Today, there’s a CLM software for almost every business, whether it’s small or an enterprise. It’s no surprise since contract management software increases productivity, saves time, automates tasks, improves contract management efficiency, and cuts costs.
Manual contract management requires a lot of time and effort. Research shows that companies lose 9.2% of their annual revenue due to ineffective document management. The average cost of a contract varies from $6,900 for simple contracts to $49,000 for complex ones. And as the number of documents rises almost everyday, so do management costs. Consequently, switching to a contract lifecycle management system is no longer an option, but rather a necessity.
Choosing a solution is a big deal as there are many things to consider. It may be a hard undertaking since the CLM software market has become enormous with lots and lots of vendors. There are hundreds, if not thousands, of solutions to choose from that offer different functions, services, and prices.
However, a wide variety of options is not the only challenge. The other is finding out how much it will cost. If you google solutions, you’ll see a wide range of prices with the cheapest at less than $1/month. That seems pretty nice, but…
…the reasonable question regarding what you’ll get arises. Will it cover all your needs, or perhaps the price shown is only for some basic features like centralized storage? Most likely, you’ll need more than that.
Price is one of the most important aspects when you’re choosing the right CLM system and pitching this software to your stakeholders. Without knowing what it’s based on, you won’t be able to calculate the ROI.
The problem is that prices aren’t really visible. Quite often, when visiting a provider’s website, you have to book a demo to discover what their pricing is. This starts an endless sales cycle that you might not be ready for. The research process becomes multifold, often leading to an understanding that while the software might be great, you just spent hours on calls only to discover that it’s way out of your budget.
Revealing the Truth About What Exactly Shapes CLM Prices
Most of the factors that determine the price for a contract lifecycle management solution are related to the company’s size. This is reasonable considering that big enterprises usually have more complex workflows and customizations than small businesses. Below, we highlight 9 various aspects that influence the price of CLM software:
Knowing what the price of CLM software is based on will help you make a more informed decision when choosing one. These are the main factors that impact the price, but there are still other things you should be aware of. If you’re not, you may be in for a shock when you receive the final bill.
· Number of users. Some software pricing structures are based on the quantity of users. For particular solutions, these costs may impact the cost per month. That’s why enterprises usually pay significantly more for contract management software than smaller companies.
· Features. The simplest CLM solutions cover only one stage of the contract lifecycle. More complex platforms offer a wide variety of features, such as automation, reporting, analytics, template libraries, notifications, collaboration, and much more. But don’t fall for a million features. It’s better if the solution is scalable, so you can get additional features when your business needs them.
· Integrations. Some operational processes may need third-party integrations, such as. CRMs, eSign, and messaging apps. Some vendors charge for such integrations. That means the more integrations there are, the higher the price is.
· Storage. The amount of documents stored impacts the price. But besides size, additional capabilities like smart search may be charged separately.
· Security. Keeping data safe is a top priority for any business. Breaches may cost businesses millions of dollars and reputational losses. So while security may not affect the price of plans, companies that provide better, more reliable, and more robust security measures may be naturally a bit more expensive. But considering the potential losses from a security breach, it may be well worth the investment.
· Volume of documents. Generally speaking, the more documents you process, the higher the price. Some companies allow you to pick a plan that covers a certain number of documents, and if you exceed that number, you pay a bit more. This permits some degree of flexibility as you can start small and see what you need before scaling up.
· Number of workflows. Similar to volume, the greater the number of workflows or templates that need to be supported, the more you should expect to pay.
· Advanced tech. This could be the implementation of artificial intelligence, machine learning, or some other technology that provides a hand in completing work. But before you fork over the cash for AI, you’ll want to have a discussion about whether or not you really need it, as well as what are the costs and benefits for you.
· “A la carte”. By this, we mean the ability to mix, match, and combine any or all of the previously mentioned price factors. Companies usually price their services as a set, Combination of all or any of the above and less obvious costs, described below.
The cost of CLMs consist of the essentials above. You can calculate it and the sum may seem acceptable. But that doesn’t mean it’s the final cost. It can be much higher because of additional fees you weren’t informed about.
The most common additional fees are charged for the following services:
Implementation. Configuring user accounts, setting up workflows, and automating contract templates may cost additional money. There are three standard approaches for implementation: 1) An implementation fee paid in addition to the software cost; 2) Implementation is included in the software cost; and 3) Implementation on your own (which is likely free, but may lead to unnecessary headache and stress).
