The Total Economic Impact™ Of LinkSquares CLM
Cost Savings And Business Benefits Enabled By LinkSquares
A Forrester Total Economic Impact™ Study Commissioned By LinkSquares, March 2022
The LinkSquares CLM is comprised of two parts: Finalize and Analyze. LinkSquares Finalize provides preapproved templates, self-service drafting tools, a standard, centralized clause library, and tailored workflows to simplify the contract drafting and review. LinkSquares Analyze provides service after a contract is finalized. It centralizes contracts in a secure repository and uses AI to run searches and reports across an organization’s legal portfolio, simplifying the management of the entire contract lifecycle.
LinkSquares commissioned Forrester Consulting to conduct a Total Economic Impact™ (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying LinkSquares Contract Lifestyle Management (CLM). 1 The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of LinkSquares on their organizations. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of Linksquares CLM on their organizations.
Return on investment (ROI)
352%
Net present value (NPV)
$2.71M
To better understand the benefits, costs, and risks associated with this investment, Forrester interviewed five LinkSquares customers with experience using CLM, which is made up of Finalize, its presignature solution, and Analyze, its postsignature solution. For the purposes of this study, Forrester aggregated the interviewees’ experiences and combined the results into a single composite organization.
Prior to using LinkSquares, customers noted how their organizations lacked a dedicated, modern contract management solution. Many were using incredibly basic tools or had contracts scattered across disparate platforms. These limitations led to slow contracting, protracted negotiations between sales and legal, and an inability to effectively comb through old contracts to identify potential risks and opportunities.
After investing in LinkSquares CLM, customers centralized and streamlined their contract management processes. Key results from the investment include significant time savings in creating and signing contracts and the ability to look through all contracts to identify their statuses.
Key Findings
Quantified benefits. Three-year, risk-adjusted present value (PV) quantified benefits for the composite organization include:
- Legal team efficiency and productivity savings recapture 40% of prior contracting workload. LinkSquares CLM provides the customers interviewed by Forrester with tools to simplify and eliminate manual effort for their legal teams. Between automating contract creation, documentation, and searching for terms in new contracts, the composite organization’s legal team more than halves the average manual labor cost per contract.
- Reduced outside counsel spend by 86%. Before LinkSquares, customers dealing with contract analysis around mergers and acquisitions (M&A) extensively relied on outside counsel to help perform due diligence on target acquisitions, contracted relationships, and existing material contracts. Additionally, customers leveraged outside counsel to process contracts from the acquired organization. Due to the LinkSquares centralized database with Analyze and preapproved templates and clauses in Finalize, the composite reduced the number of contracts requiring actions by outside counsel from 95% before LinkSquares to 9% after three years.
- Reduced probability of risk exposure during contract lifecycle by 75%. Finalize makes it easier to identify potential liabilities, obligations in the event of extraordinary circumstances, and areas where a force majeure clause is required. Analyze can identify areas of liability and obligation in past contracts. With the cost of exposure potentially in the hundreds of thousands of dollars for each contract, customers emphasized the value of LinkSquares significantly reducing the risk.
- Increased revenue-generating contracts by increasing process efficiency by 3%. LinkSquares provides sales teams with alternatives to lengthy back-and-forth emails with their legal team to hammer out the details of a contract. Preapproved templates and clauses give sales teams more autonomy and eliminate a significant amount of time spent on manual tasks. That time is refocused on selling more, thus boosting revenue.
- Increased contract value by 15% by addressing overspend. Without visibility into the universe of executed contracts, it’s easy for unfavorable agreements to automatically renew or for legal to overlook crucial, expensive provisions during signings and negotiations. LinkSquares helps customers drive improved contract value by making it easier to let contracts expire without incurring penalties, totaling 15% improved contract value by Year 3.
Unquantified benefits. Benefits that are not quantified for this study include:
- Broader reduction of risk. The same risk-based benefits generated by analyzing contracts during M&A engagements can also be applicable to a much broader set of contracts.
- Expanded reduction of outside counsel spend. LinkSquares provides the potential for significant reduction in outside counsel spend across all contracts.
- Improved operational resilience during a crisis or critical events. In addition to providing protection from generalized risk, customers told Forrester that LinkSquares provided valuable flexibility and resilience during the upheaval of the COVID-19 pandemic, and they anticipated similar adaptability in future potential crises. For example, the ability to identify force majeure clauses provided organizations with significant savings, especially during the pandemic’s early days.
- Improved communication and collaboration between remote teams. LinkSquares enables organizations to move their contracts onto a centralized repository, making it easier for different teams or employees in multiple locations to draft, sign, access, and analyze contracts.
- Increased confidence around regulatory compliance. The ability to ensure regulatory compliance requirements are included in new contracts and the easy searching of old contracts for clauses and requirements around compliance regimes gave LinkSquares customers confidence that their organizations would have an easier time with audits and avoiding fines and/or other sanctions.
- Better product innovation and client service. Without visibility into contracts around ongoing work, customers can face paralysis around developing new requested features, as they cannot quickly determine what is and is not in scope. LinkSquares provides visibility into these contracts, enabling development on innovations, updates, and other features to start much faster than before.State the benefit, how much (if have metrics), and how the solution helps. Provide supporting detail and background for this benefit. Use present tense and keep bullets to a maximum of 10 to 12 lines.
- High-quality customer service delivered. Many of the interviewed decision-makers provided effusive praise of LinkSquares customer service, saying the company went above and beyond during implementation, training, and troubleshooting potential issues.
