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Does Contract Management Software Have Product/Market Fit?

Noah Waisberg • June 23, 2022 • 5 minute read

Recently, legaltech commentator Zach Abramowitz posed a provocative question: “Has CLM reached product market fit?”

Product/market fit is, roughly, whether a product meets strong market demand, but the definition is pretty squishy and inexact1. Since the definition of product/market fit (aka “PMF”) is squishy, Abramowitz considers a bunch of indicators.

“how total number of users would increase if marketing were to slow down. Is the number of users growing organically or is traction simply a product of marketing?”

CLM vendors are generally very well funded today (meaning marketing is unlikely to slow down), so Abramowitz turns to other measures.

“anytime I hear about long protracted implementations and change management apologetics, all I hear is “has NOT achieved product market fit.” Does that make me naïve about the realities of enterprise wide implementations? Maybe. But maybe CLM shouldn’t be so painful. Maybe implementations shouldn’t lead to lawsuits. Maybe legal departments shouldn’t have to hire temps because FTEs are busy getting the system up and running.”

I thought it might be useful to compare how CLM compares to a bunch of popular enterprise systems on the difficulty to implement. In many cases, the systems considered below have lots of room for improvement. Nonetheless, they are widely adopted, and most would agree they have product/market fit.

System Example Implementation Time Implementation Difficulty Cultural Change
CLM If you’re reading this, you likely know lots Depends. From days to years Depends. Can be difficult Depends, but can be significant
CRM Salesforce, Microsoft Dynamics, Hubspot CRM Weeks to years If a decent sized company, can be hard, reasonably likely to fail 1–2 times Depends, but can be significant
Marketing Automation Platforms (MAP) Salesforce Pardot, Marketo, Hubspot Weeks to several months Can be challenging for larger sized companies Relatively low (but will require some specialists to adapt)
ERP SAP, Oracle, Netsuite, Microsoft Dynamics Many months to years HARD! Significant
HRIS/HCM Bamboo, PeopleSoft, SuccessFactors, Dayforce Weeks to years Depends, but can be difficult Depends, but can be significant
Expense Managegment Concur, Coupa Generally high
Document Management iManage Many months to years Generally hard if a bigger company Medium to high
Enterprise Messaging Slack, Teams Days, unless importing data from another system Easy Significant for many more established companies

Note: While I could probably find examples of lawsuits around implementations gone wrong for these other categories, I have a day job, so decided to cover this item with a vague “Implementation Difficulty” category.


A takeaway from my pretty low-effort table above (sorry - I’m writing this after midnight) is that long protracted implementations and significant change management are pretty common with heavily-adopted enterprise systems2. While my sense is that some CLMs are a lot easier to implement than others, even if they all were terrible to implement and overall painful, that wouldn’t necessarily mean that CLMs lack PMF.

A broader takeaway is that the heavily-adopted enterprise systems are heavily adopted because—in many cases—business leaders think it’d be crazy to run a company without them. As Abramowitz says,

“you’d be crazy not to use a CRM tool to run a sales team inside a big organization without some way to manage and track customer relationships”

It was not always so inside businesses. Before Salesforce brought CRM to the cloud, many not-giant businesses tracked customer relationships on spreadsheets. Most small-to-medium businesses use just a finance system, not an ERP3. HCM systems were—until pretty recently—just a big company thing. Now, many >50 employee companies have one.

Are contracts and contract management software systems on that level? I think a big reason so much funding has flown into the space is that investors believe that they can be.

  • Contracts are the operating system of most businesses, setting the rules underpinning relationships with customers, vendors, employees, financing sources, and more. Their details really matter, and companies who know these details can operate better.
  • Contracting faster—which CLMs can help with—is literally money in the bank. Get a recurring revenue contract agreed upon in May instead of June, and that agreement will likely contribute 8% more to your revenue.

So,

  1. if the distinction between “certainly have PMF” enterprise systems and CLMs is that business leaders uniformly depend on the “certainly have” ones, and
  2. we believe that better contracts could be a must-have for a business; then

we should be thrilled with the huge funding in the space since a bunch of money seems likely to get spent on convincing businesses that they need to have access to contract details and contracting software. While some companies will experience bumps along the way, that’s how it goes with enterprise software implementations4. Adoption should trigger more adoption, with contract details perhaps becoming a must-have.

A few final points:

  • This piece is not meant as a rip on Abramowitz. In fact, I found his idea thought-provoking enough that I engaged with it in more detail by doing this piece.
  • The rapid revenue growth of some CLM companies suggests that they have a solid level of PMF.
  • Don’t read this piece to say that CLMs are perfect software today. My sense is many (all?) CLMs have more room for improvement in their products. (Hence why many have significantly-sized dev teams.) For example (in a totally not neutral way!), one spot I am pretty sure nearly all could be better is around data extraction AI, which is why we’ve seen some big ones incorporate Zuva’s DocAI contracts API product into their systems.
  • While I think CLMs have a bright future, I suspect contract details will also come to life in other enterprise systems (e.g., CRM, ERP, HCM).

1 Sort of like obscenity to Justice Potter Stewart.

2 My teammate Adam Roegiest points out that slow implementation stuff may even be partially intentional. You simultaneously earn more money by ensuring folks have to contract out additional help (thus selling certification courses to people or proserv) and it generally makes them stickier since they won’t have done things in a way that makes a clean break feasible (e.g., could Kira have ever switched away from Salesforce at the end? Probably not).

3 At Kira, we ran on Xero, then switched to Netsuite as we got bigger.

4 We had several really bumpy implementations of widely-used enterprise systems as Kira got bigger. My sense from talking to other businesses is that it’s just how it goes.