Byte-Sized Law, hosted by Siddarth Menon, is a podcast that explores the trends and challenges currently dominating the complex landscape of legal technology. In an episode earlier this summer, Siddarth spoke with Kami Paulsen, a published author and renowned CLM expert who has spent over 2 decades working in the space.
Today, we will take you through some of the key points Siddarth and Kami discussed during their conversation, including how to set up a successful CLM implementation, how to choose the right CLM vendor, the importance of change management, and the future of AI in legal technology.
What You Can Accomplish with CLM
Many people still aren’t sure about the purpose of a CLM system. What can it do that your existing tools can’t? How does it tangibly impact the contract process?
A CLM, or contract lifecycle management, tool does exactly what its name implies. It enables contract stakeholders to manage agreements more effectively and efficiently from start to finish. Beginning with the intake request, the system walks each contract through its lifecycle. The document is generated, negotiated, approved, and managed all within the same system. After execution, you can also mine data from the stored documents.
If CLM can really do all that, why has the technology only just begun to take off in recent years? Kami cited 2 main catalysts for the CLM revolution: the pandemic and the economic environment.
The pandemic incited a surge of CLM interest mainly out of necessity. Although many companies had e-signature functions in place, they did not yet have a way to manage contracts digitally in 2020. Contract management was still being done through email chains and interoffice memos. CLM tools enabled organizations to negotiate and manage contracts electronically so that business could continue while employees worked remotely.
With an increased number of sanctions in place due to both the pandemic and the conflict in Ukraine, the economic environment also pushed businesses to adopt CLM. These tools make it easier to keep track of changing sanctions and ensure compliance.
Kami added that audits are another reason to get your hands on a CLM tool. She shared her experience failing her first audit because her company was unable to produce the necessary documents. “I never wanted to be blindsided that way again,” she stated, encouraging organizations to set up a repository at the very least to avoid those tough situations.
Partners First, Tech Last
Kami’s biggest suggestion for facilitating a successful implementation was to consult an implementation partner prior to choosing your CLM vendor. “An experienced implementation partner can help you get ready for the implementation and give you the homework you would need to make the right selection and save yourself money,” she said.
Without guidance from an implementation partner, many companies end up asking all the wrong questions to their potential vendors. Then, when they do finally talk to a partner, they find out that they’re not ready to begin implementation yet, dragging out the already long process for another few months.
Kami summed it up best in just a few words: “Tech should be the last thing you buy.”
She went on to list a few key things to look for when selecting the right implementation partner:
- Do they have experience implementing the tool you’re thinking about?
- Where are they located? Do they have resources within your preferred time zone?
- Can they provide references or testimonials about successful implementations from other customers?
Achieving CLM Readiness
Companies aren’t born ready for a CLM tool. A lot of work goes into preparing for a successful CLM implementation. You can try to do the work after you’ve partnered with your consultants and vendors, but that option quickly becomes expensive. To avoid wasted resources, Kami suggested putting in the time and energy before implementation begins.
As you prepare for a CLM, you need to figure out 3 things: cost drivers, people, and processes. Cost drivers help you narrow down what you need from your CLM system. Examples include:
- How many contract workflows do you need?
- How many legacy contracts do you have? Where are they stored?
- How many integrations with other systems will you need?
Next, you need to nail down the people and processes associated with each type of contract. Kami recommended starting with a simple contract like an NDA or MSA and synthesizing the existing contracts of that type into one template. Then, lay out the lifecycle of that contract from the perspectives of all stakeholders. Your implementation partner can take that information and look for opportunities to integrate and automate while designing a solution for you.
Basically, the CLM readiness process boils down to:
- Getting the documents ready.
- Understanding the types of contracts you want to implement.
- Cleaning up the contract language.
- Documenting the contract process from end to end for all stakeholders.
Choosing the Right CLM Vendor
So, how do you choose the right CLM vendor? Well… It depends. Each vendor can do pretty much every function you need. Therefore, rather than asking “Can you do this?” the question should instead be “How do you do this?” That information will ultimately help you determine whether or not the tool fits your unique use case and company culture.
Kami recommended evaluating your current technology and processes. Are you a large corporation that needs an enterprise-wide tool? Are you a small legal department looking for a simple repository? Have conversations with your consultants and other customers who have similar use cases to narrow down your selection.
It also helps to take advantage of available resources like WorldCC and CLOC or listen to podcasts like Byte-Sized Law for more information.
The Importance of Change Management
Kami emphasized an essential aspect of successful implementation: Change management should happen at the beginning of the process, not just the end. You need to communicate that a change is coming and start equipping employees to adapt to the change long before it actually takes place. It’s also important to encourage excitement by pointing out how the change will positively impact the lives of all employees and the enterprise as a whole.
Here’s the basic timeline Kami laid out for proper change management:
- Indicate that a change is coming.
- Find stakeholders who are interested in being part of the selection or implementation team.
- Select a champion who will be in charge of administering the tool.
- Nail down a strategy to communicate updates over time.
- Demonstrate how the change has accomplished what it set out to do.
The Future of AI and CLM Technology
To wrap up the episode, Siddarth asked Kami about her vision for the future of AI and CLM technology. She pointed out that, although AI feels scary at the moment, all that has really changed is how we interact with it. AI has existed since the 1950’s and has been a part of our everyday lives for a long time in the form of gadgets like predictive text and Siri. Now, we’re interacting with AI in a more advanced way.
Some vendors have already started deploying ChatGPT, using it to search repository data in a conversational style as opposed to inputting commands. The current use case for this type of AI is simply to augment the abilities of human beings, not replace them. By automating the menial, administrative components of our jobs, AI allows us to focus on high value tasks and enables us to work faster and easier.
Kami’s vision for the evolution of CLM in the next decade is for CLM tools to become a middleware component rather than a standalone system. She hopes that users will continue to live in their native applications and that the advanced integration capabilities of CLM will let them interact with contracts seamlessly, making CLM a background piece of the workflow.