Costs. Three-year, risk-adjusted PV costs for the composite organization include:
- An annual $200,000 fee paid directly to LinkSquares. For the composite organization, this fee covers a total of 70,000 active and archived contracts, 50 power users, and 300 standard users.
- Four hours of annual training per employee using LinkSquares. Several employees on the composite organization’s sales, finance, and legal teams need annual training to make the most out of LinkSquares.
- Forty-two hours of effort per year to set up and maintain a contract library. Split between a paralegal, a vice president, and a general counsel, the employees also spend 72 hours during implementation readying the contract library for the composite organization.
The customer interviews and financial analysis found that a composite organization experiences benefits of $3.48 million over three years versus costs of $769,000, adding up to a net present value (NPV) of $2.71 million and an ROI of 352%.
Key Statistics
-
Return on investment (ROI)
352%
-
Benefits PV
$3.48M
-
Net present value (NPV)
$2.71M
-
Payback
<3 months
Benefits (Three-Year)
Efficiency and productivity savings for the legal team and cost of contracting Reduction in outside counsel spend Reduced risk exposure in contract lifecycle Accelerated revenue from improved contract processes Reduced spend on vendor contracts by not autorenewing and consolidatingTEI Framework And Methodology
From the information provided in the interviews, Forrester constructed a Total Economic Impact™ framework for those organizations considering an investment LinkSquares CLM.
The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. Forrester took a multistep approach to evaluate the impact that Linksquares CLM can have on an organization.
-
Due Diligence
Interviewed LinkSquares stakeholders and Forrester analysts to gather data relative to LinkSquares.
-
Interviews
Interviewed five decision-makers at organizations using LinkSquares to obtain data with respect to costs, benefits, and risks.
-
Composite Organization
Designed a composite organization based on characteristics of the interviewees’ organizations.
-
Financial Model Framework
Constructed a financial model representative of the interviews using the TEI methodology and risk-adjusted the financial model based on issues and concerns of the interviewees.
-
Case Study
Employed four fundamental elements of TEI in modeling the investment impact: benefits, costs, flexibility, and risks. Given the increasing sophistication of ROI analyses related to IT investments, Forrester’s TEI methodology provides a complete picture of the total economic impact of purchase decisions. Please see Appendix A for additional information on the TEI methodology.
Disclosures
Readers should be aware of the following:
This study is commissioned by LinkSquares and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis.
Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the study to determine the appropriateness of an investment in LinkSquares Finalize and Analyze.
LinkSquares reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester’s findings or obscure the meaning of the study.
LinkSquares provided the customer names for the interviews but did not participate in the interviews.
Consulting Team:
Sam Sexton
Stephanie Slate
Drivers leading to the CLM investment
Interviews
| Role | Industry | Region | Revenue |
|---|---|---|---|
| Senior paralegal, contract administration manager | Gaming entertainment and technology | Headquartered in North America | $2.7B |
| Chief legal and compliance officer | Data protection software | Headquartered in North America | $800M |
| General counsel and corporate secretary | E-learning | Headquartered in North America | $12.5M |
| General counsel and compliance officer | Healthcare | Headquartered in North America | $120M |
| Vice president and general counsel | Insurance software | Headquartered in North America | $175M |
Key Challenges
Before investing in LinkSquares, customers either had a dedicated platform for contract management or tried to make ad hoc solutions from preexisting software.
The interviewees noted how their organizations struggled with common challenges, including:
- Time-consuming process for contract analysis and negotiation. Organizations without a dedicated solution for contract management were forced to waste valuable time during sales cycles chasing down specific sales personnel or members of the legal team to make sure contracts were good to go. The general counsel and corporate secretary for the e-learning organization told Forrester, when a request from an account executive for the latest version of a contract came in: “I would need to manually create the agreement, populate the name, address, state of incorporation, and all the details around it into the agreement. It was all manually done via email.”
- Manual effort required for contract analysis. Organizations also required time-wasting effort to search existing contracts, with the e-learning general counsel and corporate secretary explaining, “Traditionally, [searching for certain terms] would have been something manual that I would have to have pulled from every single agreement and then populate a spreadsheet.
- Inconsistent, decentralized storage of contracts. One of the main drivers of manual labor for the customers was the lack of a central repository for contracts. This severely limited visibility across the board, leaving the organizations open to potential risk exposure, upcoming contract renewals where existing negotiations stood, and compliance issues with regimes like GDPR. To quote the senior paralegal contract administration manager for the gaming entertainment and technology organization: “Every time we acquired a company, we inherited a bunch of contracts that just seemed to get lost. I know we had contracts that were still in paper version and tucked away in file cabinets.”
- Before LinkSquares, the decision-makers Forrester spoke to bemoaned that they often needed costly outside counsel to work with their legal team on ironing out issues with contracts, which created more work when information was inevitably lost during the transfer to the organization. The general counsel and corporate secretary in the e-learning industry mentioned: “There had been no one there to negotiate those contracts well, unless they sent them outside, which happened occasionally.But it’s very different being outside counsel versus in-house counsel. I didn’t even know what our contract said and how much risk exposure we had.”
Investment Objectives
The interviewees’ organizations searched for a solution that could:
- Handle a large volume of contracts.
- Provide total visibility into contract phases.
- Centralize contracts into a repository.
- Provide responsive, intuitive functionality before and after signatures.
