How to Write Requirements for a Contract Lifecycle Management System

Throughout the Gatekeeper Blog we’ve written a range of articles to help you understand Contract Lifecycle Management (CLM) and implement a CLM system in your business.

We previously discussed the high-level steps involved in getting prepared for the implementation of automated and manual CLM practices in your business.

Here we move down a level in detail to highlight what you need to do to prepare a clear set of requirements for your CLM solution.

This means determining what you do now, how it's done, who does it, what's wrong with it. This gives you a baseline.

Then you work out how you want to do it better, who needs to be involved, and what level of automation you want. This gives you your target future state and a roadmap for measuring your progress from where you are now to where you want to be.

You'll end up with a set of specifications you can use to develop a formal or informal RFP for the acquisition of a CLM solution suitable for your business's needs that will allow you to compare vendor offers more efficiently and effectively.

Documenting Your Requirements

To be effective in specifying all your requirements, you'll need to be very organised, disciplined, and thorough in your approach.

To help you with this process we’ve created an Excel Contract Lifecycle Management System Requirements Template which you can download and modify as necessary to match your needs.

The template contains a sample of indicative elements to be used in a scope of work for a CLM solution, its core and other system requirements, and system implementation factors.

Sample data has been provided in the template to highlight the type of information CLM software vendors will need to determine if and how closely they can satisfy your specific requirements.

The template will help you capture such general details and specify other requirements that are important to your CLM operations, establish a baseline for where you are today, outline where you’d like to be for the purpose of the targets you'd like to reach, and track your progress towards those targets.

The key steps involved in specifying your CLM software requirements are:

• Identify all CLM stakeholders
• Describe current CLM issues
• Document current CLM processes
• Determine the scope of CLM practices required
• Research the CLM solution market
• Propose initial CLM system requirements
• Validate initial CLM solution requirements
• Finalise CLM software requirements.

1. Who Are Your Stakeholders?

When you consider all the activities that might be performed in managing contracts, it may be something of a surprise to discover how many people can be involved in some fashion.

The IACCM have estimated that the cost of the average contract, based on the time spent by multiple parties within the business in preparing and agreeing it, is at least $6900.

Apart from any dedicated CLM staff, the parties involved might include:

• Any part of the business that needs to specify, acquire, and use products and services from third parties
• Procurement to prepare the formal requirements specification
• Legal to advise on contract terms and applicable regulations
• IT to advise on the technical aspects of implementing the CLM software
• People with spend approval rights to authorise acquisition of the CLM software
• People with contract signing rights to execute the contract with the CLM provider.

To ensure your requirements document meets the needs of all the relevant parties, you need to identify them all and invite them to provide their input.

2. What Issues Are Driving Your Need For A CLM Solution?

For this part, you need to be completely objective and dispassionate about the CLM issues you’re experiencing and the problems you’re trying to solve. There are many common CLM pains that businesses share, but you have to establish the answers to hard questions like:

• Do you have too many contracts to manage manually without enough staff to do it?
• Are you using Excel to manage contracts?
• Does it take too long to get contracts approved and then signed?
• Do you miss important contract dates?
• Do you lack robust processes or do people ignore them?
• Would you like to use or link to information held in other systems you're using?
• What specifically is causing you problems with your contracts?

To help you really understand the issues and the root causes, you might want to use the “Five Whys” methodology to drill into each question.

By examining your issues in detail, you’ll get an initial insight into whether the introduction of a CLM system can provide the required solutions either directly via its capabilities, indirectly via supporting processes, or both.

A contributing factor in many issues could be your maturity level in respect of CLM practices. An honest self-appraisal based on Contract Lifecycle Management Maturity Levels will establish your baseline maturity level.

3. What CLM Processes Do You Have?

Implementing CLM software will likely require re-engineering existing processes to replace manual steps with automation to the maximum extent. Doing so requires sufficient and sufficiently accurate documentation of any relevant processes currently in place, covering but not limited to:

• The process flow
• The people/roles involved
• The scope and availability of appropriate documentation
• The level of compliance with the process, especially when usage is mandated
• The nature of any SLAs or performance measures in place in the process and reported
• Any other problems associated with, caused by, or affecting the process.

We’ve outlined the importance of this in more detail in 'Three things you MUST do before selecting a contract management solution'.

This documentation provides another baseline measurement. It can not only be used to validate your assessed CLM maturity level, it will also be useful down the track for a CLM software supplier to understand how its solution might be implemented for your business.

4. What Is The Scope Of CLM Practices You Require?

Our free ebook - The Complete Guide to Contract Lifecycle Management (CLM) - describes a wide variety of activities that might be performed in the practice of CLM.

While many activities would generally be considered as core, every business should decide for itself which activities it might undertake now and in the future to meet its specific contract lifecycle management needs.

The template lists a wide range of these typical CLM activities, allowing you to indicate:

• Activities undertaken now and how important they are. This provides your final baseline measurement
• Activities to be undertaken in the future and how important they are. This will provide a roadmap for resolving your issues as well as increasing your CLM maturity level.

The template can be expanded to include activities specific to your business, industry, country, contract types used, or any other criteria required.

It is critical that your scope is realistic, sufficient, and achievable in terms of resources, time, and money.

