Despite procuring some of the most expensive contract lifecycle management (CLM) tools on the market, organizations often fail to achieve the required return on investment. Why is this?
To answer, let me tell you about a conversation I had with the contract management head of a large organization at a recent conference. His organization had purchased one of the best CLM software tools available on the market today, but even after six months following its implementation, the tool still did not operate properly. Questions arose about the cost. Needless to say, he was extremely frustrated.
Unfortunately it’s nothing new. I’ve heard similar experiences from other organizations on many CLM implementation issues, including:
- technical challenges trying to integrate a CLM tool into existing systems;
- user dissatisfaction from inefficient change management;
- lack of continued sponsorship and support for the tool;
- lack of coordination and extended implementation time, leading to delayed return on investment;
- lack of desired results despite extensive use of the tool;
- oversell by the tool vendors, especially around the capability of artificial intelligence (AI) and machine learning (ML).
If these pain points sound all too familiar, here is my advice on how to mitigate the challenges of implementing a best-in-class CLM tool.
Get smart about technical integration in your organization
Find the right tool! Gone are the days where it’s possible to manage your contract portfolio without an effective CLM tool. Although buying a tool is a great first step, you need to first perform a series of technical evaluations and look for a best-in-class tool with the right functionality for your systems.
Be sure your tool is a fit for its environment. Your hardware, servers and IT infrastructure need to be compatible with the new CLM tool, and you should ensure all technical requirements listed by the CLM provider are available to your infrastructure provider. Carrying out this important step reduces the chances of system and tool incompatibility, minimizing the frustration when your tool does not work the way you expect it to. In fact, system slowness caused by insufficient or outdated hardware can lead to a three-way dispute between your tool provider, infrastructure provider, and your organization.
To avoid such a dispute, consider hiring a team of CLM consultants to help select the correct tool for your specific needs. (You can research suitable software using IACCM and Capgemini’s contract automation software comparison tool.1 ) A well informed team can work as a third party between your CLM provider and your organization to ensure you get the correct implementation with industry best practices, structured governance, CLM performance, and industry benchmarking to ensure the selected tool is updated and future-proofed.
Resolve user dissatisfaction and poor change management
Change management is often the most neglected process in large CLM tool implementations. Not only do people tend to resist change, organizations don’t always spend enough time carrying out user acceptance testing (UAT), collating user feedback, and instructing tool vendors to implement changes suggested by users.
In addition, frustration often arises from a lack of user awareness and training about using the tool. It is, therefore, important to assign a change management expert or manager to be responsible for implementing the change and educating users to make sure they are comfortable with operating the new system.
Top management dedication, essential
Business leaders often invest heavily in making the final decision to buy, only to lose enthusiasm once they secure the budget, and procure and onboard the CLM tool. That’s a mistake! Top management’s lack of sustained interest and rigor can lead to stagnation – contract managers continuing to work in the same way they did previously either by manual contracting or by continuing to use an older legacy system or a part of it.
Without management buy in, users simply don’t invest the time or effort in understanding the tool and tend to work on a “trial and error” basis. As a result, accurate data does not get loaded into the system and the system can’t generate the required reports.
It is, therefore, very important for business leaders and decision-makers to continue investing in the CLM tool – at least until the tool has been fully implemented and adopted among employees, and the early results are visible.
Lack of coordination confuses and delays the process
Although the latest best-in-class CLM tools are capable of meeting an organization’s requirements end-to-end by integrating the workflow of several departments – including legal, finance, procurement, and business – if these departments are not coordinated, they can delay implementation and create confusion over who owns what.
In these situations, it’s common to hear “that’s not my job,” “I don’t know,” or “go ask xyz.” To avoid this, it’s important that business leaders clearly identify each department’s responsibility, with the escalation path made clear to address any challenges that arise out of the implementation. The CLM provider also needs to carry out thorough mapping of decision-makers at the organization level to avoid any delays or dispute.
On top of this, implementing a CLM tool can be a long and time-consuming process, and requires a great deal of patience – especially when it comes to return on investment. Even with the most prepared contract management team and the most thought out and detailed plan, organizations need to invest time collaborating with the CLM provider to successfully complete the implementation.
For example, a long contract (1,000 pages or longer) owned by multiple people requires considerable time to identify all the owners, assign the right tasks, and train the owners on the system to help them adopt the “tool” way of processing contracts.
Bad input equals bad output
All CLM tools generate an output based on the data that is fed into the system. If the quality of that data input is low, the output will always be poor and inaccurate. No matter how advanced the tool, if the input is poor, it won’t be able to deliver the desired results.
From a user’s perspective, data quality is impacted by entering inaccurate data into the system, meaning the data is either wrong or fields are left blank. Without an effective change management program, users often don’t realize the importance of the data and might input only the basic information and overlook mandatory items. For instance, if the term or expiry date of a contract is not fed into the system, the report will always be blank or perpetual depending on how you have configured the system. Similarly, if you don’t input the correct client name, the output will always be incorrect.
To make a CLM tool implementation successful and get the desired output from the tool, it is imperative that users feed the system with accurate information.
Oversell destroys basic trust
The CLM market is extremely competitive. Providers don’t just sell CLM tools, they also sell procurement, contract analytics, and workflow tools that solve a number of different challenges faced by the industry. Although a report2 published by Capgemini-IACCM demonstrates that all CLM tools have their own unique selling points, oversell by CLM providers can leave a bad impression if the desired results are not achieved for the reasons I’ve touched on earlier in the article.
In addition, many organizations are increasingly being sold AI and ML tools to reach and extract key information from contracts. While the accuracy promised at the time of proposal is often upwards of 90%, the quality can dip significantly at the execution level. This happens for a number of reasons, including poor or illegible contracts, lack of annotations while teaching the machines, and various contract templates being used. The result is a breakdown in trust and reduced adoption by business leaders who believe CLM tools are not right for their organization.
Many large organizations have embraced best-in-class CLM tools, nevertheless, the industry still needs to be educated that these tools are like any other tools designed to help organizations and users. Driving successful results depends on an organization’s ability to integrate the CLM tool within its technical infrastructure, provide the right focus for implementation with proper user training to obtain accurate data and continued executive sponsorship and support.
As the technology matures through AI and ML applications capable of doing the job in few clicks, CLM tools are becoming smarter. However the success of implementing and leveraging a CLM tool lies not just with CLM providers and the tools, but also with the organizations and their ability to use the tools diligently by adapting new ways of working as offered by CLM tool implementations.
ABOUT THE AUTHOR
Mani Agarwal advises clients on commercial and contract management transformation initiatives. He helps organizations to transform their contract lifecycle and contracts portfolio by implementing the right AI and ML tools. He also uses his expertise in optimizing the performance of contracts to ensure maximum value through all contractual opportunities and avoid any revenue leakage. Mani is a qualified lawyer and an elected member of the prestigious IACCM Council for IT and Outsourcing Networks. Prior to this role, Mani managed contracts and risk for various large legal and technology companies.
A global leader in consulting, technology services and digital transformation, Capgemini is at the forefront of innovation to address the entire breadth of clients’ opportunities in the evolving world of cloud, digital and platforms. Building on its strong 50-year heritage and deep industry-specific expertise, Capgemini enables organizations to realize their business ambitions through an array of services from strategy to operations. Capgemini is driven by the conviction that the business value of technology comes from and through people. It is a multicultural company of over 200,000 team members in more than 40 countries. The Group reported 2018 global revenues of EUR 13.2 billion.
Visit us at www.capgemini.com.