Is your CLM investment delivering value? 5 essential metrics to measure ROI.

Investing in Contract Lifecycle Management (CLM) software will reap significant benefits for your organisation. But, talk of efficiency gains, synergies, and other beautiful buzzwords can quickly distract from the core question - how much is your organisation saving on an annual basis? What is the best way to actually quantify the gains? 

To determine whether the investment is worthwhile, we’ll introduce you to some metrics that allow you to compare costs against expected (and realised) ROI. 

Because there are many use-cases for CLMs, we’ve covered a range of them below, for a detailed review of how Docfield can transform your organisation - reach out to us and we’ll be happy to provide you with a custom review completely free of charge!

1. Understand your costs

This section is absolutely crucial as a departing point into understanding the value of your CLM. Measuring ROI begins with understanding the base-case, which is your cost structure prior to implementation. 

Not only is it important to review the direct costs of your CLM; you should also consider the the indirect costs of things your CLM seeks to replace. 

Direct costs of using the CLM

This simply means understanding the pricing model of your CLM. Various models exist, like: 

1. Per Seat Licensing:
   In this case, be mindful of any minimum seat requirements that might force you to purchase more licenses than you currently need.
2. Usage-Based Pricing:
   In this model, you pay based on how much you use the system—for example, charging per contract processed. This could seem advantageous if you have modest usage initially. However, these pricing models can rapidly increase as you scale. 
3. Enterprise Pricing:
   For larger organizations with unique requirements, vendors usually offer custom enterprise pricing. This usually involves a tailored agreement based on your specific contract volume, integration needs, and support demands.

In addition to these primary pricing structures, be aware of potential hidden fees. These may include extra charges for additional features or modules not included in the base price, called add-ons. Also, look for things like minimum usage requirements, which could rack up unnecessary costs. Getting a clear picture of your costs ahead of the implementation ensures that you’re not caught off guard by unexpected expenses, but also helps you measure your ROI more accurately. 

Indirect costs: what will you CLM replace?

Next, consider the cost implications of what the CLM is replacing. A new CLM might consolidate several tools or functions that you’re currently using, such as:

• Multiple software tools: If your CLM replaces other systems in whole or in part, thereby decreasing your direct expenditures, you should tally them up here.  
• Entire functional departments: Streamlining processes that previously needed dedicated staff or we’re outsourced to externals. 

Understanding these indirect savings is just as important as the direct costs. The reduction in overhead and elimination of redundant tools can significantly enhance the overall value of your CLM investment. Again, we’re not thinking about things indirect costs related to inefficiencies yet. 

2. Quantify efficiency gains in contract workflows

A major promise of CLM software is enhanced operational efficiency. A well-implemented CLM solution should streamline your contract processes from draft to execution and renewal. 

How do you measure this?

• Cycle time: Track the time it takes to complete contract negotiations and approvals before and after implementing the CLM tool. If you’re unsure how to do this, we’re happy to help you!
• Manual task reduction: Monitor the decrease in repetitive tasks, such as data entry, locating contracts, or manually following-up emails, to help quantify the time saved. Ultimately, your existing processes should be audited and compared against the features of your CLM in order to understand the cost savings better. 

On the basis of manual task reduction alone, Docfield saved clients in education over EUR 8.5 million in 2024. 

Tip: there are many more tasks involved in contract management than you might anticipate - we’re happy to help identify them!

3.  Calculate financial gains and cost avoidance

In this section we’ll briefly touch on two core use-cases for a CLM. Increasing revenue and decreasing costs. In case 1, the CLM is used by sales, and in case 2 by procurement. 

Case 1: sales (financial gains)

Increasing revenue is quite simply a function of closing more deals, closing larger deals - or both. The core benefit of a CLM here is that decreased sales cycle time decreases drop-off (in other words, increases conversion) and enables you to get more out of your deals (better up-sells and cross-sells). 

So, not only does time to revenue go down, revenue itself goes up! Leverage your CRM to understand your typical sales cycle time, conversion rate, and average deal-size before implementing your CLM. Periodically check how both are tracking post-implementation.

Case 2: procurement (cost avoidance)

Even if revenue stays flat, your business can grow by improving margins. This simply means spending less, ideally whilst holding output constant. By way of handy dashboards, you can see exactly where your spend is going, helping you find inefficiencies in spend. To provide a more concrete example; perhaps you have two departments that otherwise don’t talk to each other, leveraging different systems with the same functionality. At the contract level, this spend can be unified and simplified. We’ve seen it happen with customers!

Furthermore, you can avoid costs in the form of penalties from missing obligations, or regulatory breaches, or outright missing renewals. The possibilities to avoid costs with a CLM are endless! We cover cost optimisation more in section 5 – read along. ‍

4. Monitor contract renewals

Renewals are the perfect opportunity for a business to review its needs, respond to changing circumstances, and optimise for the future. This equally makes huge losses possible, when mismanaged. A CLM system is the most fool-proof way to secure renewals ahead of time, meaning you can think proactively about your needs. This enables you to secure better contract terms and cull unnecessary spend. Remember: it takes just one contract to auto-renew in the background to potentially justify the cost of your entire CLM!

In this section it is harder to establish the counterfactual - in other words, how much the CLM alone saved you. That’s because we can’t determine if you’d have truly missed the renewal without it. However, you can still track cost avoidance and impact on revenue from the point of implementation, and see how this grows over time. There are handy features in the Docfield CLM dashboard to help manage this for you. 

5. Evaluating resource optimisation

Resource optimisation is critical to any business. We’ve alluded to it throughout this article. Ultimately, a blueprint for growth can be reduced to as little as a function of increasing revenue and decreasing costs. Cost optimisation is a wonderful concept, precisely because the goal is not to blindly cut spending (at the cost of cutting output of that spend) but to hold the output constant, and simply allocate fewer investments to get there.  

These examples become especially pertinent if your company is looking at M&A options, or is in the process of integrating a newly acquired company, because there will be lots of spend that can be unified at the contract level. 

Another interesting example is to look at how automations in your CLM empower your most critical resource – your staff. Making up the majority of operational spend, how can a CLM make your team more efficient, by way of automations in workflows. 

What are some metrics to think about?

Productivity metrics:
This bucket asks, "How many more times can we do the same task, in the same amount of time?" With automation, repetitive tasks can be completed more frequently. For example, if your team was previously processing a certain number of contracts a day, automation might allow them to handle even more without adding extra strain. This improvement shows that your systems are working faster and more efficiently.

High-value task time
The second bucket focuses on doing less work while still achieving the same results. Instead of repeating the same routine tasks over and over, automation can streamline processes so that fewer manual steps are needed to get the same output. This means your team can spend less time on administrative follow-ups and more time on strategic tasks like negotiations and decision-making.

Ultimately, the majority of people will derive more enjoyment from their work if they are able to devote more time to stimulating and rewarding types of work, as opposed to repetitive administrative tasks. Introducing a CLM should be seen as empowering the work of your team, enabling them to focus on high-value tasks, as opposed to automating them away.

Conclusion: Is Your CLM Investment Delivering Value?

Evaluating the ROI of your Contract Lifecycle Management software is about much more than crunching numbers. It’s about understanding how efficiency gains, cost reductions, risk mitigation, productivity enhancements, and stakeholder satisfaction contribute to your overall business success. By carefully tracking these 5 metrics, you can gain a clearer picture of how your CLM system performs. We’d be super thrilled to help you look how Docfield can bring positive changes to your organisation. 

What positive changes have you noticed since deploying your CLM software? What challenges remain? Let us know!

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