Contract management key figures
In 2022, contract lifecycle management is becoming increasingly important for companies.
Better known as contract management, this discipline consists of managing all of a company's contracts throughout their life cycle, from upstream negotiations to their signature and execution.
On this page, we give you all the key figures on Contract Management.
20 key figures on Contract Management to know in 2022
Today, when we talk about contract management, we generally mean software solutions designed to optimise the management of contracts; these solutions are offered by innovative companies in the legal sector, known as legaltech.
In a context where companies have to manage ever-increasing volumes of contracts, contract management tools are becoming indispensable, gradually replacing manual processes.
On the same subject 👉 All you need to know about Contract Management
For legal departments
#1 - 78% of legal departments want to automate their contractual processes
Legal departments are the first to be affected by the cumbersome nature of contractual processes. Repetitive tasks, tedious information searches, sometimes endless exchanges with other departments... In companies that deal with large volumes of documents, this cumbersomeness is even more marked. However, most of these tasks can be automated; the objective being to save time, so that legal departments can concentrate on tasks with high added value.
Source: EY study - Observatory of legal departments, 2019.
#2 - For 73% of lawyers, artificial intelligence is a priority topic
Technological innovation is highly desired by legal departments. Of all the technologies available, artificial intelligence is among the most sought-after. Indeed, this innovation considerably speeds up the processing and analysis of contractual data; it also reduces the margin of error, compared to a long and tedious manual reading. Artificial intelligence is of course of benefit to lawyers, nearly 3 out of 4 of whom consider it a priority, but it also optimises the work of other professions.
Source: "Digitalisation of legal departments" study, conducted by Day One, CMS Francis Lefebvre Avocats and the association of legal directors Cercle Montesquieu, February 2019.
#3 - 29% of legal departments have a specific contract management tool at their disposal
Compared to manual management, contract management tools offer many advantages for legal departments: they automate repetitive tasks, reinforce contract compliance, simplify workflows, and centralise all contracts in a single database for easy access to information. This explains the growing adoption of these solutions within companies.
#4 - 62% of legal departments believe their workload will increase
In 2020, the consulting firm Day One surveyed 50 legal departments of large companies to assess the impact of the health crisis on their future prospects.
Almost two thirds of respondents expect their workload to increase in the coming years! Indeed, the crisis has put the legal departments back in a central position within the company: faced with the upheaval of activities, they have accompanied all the business lines, and have become more involved in decision-making.
Source: DayOne, COVID-19 & LEGAL DIRECTORS: Feedback for the future, Assessment and perspectives for legal departments, July 2020.
#5 - 88% of legal departments believe that the crisis will have a strong impact on the management of change towards more digitalization
The digitalisation of companies is not a new phenomenon; on the other hand, the health crisis has accelerated this transformation, impacting all professions, including legal. In particular, the limitation of travel and the widespread use of teleworking have given rise to new needs: remote access to legal documents, dematerialisation of the drafting and signing of contracts, fluidity of exchanges, etc. This is why almost 9 out of 10 legal departments believe that the health crisis will accentuate the digitalisation of the profession.
Source: DayOne, COVID-19 & LEGAL DIRECTORS: Feedback for the future, Assessment and perspectives for legal departments, July 2020.
#6 - By 2025, legal departments will triple their spending on legal technology
In order to cope with their increasing workload, as well as with the recent changes in organisations, legal departments must adapt. This explains the forecast of a threefold increase in legaltech spending by 2025. This is necessary to maintain the productivity of legal departments, to adapt to teleworking, and to reduce dependence on external legal advisors.
Source: Gartner, State of the Legal Function 2020.
#7 - By 2024, legal departments will have automated 50% of the legal work related to M&A transactions
In the coming years, the number of mergers and acquisitions will continue to increase, in connection with the consequences of the health crisis. These transactions represent a significant workload for legal departments, which is why automation is being used more and more. For these critical tasks, cutting-edge technologies such as machine learning and natural language processing are most in demand.
Source: Gartner, State of the Legal Function 2020.
#8 - 12% of legal departments have integrated artificial intelligence into their processes
This is a small proportion when one considers the contribution of artificial intelligence to legal services.
Indeed, this still new technology has two major advantages: it considerably reduces the risks inherent in contract management; and it also frees legal departments from paperwork and other repetitive tasks.
Source: CLOC 2019 State of the industry survey.
#9 - 50% of legal departments cite deadline monitoring as the main risk in terms of contract management
Storage and archiving is the next most important risk. Security is achieved through the implementation of a tool, for 1/4 through processes and the adoption of a contractual policy.
For sales management
#10 - 3.4 weeks is the average time to draft a contract
Manual contract management is not only costly in terms of money, but also in terms of time: it takes an average of 3.4 weeks to draft a single contract! This is a timeframe that can be greatly improved when you consider that most contract-related tasks can be automated.
Source: Forrester.
#11 - 55% of sales managers think that the contracting stage slows down the sales process
Sales departments are the first to be affected by the cumbersome nature of contractual processes. This has an impact on turnover!
The slower and more time-consuming the contracting process, the less time salespeople have to focus on their core business: selling. Sales departments must therefore simplify the contracting process as much as possible, so that it has less impact on their performance.
Source: Forrester study for Docusign, State of the Agreement Systems, 2020.
#12 - Automated contract management speeds up negotiations by 50%.
Thanks to automation, companies with a contract management tool can save valuable time.
These time savings are achieved at all stages of the contract lifecycle, but are most noticeable during negotiation. In manual management, negotiation is a lengthy process, often involving complex email loops where multiple versions of the contract get lost.
