Amid a global pandemic that has sparked economic upheaval, legal teams and other business units have greatly reduced their contract completion times, according to a new report from CLM provider Ironclad.
The company’s analysis of more than 1 billion contracts in its platform found contracting cycle times have decreased from an average of 16.6 days pre-pandemic to an average of just 6.7 days this year.
Ironclad General Counsel Chris Young attributes the trend to legal departments and the business teams they work closely with leveraging technology more than ever before to address evolving public health and economic conditions that have required quick adjustments.
As the pandemic first began spreading widely across the U.S. in 2020, contract cycle times decreased 13% from levels the year before.
This trend has continued with businesses reducing contract completion times by 23% compared to pre-pandemic levels last year and 60% so far this year in comparison to 2019, according to Ironclad’s Digital Contracting Data Trends Report.
“Whether this was the pressure cooker environment of the pandemic pushing companies to get more deals closed, purchase more services to enable remote work, or simply move faster to survive, companies have doubled down on speed in a time of immense change,” the report said.
Young says the enhanced contracting speed has freed up time for legal teams to confront the wide array of new challenges they have faced, such as shifting public health protocols and more recently the economic fallout from Russia’s invasion of Ukraine.
“If you can really accelerate and make more efficient and effective the contracting process in your organization, you're much better suited as a team to confront some of these weighty issues that we're seeing arise,” Young tells Legal Dive.
Uptick in amendments
At the same time contract completion speeds have increased, companies have also made more amendments to their agreements.
There were 4.5 times more amendments made to contracts in 2020 than in the previous year and 14.3 times more amendments in 2021 compared to pre-pandemic levels, according to the Ironclad report.
Young says he was encouraged to see those statistics because it indicates parties with strong existing relationships have made concessions amid external forces such as supply chain issues that have made the business environment more challenging.
“When you have that type of relationship, no pandemic, no market downturn is going to come in the way,” Young says. “Instead what happens is the parties come together and find a mutually agreeable way to move forward.”
He expects the current economic disruption sparked by geopolitical conflict will drive another increase in contract amendments.
The rise in contract amendments has come as legal departments and other business units have found new ways to collaborate.
Stacey Wang, Ironclad’s director of product marketing, says traditionally Microsoft Word has been the “gold standard” for contract editing among lawyers.
But she and Young say remote work has helped create an atmosphere in which in-house legal teams and other business units have been willing to try browser-based collaboration.
For example, Ironclad has seen a 262% year over year increase in the usage of Ironclad Editor, its DOCX-compatible browser-based contracts editor launched in 2020.
Additionally, the Ironclad Connect tool that allows external counterparties to negotiate contracts in-browser saw usage rise 150% from the third quarter of 2021 to the fourth quarter, with another 119% increase in the first quarter of this year.
Young says his company’s editing tools combine what works best in Microsoft Word for negotiation and in Google for collaboration.
“The in-app Editor and the ability to collaborate in that has really been a big part of why not only our legal team but other legal teams in our install base quickly adopted that Editor,” he says. “And I don't see folks going back, because you get used to it, you see the best of both worlds right in front of you, and you kind of just keep moving at breakneck speed when you're dealing with a huge workload.”