As per Gartner’s “5 Legal Technology Trends Changing In-House Legal Departments 2022” Legal departments are forecasted to increase their spending on legal technology threefold by 2025.
Amidst this change and the growing adoption of CLM Software, it is essential to have a complete understanding of the choice between hosting the technology on your premises and hosting it on another (external) server.
Security-conscious, risk-averse, and (often) tech hesitant legal professionals are presented with this choice that has huge implications for strategy, investment, and the resultant ROI.
This debate between cloud and on-premise solutions has got its fair share in the spotlight. And with each approach having its own merits and demerits, the clear question for legal leaders today is ‘Which will empower their in-house legal teams?’
To help you answer this question, we will evaluate both approaches with contract management at the center of the discussion.
Let’s start with on-premise
This approach presents you with the opportunity of being able to manage your end-to-end contract management in-house, from your own ‘on-premise’ infrastructure.
Some instances where companies may choose to do this are:
On-premise solutions can be tailor made to fit unique requirements. Organizations with very complex and advanced customization and integration needs that are beyond the standard offerings of cloud solutions may want to opt for on-premise alternatives.
Need for control
Organizations that want complete control over how and where their data is stored, or ones that are wary of housing their CLM solutions on an external server may want to go this route. Also, in instances where the security compliance of an organization does not permit third party hosting, on-premise CLM tools are the only available, feasible option.
Large, expert in-house IT teams
Companies with a huge fleet of dedicated IT professionals who are up to the task of running and maintaining an on-premise solution may find this option more lucrative.
And while the on-premise CLM offerings serve some very specific needs, there are tradeoffs that need to be accounted for:
A highly customized, tailor-made solution that needs to be migrated to the buying organization’s infrastructure comes with a fairly extended implementation timeline.
Scalability and costs
Upfront set-up costs can be huge; this may taper off eventually once the system is up and running. But if you are anticipating major changes in user-base and volumes, then the initial set up may fall short soon and you may incur extra cost to upgrade. Fast growing companies that need to scale quickly will likely feel the brunt of an ageing infrastructure that cannot keep up with their rapidly changing needs.
Speed of advancement
Technology is changing fast, and best-in-class CLM players stay on top of new features and optimizations that can enhance the user experience. On-premise solutions are not built to cater to such rapid advancements. Upgrades take time and incur extra cost.
The Cloud Wave
Let us now move on to cloud solutions.
As per Legal Business Report, titled ‘The Next Five Years: Future of Legal Technology’ – We may be in the middle of the ‘Great Law Firm Cloud Migration’: in the next 5 years, it is anticipated that most law firms will be using someone else’s servers, even for critical systems.
Clearly, cloud solutions are catching on. So, what are some reasons why companies may want to choose cloud-based solutions? Here are the top 7:
Using a cloud-based solution gives employees, vendors, and customers 24*7*365 access to contract information. This may seem risky for sensitive documents like contracts, but CLM solutions can grant role-based permissions. For instance, Zycus CLM ensures enhanced security & data integrity with granular, user-defined access & encryption. All relevant stakeholders can make changes, and all changes are captured with complete details to ensure easy audits and tracking of a contract’s version history. This easy accessibility from anywhere ensures that there are no delays even if stakeholders and approvers are geographically separated or working remotely.
Better visibility and collaboration
Storing your contracts on a cloud means, all stakeholders have access to a single source of truth. All versions, changes, approvals etc. are done on a single platform and all people involved are always apprised of the most current version of a contract. This enables better collaboration, with faster approvals, timely alerts and payments, and quicker deal signing.
Ease and speed of implementation
Compared to on-premise solutions, cloud solutions have a much shorter implementation timeline. It is also relatively hassle-free, because configurations, upgrades, and user training are all taken care of by the technology provider. It requires relatively lesser effort from the purchasing organization and their in-house teams.
Scalability and Upgrades
Leading CLM vendors ensure they stay on top of technological advancements and come up with software updates to constantly enhance user experience. If the solution is hosted on a cloud, the software will likely always be at its latest version with next to no recurring cost and effort for recurring upgrades.
Security (the hot debate)
In the world of contracts, security means everything, and it is a common belief that data housed in your own in-house infrastructure may be more secure. But one needs to keep in mind that Cloud/SaaS companies that work with enterprise clients are aware of this need, and to stay in business, they take security very seriously. Zycus CLM is SSAE 16 and SOC 1 & 2 certified and offers features such as contract encryption and single sign-on for safe, secure and easy access to the application.
Total cost of ownership
With cloud and SaaS solutions, the large portion of the pie including maintenance, upgrades, security, falls in the purview of the solution provider. This can significantly bring down operating costs of using a CLM software.
On-premise solutions can be extended and customized in terms of functionality, but this is not always quick and not always easy. A huge benefit of a SaaS cloud-based contract management solution is that it can easily integrate with your existing tech stack. Especially with common collaboration, sales, and legal software like Microsoft Teams, Outlook, Salesforce, etc.
In conclusion, both approaches have some specific kinds of needs that they cater to. You as a technology buyer, evaluator or user need to first narrow down your needs, current resources and constraints and then make a decision on which is the best fit for you.