How CLM can Optimise Procurement Processes

The Hackett Group have published the first Digital World Class Matrix focused on the contract life-cycle management (CLM) and intelligence software market.

A core component of the upstream procurement tools within the source-to-pay (S2P) technology landscape driven by rapid artificial intelligence (AI) innovation and increasingly complex business requirements.

CLM - a critical component

CLM spans the entire life of a contract – from its initiation through to award, compliance, tracking and renewal. Optimising and aligning CLM with processes like sourcing and risk management is a critical component of a successful business operation, regardless of size.

With 28% of companies making plans to pilot CLM technology and increasing investments in AI-driven solutions in 2024, the market is projected to grow by 11% this year according to recent research from The Hackett Group.

Its potential value for an organisation of US$5bn to US$10bn is transformative. Through installing a CLM solution, the Digital World Class Matrix report revealed these companies can achieve 45% in operational efficiency gains in the negotiation and supplier contract creation process, reduce contract cycle times by 35% and cut noncompliance-related losses fivefold.

These results underpin the vital role a CLM platform can have in optimising the procurement processes and unlocking significant financial benefits for larger enterprises.

“An unparalleled opportunity”

"Contract life-cycle management offers an unparalleled opportunity for organisations to realise significant value through streamlined processes and better compliance," adds Chris Sawchuk, principal and Global Procurement Executive Advisory practice leader at The Hackett Group.

"Selecting the right CLM partner can unlock substantial benefits – from reduced cycle times to improved risk management – ultimately strengthening their competitive position."

The CLM Digital World Class Matrix is a comprehensive guide for understanding the evolving aspects of the CLM market, analysing providers' differentiated capabilities and the value that organisations can expect.

Providing valuable insights for both buyers and the vendors, this report includes extensive interviews and 18 criteria to evaluate 21 AI-enabled providers, including S2P suites, CLM specialists, document automation specialists and legal information solution suites.

The Hackett Group's 2024 study of procurement executives found that generative artificial intelligence (Gen AI) has the most potential in three key areas:

With leading CLM solution providers differentiating themselves by integrating advanced AI capabilities across their platforms.

From AI-driven contract creation, risk management and enhanced search functionalities, to data analysis and intelligent obligation management, all of which are harnessing AI to provide a more robust and efficient contract management solution.

The significant benefits of CLM

The results from the CLM Digital World Class Matrix showcase the significant benefits of adopting or upgrading CLM systems:

• Customer satisfaction: 89% of customers were very satisfied or extremely satisfied with their CLM solution and felt it was worth the investment.
• Contract management: After implementing CLM solutions, 81% of contracts were successfully managed through the system.
• Faster contracts: On average, contract completion times improved by 35%, thanks to smart automation, better workflows and enhanced visibility into contract status, risks and critical milestones.
• Business improvements: About 80% of companies achieved their business improvement goals after implementing CLM and redesigning their processes.
• Efficiency improvement: CLM implementations led to a 63% improvement in contracting efficiency and automation.

"As companies evolve, they quickly move beyond the basic needs of contract standardisation, extraction, workflow automation, electronic signature and retrieval," adds Richard Gardner, senior director of Market Intelligence at The Hackett Group.

"Companies are seeking and expecting AI-enabled capabilities such as contract interaction, assisted contract reviews, automated scoring of contracts, negotiation intelligence, obligation management and predictive analytics."

By harnessing the comprehensive analysis and deep understanding of stakeholders and requirements, procurement and legal professionals can make informed decisions to optimise operations, deliver competitive advantages and fully realise the potential of next-generation CLM technologies.

Those providing these services can gain valuable insights into the market trends and client needs, enabling them to enhance their offering and strengthen their market position.

The CLM Digital World Class Matrix is available to The Hackett Group's Executive Advisory members on Hackett Connect. A complimentary summary is also available for immediate download. Inquiries regarding purchase of the full research report can be made by visiting Market Intelligence webpage.

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