Category Archives: contract management

CLM is Dead! Long Live CLM!

Last month THE PROPHET ran a RIP post for CLM over on LinkedIn where he heralded the demise of CLM.

Which is coming fast and furious for CLM 1.0 and CLM 2.0 because, as we’ve said before, most current CLM solutions are nothing more than a glorified document repository / barebones CMS with a bit of linguistic rebranding, a few customized meta-data fields, maybe a bit of versioning support, and if you’re super lucky, some integrated e-Signature support.

As for the prophet’s suggestions, most of them won’t happen.

CLM absorbed into I2O?

Considering most I2O (Intake to Orchestrate) players still haven’t absorbed a fleshed out working Source to Pay model … not likely.

CLM goes vertical?

The whole point of CLM is horizontal — to get a grip on all of your contracts, not just a subset of them!

Agentic Solutions?

I like my contracts the way I like my maps: ACCURATE!

The best “AI” can do is enhance the productivity you get from a (very) small legal team … it CAN NOT replace it!

GPOs?

Standard terms around pricing DOES NOT satisfy geographic requirements which vary on levels of regulation, compliance, etc.

Clause based?

Ask Icertis and especially Exari how well that worked out for them …

Every other suggestion

Maybe … but all of this is trickier than THE PROPHET lets on!

The reason that CLM doesn’t work, as we noted above, is that the majority of “CLM” solutions on the market are NOT CLM at all. They are glorified repositories with some authoring and e-Signature support … not at all what an organization needs.

An organization needs “lifecycle” management. That’s a heck of a lot more than just drafting, redlining, signing, and sticking in a repository. That’s because contract “lifecycle” management really starts when the contract is signed (whereas most platforms seem to think it ends when the contract is signed).

It’s about automatically extracting the obligations, indexing them, assigning them, tracking them, and making sure they get done.

It’s about extracting the milestones and deliverables, as well as those obligations, and wrapping them in a project plan, assigning the resources, assigning the supervisory chain, tracking them, making sure they get done, and making sure all requirements are met.

It’s about extracting the SKUS, price tables, rate cards, and pushing them into the Procurement systems to allow those systems to perform the right m-way matches and make sure nothing is paid out that wasn’t agreed to. It’s about pulling in the paid invoices for tracking purposes and allowing the contract/relationship managers to track total contract fulfillment.

It’s about ensuring that the right parties are notified when a contract is coming up for renewal, have all the information necessary to make the decision on termination, renegotiation, or allow an evergreen renewal.

And about a whole lot more where VALUE is concerned. Just check out what The Maverick has to say over on Spend Matters.

Can’t Get Your Contracts In Your Sights? Maybe You Need a Birdseye.

Birdseye(.digital) was created by With, a Strategic Consultancy founded to enable strategic sourcing and contract management excellence, to solve the most critical problems their clients had in value realization from strategic sourcing: post-signature execution. This, as we identified yesterday in our post on why aren’t you realizing the full value of your sourcing efforts, is one of the primary reasons that up to 40% of value identified during a sourcing project never materializes — as value realization requires proper Procurement (and a proper system), proper logistics (and a proper system), and proper contract execution management (and a system to support that).

Birdseye(.digital) was created for the

  • Procurement Managers,
  • Contract Managers
  • Risk and Compliance Managers, and
  • Legal Counsels and Advisors

who are responsible for managing the organization’s contracts, allowing them to get a 360 view of each contract as well as all contracts that fall under their purview and/or relate to a compliance requirement, risk, or obligation that they are responsible for.

So what is Birdseye(.digital)? It’s fundamentally a contract governance solution that allows you to define:

  • the responsibilities (obligations) of the organization as tasks and action items
  • the risks that need to be tracked and managed
  • the supplier management and (re)qualification activities
  • the stakeholder engagement and surveys

The primary components that allow this are:

  • workflows
  • risk matrices
  • forms
  • review/governance templates (scenarios)
  • calendars
  • dashboards

Workflows

When an obligation or action item is defined and assigned, the platform will track it, notify the appropriate stakeholders when it is coming due, kick off associated activities when a task is done or a status changes, and monitor those as well.