Composite Organization
Based on the interviews, Forrester constructed a TEI framework, a composite company, and an ROI analysis that illustrates the areas financially affected. The composite organization is representative of the five decision-makers that Forrester interviewed and is used to present the aggregate financial analysis in the next section. The composite organization has the following characteristics:
Description of composite. The North America-based, $200 million software-as-a-service (SaaS) organization with active mergers and acquisitions employs a total of 1,500 FTEs.
Deployment characteristics. The composite organization uses LinkSquares Analyze and Finalize tools. Fifty of the composite organization’s FTEs are power users with LinkSquares, while an additional 300 are standard users. The composite organization has 70,000 contracts total with LinkSquares and starts with 4,000 active, revenue-generating contracts that require processing in Year 1.
Quantified benefit data as applied to the composite
Total Benefits
| Ref. | Benefit | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|
| Atr | Efficiency and productivity savings for the legal team and cost of contracting | $188,082 | $188,082 | $188,082 | $564,246 | $467,732 |
| Btr | Reduction in outside counsel spend | $367,200 | $420,188 | $503,100 | $1,290,488 | $1,059,067 |
| Ctr | Reduced risk exposure in contract lifecycle | $270,938 | $358,594 | $478,125 | $1,107,656 | $901,888 |
| Dtr | Accelerated revenue from improved contract processes | $405,000 | $405,000 | $405,000 | $1,215,000 | $1,007,175 |
| Etr | Reduced spend on vendor contracts by not autorenewing and consolidating | $13,500 | $16,200 | $20,250 | $49,950 | $40,875 |
| Total benefits (risk-adjusted) | $1,244,720 | $1,388,063 | $1,594,557 | $4,227,340 | $3,476,737 | |
Efficiency And Productivity Savings For The Legal Team And Cost Of Contracting
Evidence and data. LinkSquares customers realized significant productivity savings for their legal team thanks to CLM automating contracting processes.
- The senior paralegal contract administration manager for the gaming entertainment and technology company explained how LinkSquares Analyze saved their organization time by consolidating information: “The biggest improvement for us has been the ability of our attorneys and other departments to go into the database without asking me for help to find a document. It’s such an intuitive system and it’s fairly easy to figure out what we’re doing.”
- LinkSquares Finalize tool also saved time for many of the interviewed customers and their teams by increasing visibility, meaning fewer costly legal personnel had to spend time tracking down other parts of the organization to get updates on where the contract process was. The general counsel and compliance officer for the healthcare organization told Forrester: “From a reporting standpoint it’s been helpful to see where contracts are in the signature [or] review process and how long someone’s held the pen. I think that’s really important from an efficiency standpoint. Before, we missed that insight doing everything through email and we didn’t have robust reporting features.”
- LinkSquares’ automation capabilities were also a source of significant time savings. The chief legal and compliance officer for the data protection software organization told Forrester: “[Before Finalize] my team of $250-an-hour negotiators had to spend 10 hours per contract to absorb it into our program. With LinkSquares, we could just set up the form and it would automatically populate the information.” Finalize let the data protection software organization’s sales team automatically generate suitable contracts, “The result is that 80% of the time, [our] contracts never get negotiated.”
- Automation, increased visibility, and better communication enabled legal teams to process more contracts in less time than before LinkSquares. The healthcare interviewee remarked: “I don’t think that we could have done 72 [contracts] in September without this software. We would not be averaging 45 [contracts] a month if we didn’t have the software.”
Modeling and assumptions. Based on the customer interviews, Forrester estimates the following for the composite organization:
- It has a contract legal team that consists of two paralegals, one associate attorney, and two legal counsels.
- Each member of the legal team spends a certain percentage of their time on tasks like documentation, templating, and searching for terms heavily impacted by LinkSquares.
- The organization has a total of 4,120 revenue-generating contracts annually, a 3% increase on their pre-LinkSquares total due to more efficient sales (see Benefit D).
- There is a 40% recapture of their team’s workload thanks to LinkSquares enabling work on higher-value tasks.
Risks. Differences across organizations that may impact this benefit include:
- The size, salary, and tasks of legal team.
- The amount of workload legal team can successfully recapture.
- The number of revenue-generating contracts processed by legal team each year.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $467,700.
