TL;DR
- The goal of evaluating contract lifecycle management (CLM) software is to find a contract solution that increases efficiency and control while reducing risk.
- Critical capabilities teams should prioritize include contract redlining and version control, support for complex approval workflows, cloud and on-premise deployment options, and automated clause library management.
- The price of choosing the wrong CLM is costly - with delays, compliance gaps, and wasted spend increasing risk, decreasing revenue, and eliminating opportunities.
What Should Legal Teams Look for in CLM Software in 2026?
Legal teams should prioritize tools that increase the speed, control, auditability, and scalability of contracts. More specifically, legal teams should look for:
- Contract redlining and version control: Surgical auto-redlining seamlessly replaces suboptimal contract language with preferred phrasing. Numbered version control makes auditing and oversight easier.
- Workflow agents for complex approval workflows: Workflow agents for complex approval workflows should make it so you are not punished for requiring the input of multiple stakeholders or "complicated" approval pathways.
- Cloud and on-premise deployment options: Solution deployment should be adaptable depending on an organization's requirements.
- Clause library management: Clause libraries should support language standardization, easily merge clauses with pre-approved templates, support clause comparison, and facilitate AI clause playbooks for negotiation ease.
Step-by-Step Framework to Evaluate CLM Software
Evaluation of CLM for legal teams should consider real-life contract workflows - not curated demos or feature lists!
Step 1: Define Legal Requirements
Your team should start by identifying common contract types, your total contract volume, and the stakeholders that should be involved in a typical contract lifecycle. So you are clear on what not to do, you can document your current bottlenecks (e.g., slow approvals, missed tasks, etc.). Once you know what to avoid, you can define success so you have a goalpost (e.g., faster contract lifecycle, cross-departmental contract collaboration, etc.).
Step 2: Assess Contract Redlining and Version Control
Check the CLM for:
In general, the CLM software should eliminate confusion.
Step 3: Evaluate Complex Approval Workflows
Plan on deploying complicated workflows? Look for features that support custom rules and task assignments that automatically trigger when contract criteria are met. Also, make sure the solution prevents contracts from getting "stuck" (e.g., with task escalation).
Step 4: Review Clause Library Management
In addition to the aforementioned features, make sure the solution has centralized and highly searchable clause storage, easy updates or replacements to preferred clause versions, fallback or alternative clauses, and clause percentage matching.
Step 5: Compare Cloud Vs. On-Premise Deployment Options
Ideally, you will choose a solution that supports cloud and on-premise deployment - in the (however unlikely) event that your hosting requirements change. Cloud hosting is seen as offering faster setup and easier access. On-premise, meanwhile, is said to offer more control and is a stricter compliance fit. Your deployment decision depends on IT resources and regulatory needs.
Common Mistakes Legal Teams Make When Evaluating CLM Software
- Focusing on features instead of workflows. Don't do this! Mirror your day-to-day instead.
- Ignoring usability and adoption. A long list of top-of-the-line features is nothing if you cannot use the system.
- Not involving key stakeholders. Getting the OK from key stakeholders is easier when they know what they're signing up for.
- Choosing for today, not future scale. You want to make sure you choose a scalable system that adapts to your needs, not just your needs today.
- Overweighting price vs. fit. There's a high price for low-cost contract management. Beware.
How to Compare CLM Vendors Effectively
- Use a scoring system based on your priorities.
- Test tools using real contract scenarios that you would find yourself in.
- Request tailored demos and trials - not generic ones.
- Compare:
- ease-of-use
- workflow fit
- implementation/support
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*Legal Disclaimer: This article is not legal advice. The content of this article is for general informational and educational purposes only. The information on this website may not present the most up-to-date legal information. Readers should contact their attorney for legal advice regarding any particular legal matter.