How to know if your organization is ready for CLM software

Your manual processes can’t keep up with the volume of incoming contracts. Your key stakeholders are struggling to find and track agreements. Missed obligations lead to compliance risks. Not only that, but leadership also demands better visibility into contract performance and risk exposure. 

If this sounds familiar, it might be a sign that your organization has outgrown manual contract management and needs to implement a digital solution that supports its strategic growth. While many organizations recognize this, some still hesitate on implementing a robust Contract Lifecycle Management (CLM) platform. Whether it’s timing, resource availability, organizational readiness, or uncertainty on ROI, businesses often find themselves stuck at a crossroads, unable to move forward. 

Read to learn the clear CLM readiness indicators that will help you confidently make the right decision for your organization. 

Warning signs that your organization needs a CLM

As your organization grows, it will reach a point where CLM implementation becomes an inevitability. But waiting too long to begin the process amplifies the risk to your business, while rushing into it without adequate preparation results in challenges that undermine adoption. Hence, you should identify these warning signs that indicate a CLM implementation should be on the horizon.

1. Visibility and control challenges

A clear warning sign that you need CLM is the inability to answer basic questions about your contract portfolio. Leadership asks straightforward questions that require hours or days to answer:

• How many contracts do we have with a specific vendor?
• What’s our total spend commitment across all suppliers?
• Which contracts are up for renewal next quarter?
• What are our obligations under a particular agreement? 

The root cause is typically contracts scattered across multiple storage locations, such as email attachments, shared drives, filing cabinets, and individual desktops. There’s no single source of truth. Teams waste hours searching for executed agreements, and the risk of working from outdated versions creates compliance and operational problems.  

2. Risk and compliance concerns

Missed obligations and deadlines provide another clear indicator of readiness. Auto-renewals catch you by surprise, locking you into unfavorable terms for another year. Missed payment deadlines result in late fees and penalties. Deliverable obligations get overlooked, damaging vendor relationships. In fact, poor obligation management can result in losing up to 9% revenue annually, according to PwC.

That means your organization cannot systematically assess risk across its contract portfolio. If there’s no standardized risk scoring process, teams can’t identify unfavorable terms across multiple agreements. Regulatory compliance becomes increasingly complex to demonstrate, while your business’s liability exposure across all active contracts remains unknown. Contract disputes arise from miscommunication or terms that were never properly documented. 

3. Strategic limitations

The most significant red flag indicating a need for CLM is an inability to leverage contract data for informed strategic business decisions. When your organization can’t benchmark vendor performance effectively, there are no insights into spend patterns or opportunities for optimization. Demonstrating the ROI of contract management to executive leadership becomes difficult or impossible, while legal and procurement teams are often viewed as cost centers rather than strategic value drivers. 

This leads to missed opportunities for volume discounts because no one can see the total spend across vendors. Meanwhile, improved terms and pricing go unnoticed because there’s no systematic way to compare contracts. In short, without the key to unlock it, the strategic value locked within your contract portfolio remains inaccessible. 

Prerequisites for CLM implementation success

Beyond recognizing the need for CLM, certain organizational factors indicate actual readiness for successful implementation. These prerequisites don’t require perfection, but they do require commitment. 

1. Executive sponsorship and buy-in

Buy-in from leadership is critical for CLM success; you need an executive sponsor willing to champion the project across the organization. Budget must be allocated not only for software licensing but also for implementation services, change management, and ongoing support. 

Executive leadership must recognize that CLM represents a strategic initiative, not just an IT project. ROI takes time to materialize fully: his understanding shapes expectations appropriately. While it isn’t impossible to achieve some short-term wins, generating transformational value will require sustained commitment. Organizations that treat CLM as a technology purchase rather than a business transformation typically struggle with adoption and fail to realize the platform’s full potential. 

2. Cross-functional stakeholder engagement

Contract management doesn’t live solely within Legal. Successful CLM implementation requires inter-departmental engagement from across the enterprise, and key stakeholders from each department need to be identified early and remain involved throughout implementation. Willingness to collaborate across traditional departmental boundaries is a key indicator of organizational readiness. 

By agreeing on core requirements and priorities before implementation begins, you can prevent conflicts later. Most importantly, stakeholders must be ready to adapt processes, not simply automate existing ones. Think of it as reimagining workflows and discarding inefficient sections of the whole, rather than digitizing broken manual processes in their entirety. 

3. Data and process readiness

Perfect processes aren’t necessary to implement CLM. Even so, there needs to be a reasonable understanding of your current contract workflows, even if they’re entirely manual. A data-first approach where you identify the types of contracts in your organization, as well as approximate volumes, helps scope your implementation appropriately. 

A common misconception is that you need to migrate all your contracts into digital form first. It’s actually very possible to implement CLM for new contracts first while gradually migrating existing agreements! As an additional note, having a clear understanding of required integrations with existing systems, such as ERP, CRM, procurement platforms, and signature solutions, will prevent surprises during implementation. 

4. Resource allocation

Implementation isn’t simply a matter of financial resources; it’s also crucial to allocate the necessary human resources. Having a project manager or coordinator to drive implementation forward, maintain momentum, and keep everyone accountable is a tremendous help. Getting the opinions of subject matter experts on important decisions that shape implementation also ensures better adoption. Lastly, time needs to be allocated for testing and user acceptance before launch. 

Training budget and schedule considerations ensure that users can effectively adopt the platform. Contract management tools often rank among the least effective in legal technology arsenals; not because the tools are inadequate, but because organizations underinvest in training and change management. A post-implementation support plan that extends beyond go-live prevents the platform from becoming shelfware. 

Are you ready?

The cost of waiting increases daily, with problems compounding as contract volumes expand. Organizations that stay ahead and implement CLM well in advance gain a competitive edge while their peers struggle with poor scaling processes.

Remember that perfection is the enemy of progress – rather than waiting for the perfect moment, what matters more is determining if effective contract management is important enough to your business to warrant investment. 

Ready to take the next step? Agiloft has helped hundreds of organizations successfully implement CLM, regardless of their starting point. Our team can assess your readiness, address your concerns, and chart a clear path to contract management success.

Take the first steps. Learn how to build a successful business case and communicate the need for CLM to leaders at your organization.