Legal Process Outsourcing
How contract lifecycle management has evolved into a strategic asset?
Estimates show that businesses lose an average of 9% of annual revenue due to contract mismanagement. Here’s where modern contract lifecycle management (CLM) becomes an integral part of a business, enforcing standards of service delivery, meeting business objectives, and using workflow automation to drive process efficiency.
Technology-driven CLM makes it easy to monitor contract performance, negotiate terms, identify cost-saving opportunities, and streamline, automate, and standardise workflows.
The challenges of traditional contract management
Traditional contract management is riddled with manual and archaic processes that are time-consuming and exposed to human errors. These paper-based contracts with disjoint communication channels and process siloes hinder productivity.
A study by a leading management consulting company reveals that traditional contract management costs businesses up to 12% of their annual costs. These inefficiencies manifest in the form of lost deals, slower response times, regulatory penalties, non-compliance, and loss of reputation.
How is CLM a strategic business asset?
Whether it’s supplier agreements, customer contracts, partnerships, or service level agreements, these documents are legally binding and protect the interests, expectations, and obligations of all parties. Here are a few contract lifecycle management benefits of a CLM system –
Managing complex contracts in high volumes
Companies, whether a small growing business or a large multinational, manage several contracts at any given time. According to a study, a Fortune 1000 company maintains between 20,000 and 40,000 contracts across locations. No matter the scale of operations, CLM makes the process smooth, minimising errors and inefficiencies.
Cost reduction through greater efficiency
Research shows that a CLM system reduces the time taken to create and finalise a contract by up to 50%. This translates directly into process streamlining and cost savings on administrative and legal matters.
CLM systems reduce the contract cycles by up to 80%, resulting in higher revenue, profits, and stakeholder satisfaction. It also makes the process of getting a request for proposal (RFP), negotiation, and approval structured and efficient.
Managing risk and compliance
Managing and updating compliances across locations is critical but highly challenging without a CLM. The system identifies and mitigates any risks by aligning the contract with current regulations. This can reduce the cost of non-compliance and penalties by up to 30%.
Greater contract visibility and control
CLM systems provide end-to-end visibility across the contract lifecycle, essential for informed decision-making and identifying opportunities for renegotiation during contract termination and renewal.
Streamlining internal processes
CLM systems integrate seamlessly with CRM, ERP, and supply chain management systems, streamlining internal processes and aligning strategic contract management with business objectives.
Data-driven decision-making in contract management
CLM systems leverage data analytics to provide insights into contract performance for better strategy and decision-making. Studies show that organisations with data-driven decision-making and contract management have 23x higher chances of gaining a customer and 6x higher chances of retaining them.
Future trends in CLM
Technological advancements and changing business needs are reshaping the way organisations manage contracts. Here are a few contract lifecycle management trends that are making it a strategic business asset –
Artificial intelligence
One of the key trends in CLM is the integration of AI, which is revolutionising contract management by automating data extraction, streamlining contract review, assessing risk based on clauses, and identifying process improvements. This integration enhances efficiency, speeds up negotiations, and helps mitigate risks in contract management.
Data security
Contracts contain sensitive and confidential information that businesses want to protect from potential system breaches. Modern CLM systems use advanced encryption techniques, security audits, and access control to safeguard sensitive data. This builds trust and keeps the contract compliant with international data protection standards.
Cloud-based solutions
With cloud-based solutions, strategic contract management can achieve the scalability needed for a growing business. This comes with cost-effective pricing plans for small, mid-sized, and large companies. Your team can access the cloud-based CLM system remotely and collaborate easily with other team members.
Analytics and reporting
Advanced analytics and reporting within CLM systems are integral components that facilitate effective negotiation and better decision-making. With tailored reporting and analytics, you can assess the risk exposure and contract performance proactively.
How can Infosys BPM help create strategic CLM?
With expertise in contract lifecycle management services, legal, and IT, Infosys BPM helps businesses attain goals such as enforcing compliance, getting volume discounts, managing obligations, and reducing risks of litigation. Based on unique requirements, businesses can use services including CLM, contract creation and negotiation, execution and approval, and technology offerings.