With CLM tools, these endless exchanges are reduced to a minimum
Source: Goldman Sachs, Time to manage those contracts! https://cmsd.nl/wp-content/uploads/2015/10/memba_pwc_contractmgmt.pdf
For purchasing departments
#13 - 80% of buyers are not fully aware of the terms and legal structure of their contracts
Among buyers, this lack of control is particularly marked. This poses a legal problem, but also a financial one. Indeed, the contract is a key document, which lays the foundations of the buyer-supplier relationship; it is therefore necessary to understand its terms in order to generate value and limit risks
Source: 2015 IACCM Benchmarking Study, PWC.
#14 - 60% of supplier contracts are renewed without analysis
This figure from an Aberdeen study shows once again the risks inherent in poor contract management.
Without control of information, and in particular of the dates and terms of renewal, around 6 out of 10 supplier contracts are renewed automatically, without prior analysis. One can imagine the financial costs that this represents; especially when one knows that companies manage on average several thousand contracts.
Source: Aberdeen
Read more on the same subject:
👉 Contract Lifecycle Management: what use is it for buyers?
👉 5 best practices to manage your supplier contracts with a CLM
For companies in general
#15 - More than 50% of companies do not know their contract renewal dates
This figure is explained by the large volumes of contracts that most companies are faced with. Indeed, the greater the number of agreements to be processed, the more complex their day-to-day management becomes, making it difficult to monitor deadlines manually. However, not knowing the renewal dates constitutes a significant financial and legal risk for companies
source: Study "Legal management and digitalization", Deloitte Taj, 2019
#16 - 63% of French companies have set up a delegation of contracts to operational staff for the drafting of certain contracts
Of the companies that delegate contracts, 85% delegate at least 10% of their annual volume of contracts to operational staff. The delegation of contracts to operational staff is a practice that is becoming more widespread and is producing satisfactory results. However, the division between legal and operational staff remains to be clarified: who does what exactly?
#17 - 29% of French companies have digitised contract creation
As far as the creation of contracts is concerned, digitalisation is still timid. However, the contract drafting phase is a key moment for digitising the contractual relationship: it is the first step in formalising the business relationship that has been forged during the initial exchanges.
#18 - 48% of operational staff have not received legal training on the main contractual clauses
Nearly one out of two operational staff do not master the clauses of the contracts they work on. Indeed, in companies, this competence is still often limited to the legal department. This is not without risk, as ignorance of a clause can lead to delays, disputes and even financial losses. Moreover, this lack of autonomy leads to numerous back and forth between the operational staff and the legal department, which makes contract management more cumbersome.
Source: Study "Legal management and digitalisation", Deloitte Taj, 2019.
#19 - Poor contract management can lead to a 10% drop in turnover
Optimising contract management is not just a legal issue. Indeed, a study has shown that poor contract management within a company can reduce turnover by up to 10%. This is due to several mechanisms: slow and complex manual processes, missed upsell opportunities, lack of visibility on current contracts... many elements in favour of a better contract management!
Source: Automation Transforming Contracts and Commercial Management, IACCM, 2017.
#20 - 55% of companies have already managed to store all their contracts in a single tool
Storing contracts is a seemingly simple task (logging .pdf files) but becomes more complex when you consider the importance of its content: the heart of the company's business. Tools with a layer of artificial intelligence are ahead of the game in this respect, as they can detect useful information that was not anticipated when the tool was set up.
#21 - 71% of companies fail to locate at least 10% of their contracts
There are many more companies that misplace contracts than you might think, and this is not a trivial issue!
Misplacing a contract means taking the risk of missing an obligation, unknowingly not respecting a clause, or missing a deadline. The financial and legal risks are significant - it can even threaten the reputation of the company.
This difficulty in locating contracts shows an urgent need for centralisation in an adapted solution, for easy access to information.
Source: Journal of Contract Management https://www.entrepreneur.com/article/195046
#22 - Companies lose an average of 15% of their contracts
In the same vein, an Aberdeen study reveals that the proportion of contracts lost in companies is close to 15%. Here again, this poses major problems in terms of risk management and monitoring of contract performance.
Source: Aberdeen https://www.contractworks.com/blog/3-tips-for-successful-enterprise-contract-management
#23 - 83% of professionals are dissatisfied with their company's contracting process
This dissatisfaction is linked to the slowness of manual processes, but also to the lack of control over information and data. In recent years, this has led many companies to look for solutions to simplify contracting. Solutions that primarily impact the legal and sales departments, but also improve the daily life and performance of other departments.
Source: IACCM, 2016 https://blog.iaccm.com/commitment-matters-tim-cummins-blog/what-does-good-like
#24 - 9 out of 10 companies have deployed an electronic signature project in France
Practical and easy to use, the electronic signature has entered the mainstream more quickly than artificial intelligence.
In addition to legal departments, this technology is also very popular with sales, purchasing, human resources and all departments that regularly have to have contracts signed. Time saving and simplification of the contractual process are the main arguments in favour of the electronic signature. With the increasing dematerialisation of legal procedures, its use is bound to increase.
Bonus 🎁
#25 - By avoiding inaccuracies and non-compliance, Contract Management can reduce a company's annual costs by up to 2%.
In addition to slow processes, one of the main problems of manual contract management is the risk of error. Once a certain volume of contracts is reached, inaccuracies and non-compliance of documents can be costly!
Contract management tools avoid these issues, saving legal departments time and up to 2% of a company's annual expenses.
Source: PriceWaterhouseCoopers, 2019 https://blog.iaccm.com/commitment-matters-tim-cummins-blog/2010/10/04/lies-statistics-contract-management
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