Efficiency And Productivity Savings For The Legal Team And Cost Of Contracting
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| A1 | Number of associate attorneys on staff | Composite | 1.000 | 1.000 | 1.000 |
| A2 | Averaged fully burdened salary of an associate attorney | ($120,000*1.35) | 162,000.000 | 162,000.000 | 162,000.000 |
| A3 | Percentage of time dedicated to contracting (documentation, searching for terms, templating, etc.) before LinkSquares | Interviews | 0.900 | 0.900 | 0.900 |
| A4 | Number of paralegals on staff | Composite | 2.000 | 2.000 | 2.000 |
| A5 | Averaged fully burdened salary of a paralegal | ($70,000*1.35) | 94,500.000 | 94,500.000 | 94,500.000 |
| A6 | Percentage of time dedicated to contracting (documentation, searching for terms, templating, etc. before LinkSquares | Interviews | 0.750 | 0.750 | 0.750 |
| A7 | Number of legal counsels on staff | Composite | 2.000 | 2.000 | 2.000 |
| A8 | Averaged fully burdened salary of a legal counsel | ($145,000*1.35) | 195,750.000 | 195,750.000 | 195,750.000 |
| A9 | Percentage of time dedicated to contracting (documentation, searching for terms, templating, etc.) before LinkSquares | Interviews | 0.600 | 0.600 | 0.600 |
| A10 | Subtotal: Cost of labor for staff to do contracting before LinkSquares annually | (A1*A2*A3)+(A4* A5*A6)+(A7*A8*A 9) | 522,450.000 | 522,450.000 | 522,450.000 |
| A11 | Number of contracts processed in LinkSquares per year | Composite | 4,120.000 | 4,120.000 | 4,120.000 |
| A12 | Manual labor cost per contract (searching for terms, templating, documentation, etc.) before LinkSquares | A10/A11 | 126.808 | 126.808 | 126.808 |
| A13 | Percent of workload recaptured by LinkSquares allowing team to work on higher value tasks | Interviews | 0.400 | 0.400 | 0.400 |
| A14 | Recaptured savings per contract due to LinkSquares | A12*A13 | 50.723 | 50.723 | 50.723 |
| A15 | Costs per contract after LinkSquares | A11*A14 | 208,980.000 | 208,980.000 | 208,980.000 |
| At | Efficiency and productivity savings for the legal team and cost of contracting | A15 | 208,980.000 | 208,980.000 | 208,980.000 |
| Risk adjustment | ↓10% | ||||
| Atr | Efficiency and productivity savings for the legal team and cost of contracting (risk-adjusted) | 188,082.000 | 188,082.000 | 188,082.000 | |
| Three-year total: $564,246 | Three-year present value: $467,732 | ||||
Reduction In Outside Counsel Spend
Evidence and data. The same centralization, automation, and improved communication that LinkSquares provided to legal teams also eliminated the need to rely on outside counsel by expanding the team’s capabilities to the point that outside help would be redundant. These savings were especially potent with complex M&A engagements, which required both integrating large amounts of contracts from the new organization and performing due diligence on preexisting contracts.
- The e-learning organization’s decision-maker told Forrester that before LinkSquares, they were forced to rely on hiring outside counsel to find contract information. With LinkSquares, they were able to bring this task completely in-house.
- The chief legal and compliance officer for the data protection software company broke down how complex handling M&A contract integrations and due diligence were before LinkSquares: “Before Analyze, we had to pay $600 to $800 an hour for an associate to pull information out. That didn’t even help me absorb those contracts into my in-house program to manage them going forward, I still had to have my negotiators figure out what the renewal is and whether it needed to be renegotiated.” With LinkSquares, the most the customer had to pay for outside counsel work was $30,000, down from $120,000 to $300,000 before the investment.
Modeling and assumptions. Based on customer interviews, Forrester assumes the following for the composite organization:
- A total of 425 M&A-related contracts need to be processed in Year 1 (both from absorbing old contracts from the company being acquired and as part of the due diligence around acquisitions and mergers), gradually increasing to 500 M&A-related contracts by Year 3.
- Before using LinkSquares, 95% of these contracts required outside counsel to process.
- With LinkSquares, this number drops to 15%.
- Each contract requiring outside counsel needs an average of two billable hours of work to complete.
Risks. The results for reduced costs from requiring outside support before LinkSquares will vary by:
- The amount of M&A-related contract management requiring outside legal counsel.
- The number of hours and rate of outside legal counsel.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1,059,000.
Reduction In Outside Counsel Spend
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|
| B1 | Total number of M&A contracts annually | Composite | 425.00 | 450.00 | 500.00 |
| B2 | Percentage of contracts requiring outside counsel support before LinkSquares | Interviews | 0.95 | 0.95 | 0.95 |
| B3 | Percentage of contracts requiring outside counsel support after LinkSquares | Interviews | 0.15 | 0.12 | 0.09 |
| B4 | Average hourly cost of outside legal counsel | Interviews | 600.00 | 625.00 | 650.00 |
| B5 | Average number of hours per contract | 2 billable hours | 2.00 | 2.00 | 2.00 |
| B6 | Spend on outside counsel before LinkSquares for M&A events | B1*B2*B4*B5 | 484,500.00 | 534,375.00 | 617,500.00 |
| B7 | Spend on outside counsel after LinkSquares for M&A events | B1*B3*B4*B5 | 76,500.00 | 67,500.00 | 58,500.00 |
| Bt | Reduction in outside counsel spend | B6-B7 | 408,000.00 | 466,875.00 | 559,000.00 |
| Risk adjustment | ↓10% | ||||
| Btr | Reduction in outside counsel spend (risk-adjusted) | $367,200 | $420,188 | $503,100 | |
| Three-year total: $1,290,488 | Three-year present value: $1,059,067 | ||||
Reduced Risk Exposure In Contract Lifecycle
Evidence and data. Customers were very impressed with the degree to which LinkSquares helped mitigate contract risk, specifically related to M&A events.
- The vice president and general counsel for the insurance software organization told Forrester that they were impressed with how LinkSquares Analyze allowed them to more easily quantify risk, “I am able to get the quantification of our risk under our contract and understand customer pays X because we negotiated this to get the deal done...”
- The VP and general counsel was also impressed with LinkSquares’ ability to help their organization understand requirements around fast notification and alert speed for data breaches, both limiting damage from a breach and reducing the risk of infuriating a customer: “LinkSquares’ speed to notifications and alertness for data breaches are vital. You want to work as quickly as you can to show your customer base that you are taking it seriously and you’re not just sitting on it. Nothing is going to burn the customer worse than reporting to them 65 to 90+ days after an event happened.”
- The chief legal and compliance officer for the data protection software organization spoke to how LinkSquares Finalize changed risk exposure terms for new contracts going forward through improved visibility: “The visibility gave us negotiating power in consistency. Our program changed from bespoke risk exposure terms for each contract to playbook terms based on ACV [average contract value] up until a cap we would not go over.”