Customization. Vendors often charge additional fees to customize a CLM to your needs. So, if you want to get something more than basic features, or if you simply need particular features for your existing workflow, you’ll have to pay more.
Team training. Most likely, your employees do not know how to use the new software. It takes time and effort to learn before they can start fully using it. CLM providers will help you with that, but some of them charge extra for educational meetups.
Customer support. If you don’t clarify the terms of this service, it may cost you an arm and a leg. Technical assistance can be provided completely for free, for a fee, or with conditions (i.e. only during business hours on weekdays).
Add-ons. Many vendors may offer essential business add-ons such as e-Sign for additional fees. Such details can make the invoice much bigger than what you expected.
Legacy data migration. If you want to avoid being forced to manage multiple storage systems, you’ll want to migrate your legacy contracts and data to the new system. However, this takes time and a bit of effort, and that usually means an extra fee.
When choosing and negotiating with a vendor, make sure to cover all the basics and find out if it’s included in the final price or not.
And once you do have the space in your budget, don’t rush for the cheapest, the most feature-heavy, or the most famous solution. You first need to understand your business’ CLM software requirements. Start by assessing how your company will use the software so that you know what needs it should cover.
To determine your requirements for a contract lifecycle management system, you should analyze your existing document workflow. There are some points you should consider first and foremost:
· The number of ‘everyday’ users. Think about all employees from different departments that will need access to the platform: sales, procurement, finance, and legal. Each one plays an important role in contract lifecycles.
· The number of documents. Conscientiously evaluate the current volume of contract flow in your organization and how many contracts you process. And don’t forget your legacy contracts, because some vendors charge for the amount of documents stored. This number will change, so consider what growth plan you may need. The good news is that some providers offer upgrades to a larger storage size if there’s a demand.
· Types of documents. This is important since it makes it easier for you to choose the features and solution’s necessary capabilities. For example, if you frequently work with large documents and need to quickly process them, it’s unlikely you’ll want a CLM that needs 30 minutes to do it.
· Cross-department collaboration. Usually, there are at least two departments involved in document creation. Analyze how your employees collaborate on contracts, how the redlining process goes, and what would you like to improve.
· Third-party collaboration. Frequently, contracts are negotiated with third parties. Consider how documents are being shared, how access is granted, and how the negotiation process proceeds. Documents may contain sensitive information, so it’s not only about collaboration, but also about security.
· Approvals. Analyze your approval process. It’s one of the longest stages of the contract lifecycle, and usually it involves many people and opinions, making it a real mess. If this sounds familiar, you’ll want a CLM that will allow you to check if all parties have completed their reviews and whose approval is still needed.
· Esignatures. Esignature software allows you to sign documents no matter where the approver is. If you need to add attachments to the contract, such as status information, recipient/sender information, delivery tracking, or signature progress, this service will prove useful.
· Metadata storage. Metadata usually refers to the basic information about a contract so that it’s easier to find and retrieve data. It may be the company name, creation date, document type, governing law, counterparty name, etc. If you work with a wide array of contract types, consider a solution that has the possibility of adding necessary metadata and advanced search.
These are the main things to consider when you decide to switch to a CLM platform. Without knowing a business’ essential needs, you run the risk of ending up with the wrong solution, which won’t make your professional life easier, but harder instead.
Every organization’s situation is unique to them, so some of the factors above will play a larger role than others. That’s why when you’re in the process of choosing a CLM solution, you should pay close attention to what’s essential for you.
AXDRAFT strives to respect not only the time of their clients, but also the time of potential clients. The team at AXDRAFT will always be available for consultation and help regarding whether or not certain software is a good fit for your organization. And, no holds barred, we’ll tell you if we’re not the right fit, so that you don’t waste time having conversations that lead to a dead end. But, should circumstances change, our door is always open.
Contract lifecycle management is designed to make your professional life easier, and finding the optimal solution shouldn’t be a hard task. To simplify matters, AXDRAFT will work towards coming up with the best pricing option that works for you. As we can accommodate the needs of any company, we always recommend starting small and scaling later. Should you have any questions, please feel free to reach out whenever is best for you.
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