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Assessing key trends and considerations impacting CLM

Tariq Akbar is the CEO of LegalEase Solutions, which offers corporate legal departments and law firms innovative support with regulatory compliance, contract life cycle management, legal analytics, legal research and legal writing.

Jim O’Hare is Vice President of CLM at LegalEase Solutions. Over the past several decades, he worked with numerous Fortune 500 companies, entertainment conglomerates and leading universities across the United States on their CLM deployments and implementations as the founder of CLM Gurus. In his current role, Jim focuses on finding and developing ways to modernize how in-house departments across the automotive industry process contract information, engage stakeholders and revolutionize their approaches to contracts.


Colin Levy (CL): Tell me a little about how you got interested in the contract management space.


Jim O’Hare (JO): About 24 years ago, I was working on the east coast for a web developer. Along the way, we landed a project with Johnson & Johnson and their Acumed division.


Part of the process was to generate contracts from a template for healthcare organizations that the division was going to engage with. What was interesting to me was not just the process of guiding the relationship and the obligations that were part of the contract, but also how organizations were dealing with this from a manual process and how they were now starting to delve into automation.


The whole idea of automating key elements of a process has always interested me. When I got into this project, I found the automation component to be very interesting, and it started my journey. I have a brother-in-law who worked with one of the first true CLM companies in existence, and I almost begged him to have me move back to the west coast and join them because I was interested in what they were doing. Their focus was heavily pointed toward automation and workflows, and that is something that also interested me.


It just grew from there. I got more interested as I worked with each vendor.


Tariq Akbar (TA): Where I come from with my history with consulting, I saw large enterprise-level implementations in the public sector, services, and healthcare. As I got to understand enterprise-level implementation and move into the legal industry, most of our exposure was in services research and compliance support services-focused growth, along with other areas we understood.


When CLM came in, I saw that technology and legal tech solved for a particular function, whether it was workflow automation or contract organization, among others. All of these initiatives were funded, but each solved for a function. With CLM, what I saw was a path to enterprise-level transformation and capability.


The ability and potential of the organization to leverage CLM to transform finance, human resources and other divisions was obvious. When we were working with CLM solutions, we started to understand how organizations were implementing the technology and gathering data intelligence. We also saw how teams were training AI, and understanding how we achieve that data intelligence underscored CLM’s transformative potential.

CL: The CLM space is heavily saturated. Why do you think this is the case?


JO: With any software product, when the market heats up, and there’s an absolute need for that particular type of system, it will attract a lot of players. You saw the same thing years ago with enterprise resource planning systems – there were tons of systems focusing on specific areas of the ERP journey, but it took quite a while for that market to saturate and to focus on just a few key players.


I think the same thing has happened with CLM. There’s a lot of money going into CLM right now, and a lot of companies are getting significant investments. You have not seen the mergers take place yet, but there will likely be a significant number of mergers when the market starts to shrink and businesses start combining or going out of business.


CLMs represent a new enterprise system or product and capability that can be deployed across divisions of an organization and provide value across departments. It’s not just a legal, procurement, or revenue-focused tool; it can fit within all segments of an organization. It allows companies to focus on different areas such as procurement while helping other companies determine whether to place heavy emphasis on procurement, revenue, or somewhere in the middle.


We’re still going to have that large number of players that are very small just eking out a living at the lower end of the spectrum, but companies like Conga, Agiloft, ContractPodAI and Ironclad are coalescing as pack leaders. As we see the next few years come along, there will start to be this coalescing of products — or the disappearance of less successful products — and we’ll see the same things we noticed with ERP systems back in the day. Namely, we’ll start to see the market shrink up to focus on the handful of vendors that will carry on.


TA: In terms of the consolidation, I was having a conversation with a substantial player in the space, and the most significant hurdle he saw was that he felt the technology could not be consolidated due to differing tech stacks. We really have heard some rumbles in terms of the importance of that indication. I agree with Jim in terms of consulting — some players are going to die down. But two segmentations will likely survive: the mid-market and enterprise segments.


The reason why we are seeing millions in funding is because mid-market companies have been responding aggressively to consolidation. They assess plug-and-play capabilities and have the software operate with little customization. These CLMs fill the void very quickly, and mid-market companies gave birth to a lot of vendors. You will find consolidation, but you will also see market segmentation and industrial specialization happening.


JO: One of the other things to look at is that there’s still not a transformational leader in CLM. Most of the current options have the same level of functionality and use technologies from 10-12 years ago. It is hard to bring technologies together when teams are tasked with bringing together different modules coming from six different companies. That’s incredibly difficult to do.


As people realize that they didn’t deploy their CLM correctly or are not going to meet their expectations through it, they immediately look to the next player. That will keep the market wide open from a technology perspective. As each vendor churns out 10-25% of their userbase, those users need to adopt a solution elsewhere.


From my perspective, it’s important to keep the number of market players large and growing. A CLM company is not going to lose its business because it will pick up churn from a competitor. The fallout from poorly-planned deployments is keeping players in the market that would not necessarily be there otherwise.

CL: When it comes to implementing a solution, what do many get right or wrong about it and why?

JO: You think it would be an easy question to answer. But it’s not.