Modeling and assumptions. Based on the customer interviews, Forrester assumes the following for the composite organization:
- The financial impact of contract risk is $100,000 per contract.
- The probability of exposure to risk starts at 1% and gradually rises over three years.
- LinkSquares’ ability to ensure better risk-related provisions in contracts, better quantify risk, and provide better measures around security and notifications reduces risk exposure by 75%.
Risks. The actual reduction in risk exposure will vary based on:
- The number of contracts processed during M&A engagements with high levels of contract risk.
- An organization’s financial impact for contract risk.
- The likelihood of contract risk for an organization.
Results. To account for these risks, Forrester adjusted this benefit downward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $901,900.
Reduced Risk Exposure In Contract Lifecycle
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| C1 | Total number of M&A annual contracts | B1 | 425 | 450 | 500 | |
| C2 | Potential financial impact of contract risk | Interviews | $100,000 | $100,000 | $100,000 | |
| C3 | Probability of exposure | 1.00% | 1.25% | 1.50% | ||
| C4 | Reduction in probability of exposure | 75% | 75% | 75% | ||
| Ct | Reduced risk exposure in contract lifecycle | C1*C2*C3*C4 | $318,750 | $421,875 | $562,500 | |
| Risk adjustment | ↓15% | |||||
| Ctr | Reduced risk exposure in contract lifecycle (risk-adjusted) | $270,938 | $358,594 | $478,125 | ||
| Three-year total: $1,107,656 | Three-year present value: $901,888 | |||||
Increased Revenue From Streamlined Contract Processes
Evidence and data. Improvements to contract creation, editing, and negotiation enabled by LinkSquares Finalize were some of the most universally praised benefits of the platform, saving sales teams time on going back-and-forth with legal and enabling them to use that time to secure more revenue-generating contracts than they would otherwise.
- The chief legal and compliance officer for the data protection software organization broke down how important the ability for sales to self-service changes to contracts is for negotiating more deals: “When a contract has to be negotiated, you sign fewer contracts. The salespeople are distracted. When you have salespeople who can self-service, you can close deals within a week. … When it involves a lawyer, it takes three, six or nine months. Think about the time it takes them to track down and check in with the lawyer to schedule status calls.”
- The general counsel and corporate secretary for the e-learning organization told Forrester that template consistency was one of the key drivers for avoiding delays for the sales team: “The sales team never has to wonder where the latest and greatest agreements are, because they’re housed in LinkSquares. We refresh all of our agreements to comply with new directives and new standard contractual clauses. The sales team doesn’t even know the difference because the only place they access contracts is by going into LinkSquares, uploading it, populating it via the platform and sending it out.”
- The general counsel and compliance officer for the healthcare organization told Forrester that increased accountability through better tracking of the contracting process was a key feature of Finalize: “I think it’s opened up more accountability. It’s not this nebulous ‘it goes to legal’ and then we don’t know what happens.”
- For those questions from sales that still required direct legal input, the process of getting answers was faster and easier, saving salespeople further time. The vice president and general counsel of the insurance software organization told Forrester: “It’s a quicker, more efficient interaction now. In the past, we logged another ‘to-do’ on my long list for tomorrow. Now, with LinkSquares, boom, you’ve got your answer.”
Modeling and assumptions. Based on the customer interviews, Forrester estimates the following for the composite organization:
- Before LinkSquares, the organization has 4,000 annual revenue-generating contracts.
- After LinkSquares, this number rises 3% each year.
- The average value of each contract is $50,000.
- 50% of the increased revenue is attributable to LinkSquares.
Risks. Differences across organizations that may impact this benefit include:
- The number of potential sales held up by protracted back-and-forth conversations with the legal team.
- The average value of a new revenue-generating contract.
- The value of additional initiatives to improve sales.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $1,007,000.
Increased Revenue From Improved Contract Processes
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| D1 | Total expected annual revenue-generating contracts before LinkSquares | Composite | 4,000 | 4,000 | 4,000 | |
| D2 | Percentage increase in revenue-generating contracts completed annually with LinkSquares | Forrester | 3.0% | 3.0% | 3.0% | |
| D3 | New total revenue-generating contracts after LinkSquares | D1*D2 | 120 | 120 | 120 | |
| D4 | Average annual value per contract | Composite | $50,000 | $50,000 | $50,000 | |
| D5 | Additional value of completed contracts after LinkSquares | D3*D4 | $6,000,000 | $6,000,000 | $6,000,000 | |
| D6 | Percentage of value attributable to LinkSquares versus human skill and other process improvements | 50% | 50% | 50% | ||
| D7 | Profit Margin | Composite | 15% | 15% | 15% | |
| Dt | Accelerated revenue from improved contract processes | D5*D6*D7 | $450,000 | $450,000 | $450,000 | |
| Risk adjustment | ↓10% | |||||
| Dtr | Accelerated revenue from improved contract processes (risk-adjusted) | $405,000 | $405,000 | $405,000 | ||
| Three-year total: $1,215,000 | Three-year present value: $1,007,175 | |||||
Reduced Spend On Vendor Contracts
Evidence and data. LinkSquares Analyze provided the interviewees with valuable new tools to address overspend, whether in the form of provisions that needed to be renegotiated or determining contracts that should be allowed to expire.
- The senior paralegal contract administration manager for the gaming entertainment and technology organization gave an example around getting out of an autorenewing contract without paying a penalty: “The contract was set to auto renew; we had that 30-day notice of intent to terminate the contract. We had a very small window to work with, and LinkSquares came through with gold stars everywhere.”
