solution requires a solid business case documenting the tangible benefits to the bottom line. In an effort to help stakeholders build the internal business case, let's explore the key benefits CLM solutions offer and how to bring them to the attention of decision makers in an organization. 

 

Contracting Time is Money

One of the biggest advantages of upgrading contracting processes with CLM cloud solutions is how much time is saved for organizations. Leadership understands that saving time means saving money, which means adopting CLM solutions will improve the bottom line.

From drafting to searching for completed contracts, organizations can save a significant amount of time with CLM solutions. According to Aberdeen, approval times drop 82 percent when CLM solutions are used.

Considering the average number of contracts per organization is 20,000 – 40,000/year (Price Waterhouse Coopers), and the average time it takes to create and approve a single contract is 3.4 weeks (Forrester), saving time is a significant benefit of adopting CLM solutions.

Each organization has its own bottlenecks and pain-points to overcome in their contracting workflows, whether in legal, procurement, sales, operations, or finance departments. Those dealing with these challenges every day know exactly where to find the most pressing inefficiencies. By detailing these specific workflow bottlenecks, stakeholders can build a case based on their organization's averages, rather than vague averages reflecting a broad range of industries.

Once leadership understands the contrast between how much time the organization has been spending compared to the optimized results of using a CLM solution, they'll be interested in seeing how this is possible.

To build the case with decision-makers concerning saving time, stakeholders need to:

  • estimate how long it takes their organization to execute contracting processes

  • contrast this with the potential time it would take with cloud CLM solutions

  • equate this time savings with labor costs

Case studies can be used to show the potential time savings CLM solutions can bring. For instance, one of our clients has improved their assembly time by 95%:

“Using ContractRoom, the Global Procurement team merged 140 Master Agreement templates into a single digital framework, which manages over 3.5 million words of content. This effort cut the Global Procurement team's assembly time from 3 days to under 3 hours.”

In addition to case studies, analysis from thought leadership can also help build the case with decision-makers. For instance, an article found on McKinsey&Company called: "Contracting for performance: Unlocking additional value", written in May 2018, concludes:

“A good place to start is to focus on performance requirements linked to clear objectives and quantitative metrics. A more ambitious program will likely require procurement to build additional capabilities, such as adding contract specialists; establishing standing, cross-functional teams; and implementing contract management and analytics software. Given the size of the potential cost savings, procurement leaders cannot ignore the opportunity.”

Part of their solution to achieving better "contracting for performance" is implementing contract management and analytics software; in other words, their suggestion is for organizations to adopt CLM solutions in the cloud to save time and improve the bottom line.

 

Increased Efficiency and Insight Create Value With CLM Solutions

Using AI and the cloud, CLM solutions automate redundant and cumbersome tasks in contracting processes. CLM solutions are far more efficient than traditional processes using email, direct mail, word processors, and filing cabinets.

Even if an organization has upgraded to e-signatures and electronic filing, the drafting, negotiations, approvals, search and retrieval, and renewal aspects of contracting will still be inefficient. The solution is a robust CLM system that will automate all stages of the contracting process.

Overall cycle times will decrease when every stage of the contracting lifecycle is optimized with automation and centralization. Not only will this increased efficiency save time and improve the bottom line, but it willalso create opportunities for stakeholders to increase the value of contracts with vendors, partners, etc.

The McKinsey&Company article explains: 

...suboptimal contract terms and conditions combined with a lack of effective contract management can cause an erosion of value in sourcing equal to 9 percent of annual revenues.

...Lack of procurement resources or ownership tends to shift contractor management to the users in the functions requiring the product or service who are usually not trained to do it effectively. In addition, 80 percent of procurement functions are not fully aware of competitive terms and contract structure. 

In addition to explaining the potential to realize lost value within contracts, the details of how each stage of the contracting process can be optimized with CLM solutions can be explained to decision-makers. For instance, how:

Decision-makers will be more likely to listen to upgrade suggestions when the beneficial functions of CLM are clearly explained; thankfully, proving how CLM solutions increase efficiency, insight, and value to simplify their contracting processes. .

 

CLM Solutions Reduce Risk and Ensure Compliance

Another beneficial aspect of CLM solutions is how they reduce risk and ensure compliance. An article on Technology Advice explains: 

According to a report from the Journal of Contract Management, 71 percent of companies can't locate up to 10 percent of their contracts.

...Contracts often contain sensitive proprietary information. Good contract management software will include end-to-end encryption to keep your sensitive data private. Internal security should protect your contracts from unauthorized edits and changes after all parties have agreed on a version. This can be managed with user permissions and automatic change notifications.

Essentially, with rules-based automation, centralized management and storage, and end-to-end process digitization, organizations can ensure compliance and drastically reduce mistakes from disorganization. Ultimately, the risks involved with contracting will be significantly reduced when CLM solutions are implemented within enterprise systems and workflows.

The last suggestion for building an internal business case for CLM solutions is to encourage decision-makers to schedule a demo with a leading CLM software provider. This is a perfect way to show them how CLM solutions save time, improve efficiency, reduce risk, and ultimately increase the bottom-line. If interested in learning more or scheduling  a demo contact us today.

About the author

Charlene Dickey

Charlene Dickey

Charlene Dickey is ContractRoom’s VP of Enterprise Sales, joining the company from Apttus. Charlene brings special expertise in Contract Lifecycle Management (CLM) and more than 25 years of experience guiding enterprise customers to transformative technology solutions.

Experience the future of agreement