The critical role of CLM  in meeting increased legal demands 

Trends are always interesting to look at, especially at the end of one year going into the next. Some trends are cyclical, such as retail spending, and some trends are technology driven. A trend that has been growing in the legal field is the awareness that Contract Lifecycle Management is no longer a want, but a need for those involved in contracting. It’s not just the process improvement from this technology, but the use of the data that it generates.   

The Contract Lifecycle Management (CLM) movement has been quite a ride and will continue to be an ever-growing market. The expected Total Addressable Market (TAM) for CLM is projected to grow from $1.11 billion in 2022 to around $3.69 billion by 2032 with a compound annual growth rate (CAGR) of 12.33%.    

The different trends that are spurring this growth are varied. In this blog we’ll examine a few of the trends that are emerging within the CLM market.   

Scaling current technology 

According to the 2023 Harbor survey, more than 80% of companies expect legal demand to increase. Of course, the demand increases, but the budget rarely keeps pace. With the increase in legal demand, companies will need to become more efficient with their current headcount to ensure costs won’t increase. One answer? Enhancing the efficiency of the department’s current technology stack. Your CLM platform is often one of the tried-and-true areas for quick-win efficiencies. But is it prepared to deliver? 

When you purchase a CLM platform, you need to solve the problem that is presented today, whether it be an ineffective contract workflow that people work around, lost revenue to penalties, increasing risk levels due to lackluster obligation tracking, or even unintentionally committing to obligations due to a lack of awareness of auto-renewals. These issues can be easily solved with a CLM solution, but as your organization continues to grow and change, have you considered future-proofing? Does your CLM flex and scale to your future needs as they change? And with the speed of business these days, the future will come to meet you quicker than you think.  

Harbor found that companies that plan to optimize their existing systems jumped from 11% in 2019 to 20% in 2023. Because the legal budget often isn’t available to outlay for new technology, legal professionals need to take advantage of the solutions they already have on hand. That said, legal technology’s ability to scale and flex is critical to meet increased legal demand without budget keeping pace. While this may not be one of the reasons for the CLM market expansion, it is a word to the wise when those that are purchasing CLM to consider.

Resource allocation 

Transparency is one of the bigger issues unveiled in the Harbor survey. Seventy-one percent of survey respondents said transparency and actual volume of work was the biggest challenge, while 60% said they didn’t have visibility into the risk and complexity of the work. These barriers keep organizations from being able to shift different work to different resources and even identify the variety of work in the first place. 

Just throwing bodies at a problem can’t solve it, whether through new hires or outsourcing, so organizations must use their current headcount more wisely. Artificial Intelligence (AI) can help with people resource problems. It’s all about working smarter, not harder. Senior counsel reviewing standard contracts may not be the best use of their time. Standard, run-of-the-mill contracts can be routed straight to signature. But how do you solve this? 

AI has sparked a revolutionary trend – everybody’s interested in efficiency gains and what they can do with this technology. One organization has figured it out.  

Rush University Medical Center used Agiloft’s GenAI Prompt Lab to scan their contracts and automatically sort it to the correct person for review. Whether it be a standard NDA going straight to signature, an employment agreement with a $5,000 a-week contractor for a paralegal to review, or an enterprise service agreement for software that requires a full legal review, Rush has configured our GenAI Prompt Lab to know where to send contracts for all different levels of review without human intervention. This allows skilled legal professionals to not only use their time more wisely but also frees up other personnel resources who would have spent their time reviewing where the contract should have gone in the first place.  

Data structure 

Flexibility and transparency as some of the trends effecting CLM market growth, but data structure is just as critical. Different types of contract data need to be understood by the organization before it can be utilized for efficiency and growth.  

Consider the following types of contract data: 

• Contract content data – content data that covers the important information found within the contract, such as the names of the counterparties, term lengths and conditions, important dates, etc.   

• Contract process data – process data that focuses on where the contract sits in the overall contract workflow.  

• Contract performance data – performance data that introduces an element of analysis, where you explore how your contracts are performing against the commitments held and made within them.  

• Decision support data – a combination of the information collected above, decision support data focuses on details and statistics found that can influence the way you do business in the future. 

Enabling better decision-making and better distribution of work when facing increased legal demand is dependent on understanding the data that is available to you. This understanding is a backbone when considering how you set up your CLM.  

Conclusion 

Data is always a hot topic of conversation in business but has typically left the legal department out of the loop. However, the question is being asked more and more is: “How do we integrate our systems across the legal technology stack?” That is a conversation for another day, but it’s critical to remember that legal contract data is the goldmine organizations have overlooked for too long – and trends suggest that it’s starting to dawn on organizations to utilize this wealth of data to help meet increased legal demands.  

View our recent webinar on these trends and more