- The chief legal and compliance officer for the data protection software organization provided another example of how LinkSquares enabled legal teams to proactively avoid renewals: “With a service like LinkSquares and with the tiniest bit of investment, you make people accountable for their spend. Now you have an activity for the legal team that makes them heroes, which allows the legal team to justify their own expense.”
- Gathering all existing contracts in a centralized repository made it far easier to identify potential issues related to overspend or expirations. The general counsel and corporate secretary for the e-learning organization told Forrester: “Having all of your agreements in one centralized location and the ability to use AI to deep dive into each and every one of them has been critical for us to understand contract terms, renewals, whether to give notice 90 days in advance or it [the contract] autorenews.”
Modeling and assumptions. Based on the customer interviews, Forrester estimates the following for the composite organization:
- Annual vendor spend is 3% of total revenue.
- 5% of contracts contain addressable overspend.
- In Year 1, LinkSquares leads to 10% additional contract value, which rises to 15% by Year 3 as the customer fully integrates revenue-saving practices going forward.
Risks. Differences across organizations that may impact this benefit include:
- The amount of vendor spend.
- The amount of addressable overspend.
Results. To account for these risks, Forrester adjusted this benefit downward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $40,900.
Reduced Spend On Vendor Contracts By Not Autorenewing And Consolidating
| Ref. | Metric | Source | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|
| E1 | Total annual vendor spend | Forrester Research, 3% of revenue | $6,000,000 | $6,000,000 | $6,000,000 | |
| E2 | Percent of B2B contracts containing addressable overspend | Assumption | 5% | 5% | 5% | |
| E3 | Percent value received from achieving better contract terms | Interviews | 10% | 12% | 15% | |
| E4 | Percent of received value attributable to LinkSquares | Forrester Assumption | 50% | 50% | 50% | |
| Et | Reduced spend on vendor contracts by not autorenewing and consolidating | E1*E2*E3*E4 | $15,000 | $18,000 | $22,500 | |
| Risk adjustment | ↓10% | |||||
| Etr | Reduced spend on vendor contracts by not autorenewing and consolidating (risk-adjusted) | $13,500 | $16,200 | $20,250 | ||
| Three-year total: $49,950 | Three-year present value: $40,875 | |||||
Unquantified Benefits
Additional benefits that customers experienced but were not able to quantify include:
- Expanded outside counsel spend reduction. LinkSquares possesses the potential to provide organizations with much broader reductions to outside counsel spend, providing far larger savings in this area. The vice president and general counsel for the insurance organization told Forrester how LinkSquares was vital for reducing outside counsel spend around identifying potential points of liability in contracts: “I don’t know if I can quantify it, but [without LinkSquares] we would be stuck cross-checking with a much more simplistic product.”
- Broader risk reduction in the contract lifecycle. LinkSquares offers broader risk reduction functionality, providing organizations with the ability to realize universal risk-reduction benefits across all contracts. The general counsel and corporate secretary for the e-learning organization told Forrester that “risk mitigation was a significant driver... [before LinkSquares], we didn’t know what contracts promised or what they provided – that was a huge risk.”
- Better disaster preparedness. LinkSquares provided organizations with a better ability to identify force majeure provisions in the event of disasters. The chief legal and compliance officer for the data protection software organization told Forrester: “Two years ago, that was the hot topic: ‘How can I get out of these contracts?’ A lot of them were event contracts, and everybody went to the force majeure provisions. But, in order to exercise force majeure, you have to know which contracts to pull. With Analyze you can tag them correctly so you know that they’re procurement, you know that there’re events, so you can search within the right universe. That’s the beauty of LinkSquares CLM.”
- Improved communication and collaboration between remote teams. In addition to requiring organizations to search for force majeure clauses, the COVID-19 pandemic also forced organizations to quickly adapt to remote work. LinkSquares’ ability to easily store and present information on a centralized digital platform made this adjustment easier. The chief legal and compliance officer for the data protection software organization gave an example around avoiding clogging inboxes: “Let’s say my contracts negotiator Tom is busy and has a lot on his plate, , the sales team use the nudge button within LinkSquares. It’s like a poke on Facebook. They don’t even have to pick [up] a phone, or write an email, they can just give a little nudge.”
- Improved confidence around regulatory compliance. LinkSquares Analyze provided the interviewed decision-makers with an improved ability to ensure their contracts complied with compliance regimes like GDPR. To quote the senior paralegal contract administration manager for the gaming entertainment and technology organization: “The really nice thing about LinkSquares is in the spreadsheet they produce, there’s an actual link to the document itself. To access the spreadsheet one of the auditors wanted to see, all I had to do was open the database, open the spreadsheet andclick on that link to download the agreement.”
- Ability to provide better service to clients and product innovation. The chief legal and compliance officer for the data protection software organization told Forrester that before LinkSquares, their team lacked visibility to know whether they could begin developing new product features for a customer, or if such features would be out of contracted scope. Thanks to LinkSquares, they had an answer: “Through LinkSquares we’re able to answer this question for [our team] and they’re able to start very interesting product innovation development. … They are currently working on a prototype.”
-
High quality customer service. The customers were effusive about LinkSquares’ high-quality support throughout the implementation and maintenance of the CLM.
- The general counsel and corporate secretary for the e-learning organization told Forrester: “I’ve never, ever experienced customer support like I have with LinkSquares. Our customer support person has done training for multiple teams. He has done presentations of trainings and literally personalized our instance so it wasn’t a generic presentation. It was a custom presentation for our organization and he led the team through it. He is always available.”
