Analysts expect the global market for contract lifecycle management software to more than double over the next few years, growing from $1.5 billion in 2020 to $3.84 billion by 2026. 

Driving this tremendous growth is digital transformation accelerated by the global pandemic. By automating routine business processes like contract review, corporate legal departments not only conserve resources, but also free up employees to focus on more important and fulfilling tasks. As productivity and customer service levels increase, companies can scale to take on a greater volume of business while increasing revenue. 

This article highlights the importance of utilizing contract lifecycle management (CLM) tools for process efficiency by breaking down the stages of CLM, offering tools for each stage, and revealing where in a contract’s lifecycle business leaders can gain the biggest returns.

Contract Lifecycle Management Statistics

Recent statistics underscore the importance of contract lifecycle management tools:

• The International Association for Contract and Commercial Management (IACCM) found the average cost to process and review a basic contract now tops $6,900.
  
  
• CLM software reduces the 3.4-week average contract approval time by 82%.
  
  
• Goldman Sachs estimates that automation cuts contract management costs by 10-30%.
  
  
• PricewaterhouseCoopers suggests CLM can save businesses 2% of their annual costs.
  
  
• Aberdeen found that contract lifecycle management improved compliance by 55%.

Contract Lifecycle Management Stages and Tools

End-to-end CLM solutions do exist, but none have effectively handled the contract drafting process. Instead, most focus on organizing the CLM process rather than optimizing it. Many organizations choose a solution that aligns with their existing technology stacks and makes sense for their particular pain points and goals.

The lifecycle of a contract can be broken down as follows, with recommended tools that can help streamline each step:

   1. Template Authoring 

Templates create spaces where standard terms and clauses from a legal playbook can be inserted to reduce the amount of review and negotiation work for each contract.

Recommended tool: Businesses may consider implementing an authoring solution like PandaDoc to drag-and-drop custom templates and set up custom workflows.

   2. Contract Creation 

Contract drafting requires deep expertise in industry best practices, prevention of potential liability issues, adherence to strict compliance of business standards, and knowledge of the other party.  

Recommended tool: Updraft is a contract drafting tool that uses a natural language questionnaire-based approach to mimic attorney best practices. 

   3. Contract Review and Negotiation 

Once a contract has been drafted, a junior-level lawyer typically combs through it to ensure it complies with the company’s playbook. Senior-level lawyers and third parties then conduct a final review.

Recommended tool: LexCheck uses artificial intelligence (AI) and automation to fully redline contract drafts based on an AI Digital Playbook. It can also color-code potential risks and add contextual suggestions in five minutes’ time.

   4. Contract Approval 

Once reviews, negotiations, and any necessary rewrites occur, both parties must approve and sign the contract to make it a formal, legally binding document. 

Recommended tool: DocuSign keeps the process moving forward with real-time electronic signatures, saved custom fields, secure storage, and audit trails.

   5. Contract Compliance and Performance

Approved contracts must be tracked for compliance. Ideally, key timelines, dollar amounts, and obligations are extracted from the agreements and proactively managed.  

Recommended tool: Icertis Contract Intelligence uses AI-assisted automation to operationalize contracts post-execution, helping mitigate losses and liability. 

   6. Contract Analytics and Renewals

Proactive businesses always keep an eye on their portfolios and stay one step ahead of the curve by amending their obligations and renegotiating favorable terms.

Recommended tool: Conga sends auto-reminders to ensure no opportunities for renegotiation and renewal are missed. 

Which Contract Lifecycle Management Tools Offer the Most Value?

Contract review and negotiation tools are where companies find the most bang for their buck as these processes comprise the lengthiest parts of the contract lifecycle. It’s also the time where legal teams have the greatest opportunity to secure favorable terms, allow for contingencies, and prevent future losses. 

In recent years, computer scientists and legal minds have successfully integrated AI, natural language processing (NLP), and automation with pre-execution legal contracting software to create consistent and repeatable contracting processes, minimize risk, reduce employee training costs, and accelerate contracting workflows.

LexCheck’s award-winning contract review and negotiation solution performs the work of a lawyer by comparing contract drafts to a company’s legal playbook—redlining and assessing risks in the process. Within five minutes, lawyers receive feedback with contextual guidance for edits that bring the contract into better alignment with their company’s unique compliance and best practice standards. Changes can be implemented at the click of a button or escalated to senior lawyers for further review.

With LexCheck, legal teams reduce contract review times by  more than 80% and compliance training costs by 99%. It’s no wonder LexCheck experienced 4x growth in 2021, making it an essential tool for any modern corporate legal department.