Fundamentals of Digital Contracting

By PracticeLeague, January 07, 2022   |   8 Min Read

Fundamentals of Contract Management-Know the Basics

Contract Management is the current buzzword in the Legaltech domain, and its adoption is on the rise quite rapidly worldwide. As per a state of the industry report by a major nonprofit association from the legal domain, 74% of organizations globally have implemented CLM, yet, curiously, 54% of respondents still have a high intention of implementing high-tech solutions, including CLM. Another industry report highlights in the APAC region, Indian respondent organizations rated 47% on average of their own revenue to be in the at-risk category, while 40% {57% in North America} rated their organizations use digital document processes. These reports, and others, highlight the nature of the CLM market, and give a tantalizing insight into its usage trends. In that light, given the nascency of the adoption, let us look at some of the fundamentals of Contract Lifecycle Management.

What is Contract Management?

A contract is the basic document of business, and in a way, the enabler of business transactions and continuity. In a running business, there can be hundreds of contracts, with their independent obligations, requirements, dates, statutory aspects and more; keeping track of these manually can be tedious, time-consuming and fraught with risk of errors and slippages. This is where automated Contract Lifecycle Management comes in, delivering improved efficiency, contract visibility, contract compliance, all leading to enhanced productivity. But that is the subject of a more detailed article – for now, let us understand the concept of the CLM.

A CLM brings together all the components of the manual process in one place, right from the initiation – contract drafting, and creating new contracts. Its multiparty collaborative development simplifies contract negotiation and contract approvals, and enables contract tracking and administration of obligations and dates at the click of a few buttons. It brings all contracts in one central repository, enables easy searching of contracts, and management. This, then, is Automated Contract Management in very simple terms.

What are the Stages of Contract Management?

Contract Management can be subdivided into the following 6 stages:

Benefits of Contract Management

In order to fully realize the benefits from a Contract Management software implementation, one has to focus on the deliverables one expects from the implementation. Thus, lets us spell out the highlights of the aspects that are counted as best practices. The basis for this is a couple of excellent industry reports that have extensively analyzed industry best practices of the CLM implementations. Now, there are two elements to this: first, the targeted end-deliverables from the implementation, and second, the key sources of value that must be executed brilliantly to realize these benefits.

As we can summarize from the above article, the key top-level target deliverables of a proper CLM implementation are:

It is these target high-level deliverables that ultimately deliver the improvements in compliance, efficiency, and business productivity. But that is another subject for more, deeper articles to come!

The key sources of value, where implementation must succeed are:

Once these are in place, with proper implementation, the benefits spelled out above can be realized; do stay connected as we, ahead in this CLM series, look at Contract Implementation as well in one of our upcoming articles!