Software as a Service (SaaS) reached ubiquity in the early 2000s, yet many businesses are still struggling with how to understand common clauses and negotiate terms in SaaS contracts. As a result, SaaS deals all too often result in copious amounts of back-and-forth negotiation. Worse yet, deals stall and fall by the wayside. 

For SaaS startups, simple click-through contracts are often the way, at least initially, to pick up new clients. But as the company scales, it becomes harder to land bigger clients who have legal teams ready to scrutinize every detail and lobby more aggressively for terms they deem favorable. Soon, almost unknowingly, the company is put at a disadvantage and loses more money than it’s making off a deal. 

When contract management becomes more complex, it can be advantageous to consider the stages of a contract management process in the drafting and negotiating of SaaS contracts to see where modern technology may be inserted—exercising greater due diligence, establishing firm positions where they count, and assisting in overcoming sales bottlenecks.

Stages of a Contract Management Process in SaaS Companies

Tightening up the various stages of a contract management process is imperative to a SaaS company’s continued growth, particularly when the going gets tough. Fortunately, solutions exist to help both established enterprises and those operating on a startup budget.

The stages of a contract management process include:

• Planning: Every organization will need a streamlined process for drafting, reviewing, negotiating, and tracking contracts.

• What types of contracts are being managed? 
• What is the typical volume of contracts? 
• What standard agreements are used repeatedly, and what must they include?
• Who is responsible for each stage of a contract and what are their duties? 
• What are the common roadblocks encountered during drafting and execution that might be traced back to drafting? 

A strategy and preferred bargaining positions are needed here, which are often outlined in a corporate legal playbook. Increasingly, companies are transitioning these playbooks to the digital realm and augmenting them with Artificial Intelligence (AI) so they are more enforceable.

• Implementation: Once the proper processes are in place, contract management software is needed to help companies track them and ensure everything is going according to plan.

• Is there a secure, robust digital repository for the contracts?
• Is it intuitively organized so staff can find what they need?
• Who is in charge of overseeing the contract management software?
• Does everyone understand the vision and objectives for managing contracts?
• Are all employees adequately trained in using technology to support their work?

A searchable, centralized repository for documents is ideal so staff can find the contracts they need right away. 

• Pre-execution: With a strong foundation, staff can begin developing templates with boilerplate clauses for standard situations. High-level lawyers consider what strategic positions are ideal and which bottom line offers they’ll accept during a negotiation. Once drafts are created, they’ll need to be reviewed by multiple people in-house, forwarded to the other party for consideration, and then reconsidered if there are disagreements.

• How long does it take to draft a contract? How long does it take to review it?
• How long is the average sales cycle?
• What bottlenecks are occurring? Where are negotiations stalling?
• Which contract provisions are most commonly disputed?
• Is enough due diligence being exercised to mitigate business risks?
• How many contracts escalate to senior counsel?
• Are the contract reviewers well-trained in company posturing?
• Is adherence to preferred positions and the corporate legal playbook being enforced in every contract?

This stage of a contract management process is crucial, so anything that streamlines and accelerates the process will be very advantageous to business growth. Increasingly, companies are leaning on automated contract review platforms to take the first pass at a contract. These solutions not only search for common errors and omissions, but also compare drafts to the legal playbook for risk analysis and compliance enforcement. While an actual lawyer might spend days—or even weeks—combing through a single SaaS contract, the best automated contract review technology can perform this task in under five minutes.  

• Post-execution: Once review and negotiations are complete, a successful contract is signed by both parties. At this point, paying close attention to the specific terms laid out in the agreement and monitoring them for adherence is essential.

• Are clear milestones established so progress can be tracked?
• What performance metrics matter most to the bottom line?
• Who is in charge of making sure that all contractual obligations are met?
• Is the renewal of every contract on the company calendar for review and renegotiation?
• How can future contract drafts be improved?

While contracts may be set up for auto-renewal, it’s always prudent to periodically review standard positioning for missed opportunities and updates that could be advantageous to the company.

What’s at Stake in SaaS Contract Management?

SaaS contracts are crucial for managing:

• Projects: Contract terms should be designed to keep a business out of court and profitable. Obligations spelled out in each contract let teams monitor key metrics for each project to proactively address performance issues and improve client relationships. 
• Costs: Legal departments can be a huge drain on revenue if not managed properly. Managing contract processes with technology will help keep time and costs spent on contracts to a minimum without opening up the company to increased risk.  
• Time: If general counsel is spending much of their time in correcting basic contract errors, training new staff members, or trying to keep up with paperwork, it’s time for a change. In a perfect world, effective contract management means top-paid employees are devising high-level strategies to close deals faster, grow the business, and grow revenue. 
• Legal obligations: Compliance with contractual obligations is necessary to avoid hefty fines, lawsuits, and lost renewals. Tracking performance and the ability to adhere to contractual terms and conditions can help SaaS companies avoid these pitfalls and operate more effectively.

Given the high stakes and volume of contracts the average SaaS business deals with, it’s worth investing in competitive technology that makes the process run smoother. However, only the best solutions can reduce employee training costs by 99%, give employees more rewarding work to increase retention, reduce contract review time by 90%, and decrease total deal closing time by 33%.

Enforce SaaS Contract Terms and Accelerate Sales Velocity with LexCheck

If you’re looking to bolster your pre-execution contract management, LexCheck’s award-winning platform is here to help. Its breakthrough technology not only intuitively creates AI Digital Playbooks for consistent best practice enforcement, but also functions as an all-in-one contract review, redlining, and/or risk-analyzing solution. For high-growth SaaS companies with small legal teams, that means cost savings and more time for high-value work.

Within five minutes, a risk-assessed and color-coded agreement is returned to you. Changes can be easily implemented with the click of a button, or drafts can be forwarded to senior counsel for strategic consideration when necessary. 

What’s more, sections that are highlighted contain explanatory contextual suggestions for negotiations, which strengthen your posturing and help provide other parties with objective rationale for each recommendation. These helpful suggestions—guided by AI, machine learning, and automation technology—greatly expedite back-and-forth negotiations.