Contract Tech Goes to Waste if In-House Legal Team Isn’t Ready

To get the most bang for the buck from contracting software, corporate legal teams need to do a lot of things right.

Contract lifecycle management software, many vendors say, can make some of the legal department’s core functions more efficient by providing cloud storage and automated redlining. A CLM system can help a legal department manage all agreements, from drafting and negotiation to execution, monitoring, and termination.

To successfully implement a CLM tool, however, companies need to have strong organization of their existing contracts and clear templates and playbooks that integrate their legal teams’ preferred contract language.

Without those back-end processes in place, the CLM software isn’t going to fix deep-seated issues related to storing contracts, training employees on executing or monitoring contract compliance, or delegating responsibility for handling each part of the contract lifecycle. Companies that don’t take that into account stand to waste many thousands of dollars on software while frustrating employees and creating resentment toward the legal department.

“There’s so many things that could go wrong,” Rudy DeFelice, global head of Harbor Labs, said. “You’re cutting a giant check. It’s a very heavy implementation.”

That’s why buying and implementing CLM technology carries high stakes for legal ops professionals, he said. Picking a product isn’t easy with at least 140 CLM vendors out there, according to one report. If a company makes the wrong software choice or the implementation goes poorly, the blame is often directed at the legal ops leader.

“CLM stands for ‘career limiting move,’” DeFelice joked.

Getting the Foundation Right

Despite the challenges, there’s still a lot of interest in deploying CLM tech. A 2024 report by FTI Consulting and Relativity asked general counsel which technology their departments were looking to buy in the coming year. A quarter of GCs said CLM, more than any other category.

CLM vendors like Agiloft and Ironclad are among the biggest names in legal technology, backed by investors like KKR and Sequoia Capital. The vendors say their tech can walk users through the entire contract process and help all corners of the company tap into the knowledge stored in their contracts.

“We can show you, as technology providers, the promised land,” said Bernadette Bulacan, chief evangelist for the CLM vendor Icertis. But she said to get there companies have “to get the foundation right before you jump in.”

A lot goes into building that foundation. Most CLM tools provide cloud storage for all contracts at a company. But to get all their contracts into the cloud, companies have to know where they are. And for some companies, those contracts are scattered across filing cabinets throughout its departments and offices, Bulacan said.

CLM vendors also say they can make a company’s contract processes smoother, but that assumes the company has a defined contract management process to begin with. Sometimes vendors will recommend bringing in outside consultants to clean up contract processes before trying to implement the tech.

Another CLM tech benefit is the creation of a contract templates library that encompasses the legal team’s approved language. But getting that benefit assumes companies already have those templates.

Without a strong background, contracting tools become essentially worthless. When CLM adoption goes poorly, companies end up paying for software functions they can’t even use, said Lucy Bassli, a consultant who works with companies on their contracting processes.

“There’s no amount of tech you can throw on its own that will solve the problem without people, the process and, very importantly, the policy,” said Bassli.

Big Ask for Legal Ops

Legal ops leaders are left in a bad spot when it comes to implementing CLMs. The process is a full-time job, and many non-lawyers in operations don’t have experience in negotiating contracts.

“It gets thrown into the ops job description,” Bassli said. The CLM implementation will “bury that legal operations professional, " she added.

The task is so onerous “most of them do it once, and don’t ever want to do it again,” she added.

Stephanie Corey, former senior director of legal operations at Hewlett Packard, said general counsel often don’t understand how difficult it is to implement a CLM. They see the end result and sometimes talk about how great their CLM vendor is at a conference, she said, but don’t see how much time and effort went into making the software work.

“It’s always really painful,” said Corey, who consults with legal departments on contract management and other issues. “But GCs do not understand that pain because their ops people shield it from them.”

Putting in a CLM is a lot like renovating a home, Corey said. It can be a money pit because problems always pop up.

“People are wildly unprepared,” she said. “They are expecting magical behavior from the technology.”

Good Tech, Bad Process

If a company buys a CLM tool but doesn’t have strong contract infrastructure in place, it will only make things worse, said Akshay Verma, COO of CLM vendor SpotDraft.

“The only thing that happens when you put good tech with bad process is that you get more bad process,” said Verma, who previously led legal operations at Facebook.

When a customer’s contracting foundation is in really bad shape, SpotDraft will recommend that outside consultants be brought in, Verma said. But that adds tens of thousands in costs, and further dissuades customers from spending on a CLM tool.

When contract processes are clear, responsibilities spelled out clearly, and a company knows what it wants in its templates, Verma said, CLM implementation isn’t hard. His goal is to implement SpotDraft in 60 days for most customers.

But in many cases, legal ops professionals complain CLM implementation takes far longer. In those situations, the finger usually gets pointed in one direction, even when the customer is responsible for the delay.

“Then who gets blamed?” Verma said. “It’s always the vendor: ‘You brought something new into my world, and it sucks.’ So you’re going to get blamed.”

Disclaimer: Bloomberg Law sells contract management software.