My interest in contract language is largely a function of my interest in process. In particular, readers of this blog will be familiar with my interest in document assembly.
An industry has built up around helping companies manage all aspects of the contract process; the discipline is referred to as “contract lifecycle management,” or CLM. (As a business catchphrase, it’s less objectionable than many.) On looking into CLM, I’ve come to realize that it doesn’t make sense to consider drafting in isolation from other parts of the contract process. For example, the more ambitious CLM solutions include document-assembly tools.
What is CLM? It refers to any information-technology tool that seeks to rectify inefficiencies in the contract process. Consider the following list from a 2003 PricewaterhouseCoopers report on CLM:
Ten Risks Inherent to Bad Contract Management:
- Contracts lacking critical terms
- Loss of contract files/documents
- Missing contractual deadlines and commitments
- Your customers undercharged
- Your vendors overcharging
- Time and productivity inefficiency
- Uncontrolled impact of external events and new regulations
- Competitive disadvantage
- Compromised customer loyalty
- Loss of key knowledge when key employees leave
CLM solutions attempt to address some or all of the above problems, and they come in all sorts of flavors.
I’m not about to offer myself as a CLM expert. But I will occasionally be dipping into CLM, and I thought that readers of this blog might want to tag along. Today I’m posting my first such offering, a Q&A with Ashif Mawji, president of Upside Software Inc., supplier of a leading CLM solution.
If you’d like me to look into any particular aspect of CLM, let me know.
As a heavy user of these tools, I think that lumping them together and calling them by the CLM moniker is a bit much. Some organizations simply do not need the drafting portion of these types of tools, so comparing them at a holistic level may not be appropriate for all users.
As of today, there’s not enough intelligence in the drafting logic of any of the tools (Upside, Procuri, Emptoris, Nextance or any others that I’ve seen) to really take the burden out of contract drafting for truly unique deals. These tools are all good for helping a sales person put together a template agreement that’s term-dependent on product types, geography or other predictable variables. But if you introduce any real unpredictable variability (as happens in most real-life contracting situations that I’ve ever been involved in), the tools quickly fail to produce valuable results.
[My personal disclaimer: I am a long-term CMSI (now Procuri) user who dislikes their “Deal Manager” component to their “Total Contracts” solution for exactly the reasons stated above. On the flip side, I love the Contract Manager piece.]
Jeff, not sure how long ago you looked at some of these tools, but there’s been significant advancement.
We recently completed an RFI/RFP process and looked at 12 vendors and selected Upside, and the key reasons included their tool’s ability to auto draft contracts.
The tool can look at the type of contract, risk levels, which juridiction you are doing business in, monetary levels and other data, including product specific data, and select the right clauses from the right template, and creates a draft contract.
The ability to help narrow down and also pick the sections/clauses that need to be in the document and then also offering suggestions on alternative text is something that would ordinarily take a drafter several hours. This now takes less than 1 minute.
There’s definitely been some great innovation and evolution in these tools.
Are there any pitfalls or negatives to contract management now?
E: I don’t think it’s a question of pitfalls or negatives, although any given product might have glitches. Instead, I think the question is whether a given product fits your needs. And the greater your contract volume, the more likely it is that a CLM solution could work for you. Ken