5. What CLM Software Capabilities Are Available In The Market?

Having identified the nature of the issues you're having with CLM and the scope of practices you need to adopt, you can take a preliminary look at what's available in the market to help deal with those issues.

Research the market and select a few candidate contract lifecycle management providers. Study their product literature and any market reviews, and view any online demonstrations that are available.

While you're looking specifically for capabilities that deal with the issues you're facing, keep an open mind and don't ignore other features that could prove beneficial for your future CLM state.

It's also useful to take note of capabilities that you're not likely to use either just at this stage or ever.

Bear in mind that many contract management solutions are extendible either by configuration, customisation by the user, or customisation by supplier programming changes.

So, a capability that at first glance might not seem to be provided in a CLM solution may be indirectly available by use of its extendibility features.The template allows you to record any CLM solution capabilities of interest discovered
during your research that have not been covered in the template.

6. What Are Your Initial CLM Software Requirements?

To save you from having to think of everything you may desire from a solution, the template lists a wide range of capabilities that one might provide. Any capabilities you've discovered in your research can be easily added to the template if not already included.

There are typically four types of requirement:

• Functional: operational capabilities, look-and-feel, number of users/contracts handled. Provided by CLM specialists, stakeholders
• Technical: system architecture, database, delivery model, integrations with other systems. Provided by technical staff
• Business: goals, objectives, regulations, licensing model. Provided by CLM specialists, stakeholders, business management
• Process: policies, procedures, practices. Provided by CLM specialists, business management.

The template allows you to indicate which CLM solution capabilities are of interest simply by selecting an importance rating. You should focus on:

• The must-haves: capabilities critical for resolving your issues and allowing you to undertake CLM the way you want to
• The should-haves: very useful capabilities, the lack of which might make things more difficult than they need to be
• The nice-to-haves: useful capabilities that you can live without if necessary.

Hint: don't try to 'boil the ocean' here. A huge wish-list of capabilities can make the already hard job of selecting the right CLM software even harder.

As you start to see product demonstrations, you’ll likely see a range of features that you hadn’t considered previously. It’s important that you consider these in relation to your requirements and only opt to pay for them if they are genuinely solving your business problems.

Remember also that all your stakeholders need to be involved in this. They may have requirements particular to their role that aren't readily apparent to other people.

Failure to capture such requirements may have an adverse effect on the widespread adoption of the selected CLM software  and its future success.

7. Validate Your Initial CLM System Requirements

Usually more than one person will be involved in selecting and ranking the initial CLM system requirements. Different people often think in different ways and have differing knowledge, perspectives, and backgrounds that influence their choices.

It makes good sense to review your finalised list of requirements and rankings from top to bottom—a sort of sanity/quality check on what has been proposed. This will check that everything hangs together properly, makes sense, is not overkill, and is justifiable.

One not-so-obvious but really important check concerns your organisational readiness to implement certain functionality specified as a requirement. The preparatory work involved, cost, and level of interruption to normal business in getting set up to use that functionality needs to be estimated.

Then a decision can be made about the likelihood of the functionality being used in the foreseeable future.

The history of software implementations is littered with examples of such 'shelfware' functionality that has been paid for – sometimes at huge cost – but either never implemented or implemented but never used.

It's best for your business and potentially your career that you don't fall into this trap and become part of that inglorious history.

Where issues are detected, commentary needs to be added to the relevant entries in the template, including any proposed changes, additions, or deletions.

This commentary drives the next step.

The review should be conducted by a small team, with external assistance if required, to check things like:

• Are the requirements supportive of your business’s most urgent needs, technical essentials, internal resourcing realities, and so on?
• Are the requirements realistic?
• Are all the must-haves correctly ranked?
• Are there too many nice-to-haves to be useful?
• Are the requirements attainable?
• Are there sufficient requirements to distinguish one CLM solution from another?
• Are any requirements at odds with others?
• Are any requirements duplicated but with different rankings?
• Are any requirements overly prescriptive?
• Do any requirements need to be explained or justified?
• Has a need for any additional requirements been identified?

8. Restate Your Final CLM Requirements

Any issues found in the review of the initial CLM software requirements must be discussed with the stakeholders who proposed the requirements. Complete understanding of both the requirement and the issues is required.

Creativity may be required to reach a consensus on issue resolution, but where no agreement seems possible, delegation to a higher authority for a final decision may be needed.

If you really feel it's necessary, you might want to seek guidance or an objective opinion about the validity and suitability of your final CLM software requirements from a thoroughly experienced third party.

The outcome of the validation process will be an approved final list of requirements in the template representing your position going forward. Update the template to show which requirements are designated as ‘final’.

Wrap-up

You now know how to prepare a comprehensive, realistic, and achievable list of what you really and ideally need from a CLM solution. The importance of getting the foundations right just cannot be overstated as second chances and do-overs usually come at a high cost.

Your next step will be to use the information contained in the CLMS Requirements Templates and our other contract lifecycle management resources to shortlist your preferred suppliers and invite them to provide a tailored demonstration to you and your key stakeholders showing how their solutions can fulfil your requirements.

To arrange a tailored demonstration of Gatekeeper, get in touch with us today.