Choosing a contract lifecycle management (CLM) solution for small and midsize businesses (SMBs) can be a challenge, especially when there are so many options available on the market. It’s important to understand in detail all the features, deployment models and market trends before finalizing your software purchase decision. For that reason, we’ve created this buyer’s guide to help you choose the right CLM solution for your organization.
Here's what we'll cover:
What Is Contract Lifecycle Management Software?
Common Features of Contract Lifecycle Management Software
Evaluating Contract Lifecycle Management Software
Deployment Models and Pricing
Market Trends to Understand
Contract management lifecycle software organizes the complex and detailed contractual negotiation process between buyers and suppliers. These solutions typically manage the entire lifecycle of a contract, from initial request for proposal (RFP) to eventual renegotiations. Gaining full control of the contractual process allows users to not only reduce supplier risk, but also to gain increased insight into contracts—creating strategic negotiation opportunities and improved cash flow.
CLM software solutions have proven to be a must-have tool for managing efficient workflows. These solutions help streamline processes for sales, procurement, legal, operations and finance professionals. With more organized workflows, managers can focus on key performance areas and reduce the need for constant follow-ups. These systems also give users the capability to create personalized contracts with their clients.
These software systems range from applications that exclusively manage vendor contracts to robust suites that also include sourcing, bidding and procurement functionality. Many of these solutions also integrate with other supply chain, accounting and enterprise resourcing planning (ERP) systems.
By automating and simplifying contract acquisition and maintenance, users can ensure consistent contractual language, regularly maintained buy-cycles and sound financial planning. Users can also take advantage of notification systems that help identify opportunities to improve contract alignment. The result is a smoother acquisition process, higher supplier retention and reduced contractual risk that can lead to better cash management practices.
Specific features of CLM solutions include the following:
|Compliance assurance||Automation assures users that contractual negotiations meet compliance regulations. Additional company and industry-specific compliance protocols can be added as necessary.|
|Contract creation and automation||These systems often include new contract templates that can easily be exported to Microsoft Word or other document creation programs. Additionally, future contracts can be automatically sent through the user’s predefined workflow.|
|Approval management||The approval process goes through many hands. These solutions enable the next-in-line to receive automated notifications that the contract is ready for their approval—speeding up the process greatly.|
|Notifications and alerts||These systems allow users to construct both broad and long-tail notification parameters for renewal dates, expiration dates and other renegotiation opportunities. Alerts can be delivered within the system or sent directly to a user’s email address.|
|Ad hoc reporting||Reporting features allow users to find additional opportunities to improve contractual terms. Reports can be generated based on search queries or specific contracts.|
|Accounting and ERP integration||Oftentimes, these systems integrate directly with accounting and ERP solutions to maintain accurate cash flow data, as well as aid in financial forecasting.|
Analyst firms have consistently found that streamlined CLM is a best practice for companies looking to reduce supplier risk. Regulation of the contract lifecycle allows users to gain increased visibility and reduce this risk, as well as discover contract improvement opportunities.
When evaluating CLM systems, these questions can help determine if the solution fits your needs:
CLM software is generally available in two separate deployment models, which tend to have different pricing structures:
Cloud-based. Cloud-based CLM software is hosted on the vendor’s servers and is typically priced as a SaaS model, meaning that users pay a monthly or annual subscription fee that is usually based on the number of users.
On-premise. On-premise CLM software is hosted on the user’s own servers. This type of deployment usually costs a flat, upfront fee to use the software indefinitely, though there may be recurring support and maintenance fees on an yearly basis. The upfront fee is also typically based on the number of users on the system, as this type of software is sold in the form of licenses per person.
The CLM software market is gradually evolving as business executives realize the benefits of implementing a CLM solution. Buyers are looking for a solution that both fits their budget and meets the needs of their small business. Here are the primary trends influencing the CLM software market:
Digitization of paper contracts. Organizations are moving on from paper to digitized documents for faster processing of contracts. Also, digitized documentation help in reducing overhead paper and printing costs. E-signature functionality enables executives to swiftly approve documents while fulfilling all compliance requirements. Advanced CLM software helps users monitor contracts in real time and sends alerts for pending documents with upcoming deadlines.
Increased adoption of cloud-based software. Cloud-based software provides agility to businesses by reducing the upfront investment of licensing fees. This model suits the requirements of small businesses, as it incurs only operational expenditures. Furthermore, online platforms require minimal hardware infrastructure and could be more secure than on-premise solutions for small businesses operating on a limited budget.
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