Contract management has rapidly evolved into a critical business function, yet many organizations still face significant challenges in managing contracts effectively. As organizations strive to implement better Contract Lifecycle Management (CLM) solutions, a combination of fragmented processes, low visibility, and stakeholder alignment issues continues to hinder progress. At the same time, new trends in technology—especially the rise of artificial intelligence (AI)—are creating exciting opportunities for businesses to transform their contract management capabilities.
This article explores the current challenges, barriers to improvement, and key trends shaping the future of contract management.
Current Challenges in Contract Management:
1. Low Contract Management Maturity
According to a recent survey by the Blickstein Group, a staggering 81% of respondents rate their contract management maturity at 3 or lower on a scale of 1 to 5. This points to a widespread lack of advanced contract management processes, tools, and expertise across industries. Many organizations are still struggling with basic tasks such as contract tracking, document management, and maintaining compliance, leaving them vulnerable to risks and missed opportunities.
2. Lack of Centralization
The average medium to large enterprise has contracts scattered across 24 different systems, with some companies managing contracts across more than 100 systems. This fragmentation creates inefficiencies and makes it difficult to maintain visibility over contract obligations and risks. In fact, 70% of business leaders report inadequate contract visibility, leading to an average 8.6% value erosion during the contract lifecycle.
3. Stakeholder Complexity
Contract management is not confined to a single department; a WorldCC report reveals that, on average, 29% of an organization is involved in contract management. With so many stakeholders, decision-making can become slow and complicated. As a result, 42% of companies lack clear responsibility for contract management, which makes driving improvements nearly impossible.
Barriers to Contract Management Improvements:
1. Scale and Stakeholder Impact
Any effort to improve contract management must account for the scale of the organization and its stakeholders. Half-hearted attempts at digitization have often led to failed implementations or underperforming systems. Without full commitment and clear ownership, it is difficult to align various departments and ensure that new CLM tools are successfully integrated into the organization’s processes.
2. Lack of Consensus and Budget
According to a recent Benchmark report, the second biggest barrier to adopting new CLM technology is “building consensus across stakeholders,” second only to “obtaining budget.” The absence of a clear leader with a strong mandate for contract management initiatives often leads to a lack of consensus on priorities and decision-making, delaying progress on essential upgrades. Change management and adoptions initiatives are not being prioritized and eaten by daily as-is operations. Many organizations struggle to get the required buy-in from key stakeholders, especially in cases where contract management responsibilities are dispersed across departments.
Key Trends in Contract Management:
1. CLM Technology Adoption
Despite these challenges, many companies are looking to implement or upgrade their CLM systems. A WorldCC survey shows that 65% of companies are considering adopting contract management tools within the next 12 months, with a strong focus on improving efficiency, reducing risk, and boosting visibility. Furthermore, 57% of businesses are centralizing their contract technology budgets, which will likely help streamline the decision-making process and eliminate the fragmentation that has plagued many organizations.
2. AI in Contract Management
After a period of hype in 2022, generative AI is now seeing increased demand as a solution for contract management challenges. The use of AI to analyze risk, obligations and compliance is particularly appealing, with 94% of legal professionals expecting AI to play a substantial role in these areas. Moreover, 70% of professionals believe that AI will lead to significant cost savings in contract management.
However, AI adoption is not without challenges. Data privacy and security concerns remain the primary barriers, with 42% of C-suite leaders expressing reservations about AI. As organizations look to adopt AI-driven CLM solutions, they must address these concerns by implementing robust data protection measures.
The Path Forward: Overcoming Challenges and Leveraging Opportunities
While contract management presents significant challenges—fragmented processes, low visibility, and stakeholder misalignment—companies are increasingly recognizing the value of improving their CLM systems. The trend toward centralizing contract management tools and budgets reflects a growing understanding of the importance of having a unified system in place. Additionally, AI-driven solutions will play a transformative role in enhancing risk analysis, compliance management, and operational efficiency.
To overcome barriers, companies need to:
- Establish clear ownership and accountability for contract management.
- Focus on achieving consensus among key stakeholders.
- Prioritize comprehensive CLM implementation strategies rather than isolated digitization efforts.
- Address security and data privacy concerns to enable AI adoption.
As contract management continues to evolve, the organizations that successfully navigate these challenges and capitalize on emerging trends will gain a competitive edge by reducing risk, improving compliance, and increasing overall contract value.
By addressing the existing challenges and embracing the new opportunities presented by advanced CLM technologies and AI, businesses can significantly improve their contract management practices, driving greater efficiency and value from their contractual relationships.
Source: based on Icertis’ 2024 CLM Trends Mid-Year Report, “The State of CLM and AI-Powered Contract Intelligence”