Risk Matrices

A user can associate all risks relevant to each (sub) contract, track their levels, track changes over time (during [regular] review schedules), define notifications on change, and associate mitigations. It can also define a custom risk matrix that derives a color-coded risk level from a combination of the risk probability and the impact of the risk occurrence for easy visual display and classification. This allows users to quickly see if there are any high or critical risks associated with a contract, whether or not mitigations have been defined, and compute an overall risk level of the contract, which can be monitored over time during regular reviews.

Forms

Just like modern RFP solutions, a user can build their own custom review/survey forms with ease and associate them with scenario templates, activities, or one-off projects. They can also attach files as needed.

Contract (Review/Governance) Templates (Scenarios)

The system allows administrators to define scenario templates that define, for a contract of a given type, what obligations and activities should be tracked, what reviews and surveys should be done, how often they should be done, and who should do them (by role). This means that governance for a contract is easily setup simply by selecting a scenario template when a contract is signed or input into the system post signature. Selecting a predefined scenario template from a single dropdown can setup all of the default management activity required over the contract lifecycle with a single click. An organization that takes the time to classify its contracts and management processes can manage contracts with utmost ease.

Dashboards

Of course Birdseye comes with a full suite of dashboards to get complete 360 insight into the contracts, with filter capability down to any subset, individual contract, or subcontract of interest. This allows all of its users to understand how a contract, supplier management effort, compliance initiative, or other activity is going. Since the platform can also be linked to a P2P or ERP system (Oracle, SAP, and any platform with an Open API that allows an invoice to be linked to a contract ID), it can also give you an update on total spend impacted by a contract, category, or initiative.

There are out-of-the-box activity dashboards for projects, contracts, relations (third parties which can be suppliers, consultants, etc.), and catalogues (of products or services that contracts can be linked to), as well as a customizeable activity dashboard for each user that can overview their contracts, projects, relations, reviews, action items, stakeholder contributions, etc. through drillable widgets that can be filtered on every dimension down to the raw data records, which can be popped up or exported as needed. These dashboards, in addition to standard metric/spend dashboards can also be of the Red/Amber/Green Traffic dashboard variety as well.

Calendars

Just like any good (project) management solution, a user can also get a calendar view of an activity, contract, or all of their tasks to easily determine what they have to do and when. The system was designed with management efficiency in mind, because the developers know that any system that is too unwieldy doesn’t get used, and, thus, the only way to extract all of the value out of a contract is to create a system that makes a user’s tasks as easy to identify, and do, as possible. The user can add tasks and activities as needed and customize their calendar to their liking.

Crossing the Ts

As for the basics, you can have as much metadata as you want associated with a contract, and add new metadata fields anytime you need to. In addition to easily being associated with a scenario template of choice, it can have as many tags as you like, be associated with a projected value, be associated with any parent or subcontracts, and have as many attachments (with versions) as required. In addition to the action items, risks, and obligations discussed, it can also have associated issues, rights, catalogues, invoices, reviews, stakeholders, and connected projects (such as reviewing all contracts with a generic force majeure clause). There are also checklists that can be associated with contracts and projects to help a user ensure they’ve dotted all the i’s and crossed all the t’s in the execution of the contract.

If the contract (template) is not created in the platform, when a user uploads an agreement, they use AI to identify all of the meta-data that is associated with a contract of the given type (using Google Gemini today, but future releases will allow users to choose between Google Gemini or Anthropic Claude, where they found the latter works better for organizations that contract in multiple languages), and not only allow the user to override anything it extracts (as it’s not perfect) but show the user its confidence ranking. The user can filter by confidence and only needs to review/validate low confidence options to have extremely high confidence in the auto-extracted metadata.

System Administration and Configuration

As we have hinted above when we noted that the user can add and track any metadata fields that they like, the system is very configurable and the administrator also has full control over:

  • business unit hierarchy which can define visibility rights
  • users who can be assigned very broad, or very narrow, roles
  • tags that can be defined and modified as needed
  • reviews and the processes and timelines they follows
  • tasks and the basic templates and workflows
  • email templates that are used for notifications
  • currencies and mappings that are used if invoices are pulled in for spend tracking
  • usage monitoring and define how to track who is, and is NOT, using the system
  • folders and structure for contracts and attachments
  • deleted record management as even deleted records are preserved for audit trails until a user with authority determines they can be permanently deleted