I’m going to start with the vendors. Vendors are focused on ARR and selling as many licenses as they can, and ensuring those licenses renew. Their focus on services and providing services is secondary. In some cases, it can be problematic for the investors of CLM providers if those providers are making too much money on services as opposed to license renewals. They don’t view and approach CLM deployment the same way an alternative legal service provider would.


The footprint vendors use would be a common and standard process where they and the client go from kickoff, to build, and then to deployment. But stakeholders often fail to expand this process out and include areas like change management. Change management is one of the biggest areas you will not find from a vendor — and one of the most important parts of a successful deployment.


I don’t think the resources you’ll find in a professional services team necessarily cater to a broader-focused implementation focused on ensuring readiness. However, teams must spend time preparing success criteria, ensuring broad opt-ins across the organization and developing communication and operational readiness plans.


Even for projects that are supposed to take less than a year to complete, these elements and steps are critical. But you don’t see a lot of CLM companies that emphasize planning and readiness. Vendors have a need to get in and out of a project, and it’s not a negative thing; it’s likely part of their business model. They want to convince their clients they can be in and out in 12 weeks with a working system. But this approach sets up a lot of clients for failure.


Sales teams will invite a lot of negativity into the project because they are painting these pictures of goals and achievements for clients that will never materialize. I think that’s where service providers like LegalEase Solutions will come into play since they can provide actionable data regarding the journey they will undertake.


And it’s not just the pre-implementation steps that company stakeholders must consider. There’s also the whole post-production period that’s going to go on for years after launch, which teams have to account for and track when measuring success. That goes into not knowing what’s involved and not having the crucial pre-planning steps in place.


With vendors, there’s a lack of experience, especially in the CLM market. CLM is a unique type of software – you can’t take a person who has a lot of experience using a sales CRM and transition them into deploying CLM software. That is because CLM systems come with unique problems and challenges, and it takes time to train people on the nuances of those issues.


Vendors are not going to hire teams that have a specific goal of delivering top-notch change management. Education teams at the average vendor, for example, are focused on functionality instead of how the corporate client must deploy its CLM to attain their success criteria. CLM educational initiatives should focus on how corporate teams can use and maximize the end functionality in their day-to-day work life. It’s an area critical to long-term success — but clients often do not get this type of support from vendors.


TA: Another important thing to note is that the market is new. Managing contracts is not new tech, but CLM is — relatively speaking. We’re talking about AI-driven contract management and the like. With new things come some fumbling in terms of how implementations are talked through and executed.


The second thing that is key is that a bunch of these tools are sold as SaaS solutions. SaaS was the highest-valued segment of technology for the last five years, with VCs investing hundreds of billions into emerging vendors. By positioning their solutions as SaaS programs, many CLM vendors made themselves attractive for investors.


However, by describing themselves as SaaS program providers, CLM vendors confronted misconceptions that they were offering plug-and-play programs. CLMs are not like that; they are enterprise software programs. There’s a dissonance there that vendors and buyers alike must better understand.


Even though the product could be a SaaS product, there remains an implementation phase to it. The sooner the market understands that, the better.


CL: I like to advise others when it comes to legal tech, people+process then tech. Do you agree or not with this and why or why not?


JO: From my experience around legal tech in contract lifecycle management, I think it’s true that you need to focus on people and process first. From there, teams can generate profiles of what their journeys will look like, what CLM application aspects they will prioritize in the first days of deployment, and identify stages and functions that will either become part of the tech-enabled deployment or remain manual. There’s not going to be a 100% match between technology and processes; there are some that will be enhanced or replaced by technology, and others that will remain manual and work with technology.


TA: It also depends on what kind of enterprise it is. Some enterprises could be huge behemoths in the space but are archaic in how they run their people and processes and assess the tech available for augmenting what they have. It will also hinge on how forward-thinking and cutting-edge the company wants to be regarding what technology and innovation can bring to their processes.


Companies may have to address a void where they may not have the people or the process. The technology could be exciting enough that they see the term “revolutionize” as a strong word. They can be more agile and competitive by saying that in the next decade, they will invest today to commit to a more aggressive, long-term roadmap. From there, they will build the people and processes around their investments.


Processes will always exist. It just depends on the extent stakeholders want them automated or left untouched.

CL: To those wanting to learn more about CLM, what is your advice?


JO: We’re at a point now in the evolution of contract management and CLM where there is a lot of data and a lot of information online, so I think groups like World Commerce & Contracting, publications like Spend Matters, and other sources can help.


While larger companies that want to get to the top of the commercial space and are inching into the enterprise realm tend to focus solely on Gartner and Forrester, I prefer to leverage general sources and connect with people in various industries to see how they use their CLM. Yes, the Gartners and Forresters of the world are all relevant and have valid data sets one can review. But it’s also important to look at your network, reach out to people who are in your industry and contact lists and try to get a connection with them since they’re the ones that will show you how a specific CLM will work in real-time.


There are also people in the industry who have done this work forever and have enough data points in their back pockets that they can paint a broad picture of a CLM program’s effectiveness. They also have the experience and insights relevant answering general questions and offering guidance on how CLMs have worked out for specific projects and companies. These industry experts can also prove to be worthwhile resources to guide you along the sophisticated, sometimes unclear CLM market.

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