- The gaming entertainment and technology customer concurred, telling Forrester, “[Our LinkSquares contact] has been really helpful in working with the procurement team, in getting them set up both currently and with future improvements to LinkSquares for what the procurement team needs.”
Flexibility
The value of flexibility is unique to each customer. There are multiple scenarios in which a customer might implement LinkSquares and later realize additional uses and business opportunities, including:
- The ability for many different departments within the company to use LinkSquares for their own needs. Customers shared that LinkSquares is flexible enough to be used outside of just legal and sales. The senior paralegal contract administration manager for the gaming entertainment and technology organization told Forrester about how their finance department made use of the platform: “They have a brand-new process now and before they send out a bill, they pull up the underlying order and match it to the invoice. The finance department has had a lot of success with making our bills much more accurate and presentable to our clients.”
- Archived contracts can provide utility far into the future. In addition to making templatization and searching for specific clauses easier, having an archive of finalized contracts can provide insight into decision-making or business requirements for future, similar contracts. Said the general counsel and compliance officer for the healthcare organization, “If you have a contract that is similar, or nearly the same, you can easily find it and look at how you came to a decision.”
- Long term vendor savings. LinkSquares Analyze provides an immediate benefit on contract overspend by enabling legal and sales teams to identify areas of potential savings, but interviewees told Forrester that they believed there would be even more insights into addressing vendor overspend as LinkSquares became more fully integrated into the vendor management system. The vice president and general counsel for the insurance software organization elaborated: “As we continually develop our vendor management with going after our SOC, we’ll use Linksquares more to manage vendors within the system.”
Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix A).
Quantified cost data as applied to the composite
Total Costs
| Ref. | Cost | Initial | Year 1 | Year 2 | Year 3 | Total | Present Value |
|---|---|---|---|---|---|---|---|
| Ftr | Software license fees (yearly) | $0 | $230,000 | $230,000 | $230,000 | $690,000 | $571,976 |
| Gtr | Cost for additional reinforecement training of LinkSquares | $0 | $69,575 | $75,075 | $82,109 | $226,759 | $186,985 |
| Htr | Administrative costs to create and maintain a library of pre-approved templates, clauses, tags, documents, etc. | $4,307 | $2,432 | $2,432 | $2,432 | $11,604 | $10,356 |
| Total costs (risk-adjusted) | $4,307 | $302,007 | $307,507 | $314,541 | $928,363 | $769,317 | |
Annual Software License Fees
Evidence and data. The primary cost of LinkSquares was the annual license fee to use the software.
- The license fee covered the total number of contracts processed with Finalize and Analyze.
- It also covered a certain amount of power (fully featured) users and standard users.
Modeling and assumptions. For the composite organization, Forrester assumes the following:
- The composite pays an annual fee that covers 70,000 total contracts, 300 standard users, and 50 power users.
Risks. Differences across organizations that may impact this cost include:
- The required number and type of users.
- The required number of contracts.
Results. To account for these risks, Forrester adjusted this cost upward by 15%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $572,000.
Annual Software License Fees
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| F1 | LinkSquares License fees - includes 70,000 contracts, and 20 power users with 50 read only users | $200,000 | $200,000 | $200,000 | |||
| Ft | Software license fees (yearly) | $0 | $200,000 | $200,000 | $200,000 | ||
| Risk adjustment | ↑15% | ||||||
| Ftr | Annual software license fees (yearly) (risk-adjusted) | $0 | $230,000 | $230,000 | $230,000 | ||
| Three-year total: $690,000 | Three-year present value: $571,976 | ||||||
Cost For Additional Reinforcement Training Of LinkSquares
Evidence and data. LinkSquares required annual training to keep users refreshed on the platform, as well as any new updates.
- This applied across departments, whether they be sales, finance, or legal.
- Interviewees told Forrester that the amount of time required for training is relatively similar regardless of department.
Modeling and assumptions. For the composite organization, Forrester assumes the following:
- Four hours of reinforcement training are required per year (one per quarter).
- A total of 300 sales team members are initially trained on LinkSquares, which rises to 350 by Year 3 as more sales team members are required to obtain familiarity with LinkSquares
- 10 finance team members need familiarity with LinkSquares, growing to 15 by Year 3.
- A vice president and general counsel cumulatively require four hours of reinforcement training for the legal team.
Risks. Differences across organizations that may impact this cost include:
- The amount of yearly training required.
- The number and type of employees that require training.
- Fully loaded salaries for employees.
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $187,000.
Cost For Additional Reinforcement Training Of LinkSquares
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 | |
|---|---|---|---|---|---|---|---|
| G1 | Number of reinforcement training hours (annual) | One hour per quarter | 4 | 4 | 4 | ||
| G2 | Number of people on the sales team using LinkSquares | Composite | 300 | 325 | 350 | ||
| G3 | Average fully burdened hourly rate of sales representative | $104,000/2,080 hours | $50 | $50 | $50 | ||
| G4 | Number of people on the finance team using LinkSquares | Composite | 10 | 10 | 15 | ||
| G5 | Average fully burdened hourly rate of finance team | $145,000/2,080 hours | $70 | $70 | $70 | ||
| G6 | Subtotal: Labor costs for reinforcement training | E1*((E2*E3)+(E4 *E5)) | $62,788 | $67,788 | $74,183 | ||
| G7 | Average fully burdened hourly rate of a VP and general counsel | $240,000/2,080 | $115 | $115 | $115 | ||
| G8 | Number of hours VP and general counsel needs for prep and follow-up | Interviews | 4 | 4 | 4 | ||
| G9 | Subtotal: Labor costs for prep and follow up | E7*E8 | $462 | $462 | $462 | ||
| Gt | Cost for additional reinforcement training of LinkSquares | E6+E9 | $0 | $63,250 | $68,250 | $74,644 | |
| Risk adjustment | ↑10% | ||||||
| Gtr | Cost for additional reinforcement training of LinkSquares (risk-adjusted) | $0 | $69,575 | $75,075 | $82,109 | ||
| Three-year total: $226,759 | Three-year present value: $186,985 | ||||||
Administrative Costs To Create And Maintain A Library Of Pre-Approved Templates, Clauses, Tags, Documents, Etc.