It’s a well thought out, usable, and fairly complete contract execution management system that goes well beyond just creation, storage, and signing … which we know is where many older generation contract lifecycle management solutions stop. The most important point to make is that they’ve found that their customers who fully embrace the solution see a 30% value increase from using the solution. Now, this shouldn’t be taken to mean that it can singlehandedly prevent the loss of the 30% to 40% of identified savings that is traditionally not realized after a sourcing event, but that it prevents about a third of that loss and, if combined with a good e-Procurement system and good logistics management, you might actually be one of the first organizations to realize almost all of the savings you negotiate (since a good e-Procurement systems typically increases savings capture by a third as well, and proper logistics paired with proper warehouse and inventory management saves a bundle as well). The 2X process efficiency alone that its clients see more than pays for the system, so imagine the results if you realize another 30% value on the identified savings of every sourcing project. (Combined with the 50% reduction in audit findings its clients also see, which increase drastically for any customer with an integrated P2P that ties invoices to contracts as they can check full payment compliance as often as they need to.) So if you are missing a birds-eye view into your contracts, maybe you should check out Birdseye(.digital).

Why Aren’t You Realizing the Full Value of Your Sourcing Efforts?

It’s been a well known statistic going back all the way to 2009 that at least 30% (and often 40%) of identified value in a sourcing event is never realized when Mickey North Rizza of AMR Research (acquired by Gartner in 2010 in an acquisition game of the 64,000,000 pyramid) published her classic 3-part series on Reaching Sourcing Excellence with Part 1 titled How to Keep 30 Cents of Every Dollar Spent. The reality is that while many leading organizations adopted strategic sourcing quickly during its first heyday in the mid-2000s, often before Procurement, because of the huge savings opportunities that were identified with good reverse auction platforms (in markets where supply exceeded demand) and good sourcing optimization (regardless of market conditions), as sourcing optimization identified an average savings of 12% consistently (compared to reverse auctions which saw significant drops every time they were applied to the same category), most of these leaders who identified savings of 10% or more never saw half of the identified savings. This is because savings requires more than just identification and a signature on a contract, it requires execution!

Execution that, at a minimum, requires:

  • making sure you order on the contract
  • … on time to receive delivery on time using the preferred shipping method
  • making sure you receive defect-free goods that meet the spec before paying for them
  • making sure the amount you are billed is the amount as per the contract
  • … and that you are not billed for expediting fees or surcharges you DID NOT agree to
  • making sure you pay on time (to avoid penalties)
  • … and only ever pay for any good or service once (using an m-way match)
  • making sure you terminate or renegotiate before an evergreen renewal
  • … and that you have verified the supplier has all the certifications and insurances in place before placing an order or renewing the contract
  • … etc.

It comes back to the concept of the perfect order which must be

  • on time,
  • complete,
  • damage free,
  • correctly documented,
  • correctly billed, and
  • adherent to all contract terms

This is not easy to do unless you

  • have a good procurement system
  • have a (carrier that has a) good WIMS (Warehousing and Inventory Management) system

and, the part that most people miss,

  • have a good contract lifecycle management system that manages the contract execution post signing

And when you look at the majority of contract management systems, they tend to fall into three categories:

  • a glorified e-filing cabinet / document repository where you can store your contracts and search their metadata (and literally no better than what a high school student with Microsoft Access and minimal coding skills could build 20 years ago)
  • a contract creation system that will allow you to quickly draft contracts using:
    • contract templates, from your, or their, legal department, tagged by region and category they can be used for,
    • clause libraries and templates, possibly with multiple version support based on territories and categories, or, today
    • Gen-AI drafting of templates through specification of category, region, requirements, and risks that must be covered as well as e-versions of all previously signed contracts in the category, region, business requirement, or risk categories (which then need to be mildly to moderately edited by a Legal expert)
  • a signatory platform with negotiation support (version control, dynamic redlining, audit trails, etc.)

Which is all fine and dandy, and well implemented can make your Legal team and Sourcing teams considerably more productive during the negotiation process, but does diddly squat when it comes time to actually helping you manage the contract execution. Now, you might think that you can do that in the Supplier Management system, because you’re ultimately managing a supplier, or the Risk Management system, because you’re ultimately managing a risk, and you can, to a point, and specifically the point at which those systems allow you to define contract tasks, but none of these are set up to let you holistically manage a contract — contract 360 if you will. This is especially the situation if you have a master contract with a number of sub-contracts, and those sub-contracts have sub-contracts as well. This will be the case if you are buying off of a contract tied to a GPO master contract, a holding company master contract (if your company is part of a group of companies), or in construction / engineering / shipbuilding industries where your main supplier will need to subcontract to a number of smaller suppliers for custom parts or services and your organization needs to manage that for regulatory or risk reasons.

