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2020 Predictions for Contract Management: Where the CLM Market Is Going This Year and This Decade

01/14/2020 By

Contract management technology is stuck between a rock and a hard place. At its full potential, CLM solutions promise the ability to plan and orchestrate the fundamental instruments of enterprise value creation — that is, an organization’s contracts — yet their current adoption and use within businesses (beyond their current role of legal risk transfer documents) is less robust than one might expect (see today’s post “2020 Predicaments in Contract Management: Poor Adoption, CLM Market Fragmentation and Limited Imagination”).

No one is fully to blame for this historical lackluster state of affairs regarding contract management transformation, but things are starting to change. 2019 has actually been an extremely strong market based on market demand because:

* A combination of the money at stake that is currently buried within opaque legal language in contracts — and the commercial risks that continue to ramp up as global business conditions become more volatile.
* An increasing realization by practitioners of the value leakage that is occurring because of contracts that are not adequately managing commercial complexity and are not integrated with execution systems.
* Since contracts are the lynchpin between sourcing and both P2P and supplier management, CLM becomes a natural extension of these areas into the other.

* The need to cure M&A hangovers and gain enterprise scale by getting visibility of contracts, standardizing them (and the contracting process), and tying them into all business processes that touch contracts (hint: the majority of all processes!).
* A desire to apply AI in an area where it can have substantial impact on process costs (i.e., internal/external counsel rates for contract review are not cheap) and process effectiveness where CLM is the perfect candidate.
* Vendor dynamics that have impacted re-looking at CLM solutions — e.g., IBM Emptoris exiting the market; broader suite-level selections that include CLM; ERP upgrades; and/or legal groups looking to be proactive in finding solutions that go beyond glorified document management.

On the provider side, there’s also been some key growth drivers related to private equity investments in best-of-breed CLM players like Icertis, SirionLabs, Agiloft, etc. and also numerous niche AI-centric start-ups. And S2P suites have made incremental improvement, but only insomuch as to keep up competitive parity, rather than deeply innovativing.

But there are, in our view, a few key problems among providers of CLM systems that, if fixed, would go a long way toward improving the contract management maturity of their customers. Some problems are readily addressable, and we think procurement and legal organizations will see progress on these issues within the next year. Others are much thornier, and while a potential solution is conceivable, vendors will likely take several years to get there — if not the rest of the decade. There will also potentially be some disruptive moves in application categories outside of core CLM, S2P, CRM, etc. that we actually see as very feasible.

In this Spend Matters PRO brief, we’ll examine three of the biggest impediments to CLM system success within procurement and legal organizations, as discussed in our other blog post today. We’ll then project potential scenarios that vendors could follow to help solve these problems, including some “predictions” for how the market could evolve in the next year and beyond.

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