Contract Management Software Overview
What is Contract Management Software?
Contract management refers to the automation of processes surrounding creating new contracts, storing and tracking existing documents, managing contract terms, and overseeing contract renewal or termination.
One key function that contract management software provides is housing all a firm’s contracts in a digital repository. This means that businesses and legal entities no longer need to keep track of paper contracts stored in file cabinets. Although, some contract management systems support paper contracts by allowing users to print physical contracts and/or scan in signed contracts.
Basic contract management tools focus on creating contracts from templates and/or storing signed contracts. More complex contract lifecycle management (CLM) software is designed to help organizations automate every stage of the contract process. This includes all contract management stages from the approval workflow to checking contracts against compliance regulations and monitoring important contract milestones.
Contract Management Software FeaturesMost comprehensive contract management or CLM software will include the following capabilities:
Contract Authoring Features
Contract Creation: This includes a document generator and tools for creating new contracts.
Contract templates: Allows users to set up templates or templatize old contracts in order to make new contract creation easier and more consistent.
Clause library/saved fields: Users can save certain fields of a contract for re-use; these may be stored in a template or a clause library.
Integration to CPQ: Integrates to CPQ software so that calculated quotes/configuration details can feed into contracts. This is an important element of automation in the contract authoring process.
PDF generator: Users can generate PDFs of contract documents.
Contract attachments: Users can attach other documents, like invoices, images, meeting minutes, memos, etc, to contracts.
Guided logic: Automated questions (based on company policies and the circumstances of the deal) help with the contract authoring process. This is an example of partial automation.
Contract Collaboration and Review Features
Contract sharing: Users can easily and securely share contracts with internal users and external users. Contracts are accessible.
Contract editing: Contracts can go through multiple drafts and revisions. The software supports multiple versions and version comparison.
Contract merge: Multiple versions of a contract can be merged.
Contract collaboration: Internal and external users can collaborate on contracts without changing the text of the contract; this may be done through comments, questions, and/or message board conversations.
MS Word plug-in: Users can make changes to contract language using Microsoft Word.
Approval process: Approval workflows can be configured to streamline and automate the approval process.
Parallel approvals: Users can set up complex workflows to handle parallel approvals.
Interdepartmental workflows: Users can set up interdepartmental workflows so that contracts can flow between teams in a logical and organized manner.
File importing: Documents and other file formats can be imported into the system.
Contract review: Either a rules-based or AI engine will analyze the contract text and report key terms, important clauses, obligations, etc.
Text analysis: Using natural language processing (NLP) and machine learning (ML) technology, contracts and contract portfolios can be analyzed to identify risk areas, non-standard clauses, changes in negotiation terms, etc.
Contract Monitoring Features
Contract database: Contracts are stored and organized in a central repository.
Legacy contracts: The system has a record of legacy contracts that were created prior to implementation.
VORs: Allows users to send/receive variation order requests.
Contract search: Users can easily look up contracts within the database
Reminders & alerts: Users can schedule reminders and/or trigger alerts according to contract milestones.
Dashboards: Dashboards provide an overview of contract activities.
Custom contract reports: Users can create custom reports about the status of contracts, contract timelines, efficiency, and revenue tied to contracts.
Tracking contract status: Users can track the status of a contract as it moves through the approval process and beyond.
Salesforce integration: Integrations to Salesforce so that contracts are tied to contact’s CRM records.
Compliance check: Users can define and enforce complex business rules related to compliance regulations; helps automate or partially automate contract compliance check.
What is Contract Lifecycle Management (CLM)?
Contract Lifecycle Management (CLM) is the practice of organizing, managing, monitoring, analyzing, and automating contractual processes within an enterprise.
CLM holds that contracts should be accessible, digestible, and top of mind for executives. This allows the business or legal firm to better enforce contractual obligations and events, collect all due revenue, follow through on commitments, and close pending deals. This is in contrast to a signed-and-done, file-away approach to managing contracts—which can result in legal oversights and penalties or lost revenue.
Since using human resources for constant contract vigilance is resource-intensive, and humans are more prone to error, CLM is accomplished using contract management software.
While simple contract software may only allow users to author contracts via templates, or store contracts in a database, systems designed for CLM/enterprise contract management have more complex features related to the following:
Collaboration & editing
Scheduling & reminders
Project change management (such as VORs).
Contract analysis and optimization
Rather than just a contract database or contract authoring tool, CLM software functions as a digital contract manager of sorts.
Contract Analysis and CLM
Contract analysis is an essential and growing part of CLM, especially for law firms, legal services organizations, and finance teams. This activity is part of the overall contract lifecycle management process, meaning the contract analysis software category is closely related to the contract management software category.
Many contract lifecycle management software providers have started integrating artificial intelligence into their CLM solution to automate this process. Using natural language processing (NLP) and machine learning (ML) technology, AI-based contract analysis engines can help organizations find hidden risks or opportunities within legal documents.This can help legal firms and corporations identify contract terms, specific clauses, and metadata across a portfolio of contracts. Contract analysis is especially important within the legal profession and for financial or procurement activities within corporations.
Larger contract management platforms usually include a set of contract analysis capabilities. However, there are also individual products that specialize in the contract analysis part of CLM. Examples of these point solutions include:
Both types of software are included in this category so that firms looking for either type of technology can find them here.
Contract Management Software Comparison
Before investing in either a new CLM solution or contract analysis tool, consider these three key factors:
Does your business need a comprehensive CLM solution, or are you looking for a dedicated contract analysis solution? Contract lifecycle management software is ideal for corporations or legal firms looking for a platform that can help them automate the entire process of contract creation, review, management, analysis, and renewal or termination. On the other hand, contract analysis software focuses on extracting important information from contract text. This surfaces insights about key terms, clauses, risk exposure, etc that might otherwise remain hidden.
If your business operates in the supply chain management and procurement space, does your procurement software have built-in contract management capabilities? Many source-to-pay or source-to-contract procurement solutions include some level of contract management. However, if you’re looking for a platform with advanced contract management capabilities, including AI-based contract analysis, you may want to consider investing in a CLM platform.
One last thing to consider is which type of deployment will fit your firm’s needs best. Will you need an on-premise solution for managing and monitoring contracts or a cloud-based platform that can be accessed via the internet? Some vendors may only offer one type of deployment, so make sure to check with the vendor if they provide the deployment option you’ll need.
A wide range of products are available in the contract management market, from very basic to sophisticated enterprise systems. Some simple contract management tools are free and certain CLM vendors offer a free version of their product. Examples of free contract management software include:
Other enterprise-level systems offering contract lifecycle management capabilities can cost more than $8,000 per user per year. Factors that help determine the cost of a CLM solution are the number of contracts that need to be managed, amount of storage space needed, and level of features required. Most vendors do not disclose pricing on their website but will provide a quote upon request.