Evidence and data. While LinkSquares provided all the tools organizations needed to create an archive of templates, clauses, and other useful shortcuts, the archive did require customer labor to create and maintain.
Decision-makers told Forrester that it was primarily paralegals that created and maintained the library, with a smaller amount of work required from higher-ranking legal personnel.
Modeling and assumptions. Based on the customer interviews, Forrester estimates the following for the composite organization:
- One paralegal spends 60 hours during the initial implementation creating the library, and 36 hours per year going forward maintaining it.
- A vice president and general counsel provide 12 hours of labor during implementation, and six annually going forward, in a supervisory capacity.
Risks. Differences across organizations that may impact this cost include:
- The fully loaded salaries of personnel involved in creating and maintaining the library.
- The number of personnel required.
- The time required for implementation and library maintenance.
Results. To account for these risks, Forrester adjusted this cost upward by 10%, yielding a three-year, risk-adjusted total PV (discounted at 10%) of $10,000.
Administrative Costs To Create And Maintain A Library Of Pre-Approved Templates, Clauses, Tags, Documents, Etc.
| Ref. | Metric | Source | Initial | Year 1 | Year 2 | Year 3 |
|---|---|---|---|---|---|---|
| H1 | Number of paralegals tasked with creating and maintaining library | Composite | 1 | 1 | 1 | 1 |
| H2 | Averaged fully burdened hourly rate of a paralegal | $87,750/2080 | $42 | $42 | $42 | $42 |
| H3 | Hours to set up all pre-approved materials into LinkSquares | Composite | 60 | 36 | 36 | 36 |
| H4 | Averaged fully burdened hourly rate of a VP and general counsel | F7 | $115 | $115 | $115 | $115 |
| H5 | Hours to set up all pre-approved materials into LinkSquares | Composite | 12 | 6 | 6 | 6 |
| Ht | Administrative costs to create and maintain a library of pre-approved templates, clauses, tags, documents, etc. | (G1*G2*G3)+(G4* G5) | $3,916 | $2,211 | $2,211 | $2,211 |
| Risk adjustment | ↑10% | |||||
| Htr | Administrative costs to create and maintain a library of pre-approved templates, clauses, tags, documents, etc. (risk-adjusted) | $4,307 | $2,432 | $2,432 | $2,432 | |
| Three-year total: $11,604 | Three-year present value: $10,356 | |||||
Consolidated Three-Year Risk-Adjusted Metrics
Cash Flow Chart (Risk-Adjusted)
Total costs Total benefits Cumulative net benefits-
The financial results calculated in the Benefits and Costs sections can be used to determine the ROI, NPV, and payback period for the composite organization’s investment. Forrester assumes a yearly discount rate of 10% for this analysis.
These risk-adjusted ROI, NPV, and payback period values are determined by applying risk-adjustment factors to the unadjusted results in each Benefit and Cost section.
Cash Flow Analysis (Risk-Adjusted Estimates)
| Initial | Year 1 | Year 2 | Year 3 | Total | Present Value | |
|---|---|---|---|---|---|---|
| Total costs | ($4,307) | ($302,007) | ($307,507) | ($314,541) | ($928,363) | ($769,317) |
| Total benefits | $0 | $1,244,720 | $1,388,063 | $1,594,557 | $4,227,340 | $3,476,737 |
| Net benefits | ($4,307) | $942,712 | $1,080,556 | $1,280,016 | $3,298,977 | $2,707,420 |
| ROI | 352% | |||||
| Payback period (months) | <3 | |||||
Appendix A: Total Economic Impact
Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
Total Economic Impact Approach
-
Benefits represent the value delivered to the business by the product. The TEI methodology places equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization.
-
Costs consider all expenses necessary to deliver the proposed value, or benefits, of the product. The cost category within TEI captures incremental costs over the existing environment for ongoing costs associated with the solution.
-
Flexibility represents the strategic value that can be obtained for some future additional investment building on top of the initial investment already made. Having the ability to capture that benefit has a PV that can be estimated.
-
Risks measure the uncertainty of benefit and cost estimates given: 1) the likelihood that estimates will meet original projections and 2) the likelihood that estimates will be tracked over time. TEI risk factors are based on “triangular distribution.”
The initial investment column contains costs incurred at “time 0” or at the beginning of Year 1 that are not discounted. All other cash flows are discounted using the discount rate at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations in the summary tables are the sum of the initial investment and the discounted cash flows in each year. Sums and present value calculations of the Total Benefits, Total Costs, and Cash Flow tables may not exactly add up, as some rounding may occur.
Appendix C: Endnotes
1 Total Economic Impact is a methodology developed by Forrester Research that enhances a company’s technology decision-making processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders.
PDF