In other words, the only contract lifecycle management solution that is truly valuable to Procurement is the solution that allows the contract to be managed from post signature to termination, helping the organization ensure all of the obligations are met and rights are received.

You Should Embrace Legal Tech … Backed By Lawyers!

Don’t Kill ALL the Lawyers was our plea earlier this year because, sometimes, yes, sometimes, you do need a good lawyer in Procurement — just not as often as you think. No matter how much you think you can do (and you can do more than you think), you will still need them for

  • (final) contract reviews
  • significant clause interpretations
  • identification of statutes, regulations, and legal decisions you may be subject to
  • review financial and legal reports before submission
  • advisory on incident response plans and alternatives

Basically, while LLM powered Legal Tech can do a reasonably good job of

  • assembling a contract based on mandatory clauses, required terms and conditions, templates, and past similar contracts (which you can then touch up to your liking)
  • identifying clause types
  • identifying statutes, regulations, and legal decisions you might be subject to
  • identifying whether or not key sections are present in a report before submission
  • identify potential incident response plans across libraries

As the tech is NOT intelligent, it cannot

  • identify whether a contract meets your goals, only if it contains clauses that you have identified
  • tell you how a clause is likely to be interpreted by a court, as there is always some ambiguity in a clause, and opposing council might be intent on shoving as much ambiguity in there as possible to increase the chance a ruling goes in their client’s favour if something goes wrong
  • identify how likely you are to be subject to a new statute, regulation, or legal decision where it is a matter of interpretation
  • determine if the report is financially accurate or makes sufficient disclosures to satisfy the letter and the spirit of the regulatory requirement
  • determine the potential legal ramifications of a response

that requires an intelligent HUMAN lawyer!

But as we previously indicated, you can do a lot with some intelligence and tech. And you can do even more if you use Legal Tech backed by real lawyers with Human Intelligence (HI!).

For example, if you power your contract creation with a clause library vetted by real lawyers with annotations as to categories, geographies, and regulations the clause is for / satisfies, the contract creation tool can do a better job, leave you less to edit, and allow a faster review.

If you compare a contract to a clause library with comments and annotations on plain English meanings, best practices, and red flags that was developed and annotated by lawyers with Human Intelligence (HI!), you will have instant insight into what you need to negotiate, watch out for, and counter with. You will only need to involve legal for standard clauses if it is really vague or you need a heavy hand.

If your Legal team identifies which statutes, regulations, or recent decisions could affect your organization, how, and when, and tags the geographies, categories, parties, etc. that could be subject, you will instantly have that information when considering an award and then when drafting/reviewing a contract.

So yes, you should embrace Legal Tech to keep your Procurement timelines down (as well as external counsel fees), but only if it is backed and augmented by lawyers with Human Intelligence (HI!).

Don’t Kill ALL the Lawyers …

… but certainly think about how (much) and when you use them in Procurement and your organization as a whole.

Earlier this month, THE PROPHET asked a very important question regarding Lawyers, Contracts, Procurement, and Tech in 6 parts, which essentially boils down to:

When will advanced tech, especially the tech we have today, replace lawyers for most in-house and even on-retainer Legal services?
To which the doctor replied: Why hasn’t it already?

Right now we have legal-tech so good that you should NEVER use a lawyer to:

Write a contract.
In fact, if you have any contract writing skills at all, even without ANY tech whatsoever, odds are high in your favour that you will write a better contract without a lawyer, especially in tech and supply chain when you know your business, the risks, and the key agreements and protections you need in place and, frankly, the lawyer doesn’t.I can’t count the number of times I’ve been told this is a great contract and there’s nothing wrong with it as we paid XK (where X, depending on the contract type, starts at 5, 10, or even 15), when the contract is in fact mediocre at best, full of holes, and sometimes even worse than the contract the firm was using. But sunk cost fallacy takes full effect, and a slipshod effort by the paralegal, quickly reviewed by the counsel to make sure there is nothing glaringly wrong, and put before you with a big price tag becomes the greatest contract ever written.

And yes, a lawyer will know to look for the presence of key standard clauses that should be in every business contract and contract from your business but, guess what, so will any contract creation / analytics product on the market.

And yes, a lawyer can tell you the potential risks associated from veering away from a standard contract, standard terms & conditions, and standard mitigations, but, guess what, so will any contract creation / analytics product on the market.

There’s very little contract-related value a lawyer can offer that modern tech can’t do, especially in the hands of a tech-savvy contract manager who understands the purpose of a contract and writes the contract in plain English.

Locate the relevant statutes (laws), decisions, and regulations that affect your business.
There aren’t many valid uses for Gen-AI, but large document search and summarization is one valid use, and a use that usually works remarkably well (with a very low failure rate compared to other tasks wrongfully put to these LLMs). No need to pay thousands in hourly billables to dig up what these tools can dig up in minutes and you can review in hours.
Summarize your Financial and Legal (Reporting) Obligations with respect to all statutes and regulations that apply to you.
Again, this is one of the few valid uses for Gen-AI that works quite well as it’s just another type of document set summarization. So why pay a legal team dozens or hundreds of hours when you can get a highly accurate summary for next to nothing in comparison?
Summarize known incident response options, and known benefits/risks of each.
Again, this is one of the few valid uses for Gen-AI that works quite well as it’s just another form of document summarization. And while this won’t necessarily be 100% complete, or give you specific insight to your situation, it helps you get a handle on where you might start.

The reality is that you only need a lawyer to:

Do a final contract review.
To make sure you didn’t screw up a clause, miss a core enterprise requirement they have committed to memory, or address an upcoming risk or issue they happen to know about that you don’t. Considering this is all they really do anyway when you ask them to write a contract (as they are either sloughing it off to the paralegal or just pulling one from the file that is close to what they think you need and just making a few edits), just pay them for what they do that they are good at.
Review the list of statutes, regulations, and legal decisions you believe you are subject to.
Their in-depth knowledge of the law means that a good lawyer who practices in the relevant area will quickly be able to tell you whether or not each statute, regulation, and/or legal decision is relevant to you, key points you shouldn’t miss, and whether there are any statutes, regulations, and/or legal decisions they believe you should also be aware of because they are, or may be, relevant.
Review the financial and legal reporting you plan to do and advise you on completeness, correctness, and accuracy.
They know the law, and how to keep you in line with it.
Advise you on your incident response plan and best alternative options.
Again, these are legal experts who focus on mitigating risks and arguing for a living, unlike dumb algorithms which can just summarize which they are given. This is, or should be, the true value of your legal counsel and when you should really be paying the high hourly fees.

As to THE PROPHET‘s question as to:

When will it happen?
The answer is who knows?

Considering that good contract creation applications have been around for almost fifteen (15) years, where all you had to do was define clauses and variants by geography or category, standard templates by category, etc. and then rules for special situations, and it would assemble a custom template for you in minutes, the base technology should have been common a decade (10 years) ago. Now we have Gen-AI thrown into the mix which can analyze your contract repository, pre-populate your standard clauses and build starting templates, and then customize those based on the buy specifics, you can get a decent draft in minutes with very little manual effort.

We’ve had good semantic document summarization for well over a decade, and Gen-AI has taken that to a new level, most CLM vendors are integrating it, it’s easy to use, can be trained to be highly accurate for this task, and not expensive.

We’ve had good contract analytic solutions for about a decade, which can analyze all sorts of performance metrics, risk metrics, associated costs, and so on.

But yet these solutions have rarely been adopted, when they could save an organization a lot of money, help the organization get their risks under control, help the organization better manage their spend, and help the organization understand its supply chain.

This shouldn’t be surprising given that year after year, as per our recent myth-busting 2025 2015 trends, companies say they want strategic value but only focus on cost-cutting, but don’t even do that right. Only two technologies have been proven to support year-over-year cost reductions of 10% or more (adjusted for inflation), and those are

  1. (advanced) spend analysis
    (not the dinky projects some companies outsource to Big X who use second rate third party tools for poor results)
  2. (strategic sourcing decision) optimization

And how many companies have truly adopted these technologies AND use them in house? Our guess is less than 20% in the first case and we know it’s less than 10% in the second case. It’s like we said in our recent rant on You Don’t Need Gen-AI to Revolutionize Procurement and Supply Chain Management — Classic Analytics, Optimization, and Machine Learning that You Have Been Ignoring for Two Decades Will Do Just Fine!