Creative Destruction Is Coming for CLM. Are You Ready?

According to ChatGPT, creative destruction is “an economic concept that refers to the process by which new innovations replace outdated industries or technologies, leading to economic progress but also disruption.”  Austrian economist Joseph Schumpeter is credited with coining the concept.  Often cited as the prime example of creative destruction, the technology industry is certainly no stranger to it and software markets are acutely aware of the term.  So it’s not surprising to state that the market for contract lifecycle management (CLM) applications is facing creative destruction. This is particularly true in light of the impact of artificial intelligence (AI) in all its forms (ML, GenAI, agentic, et al) is having on this market.  Contract management, with its need to comb through tens or hundreds of thousands of text-based documents, is uniquely well-suited for the application of generative AI technology, and GenAI has gone from a differentiated capability to CLM table stakes in less than 24 months.

Already an attractive opportunity for VCs and private equity investors, CLM is also gaining attention as companies begin to recognize the strategic value of data contained within contracts. Every critical business relationship – with customers, suppliers, and employees is codified in a contract. CLM is no longer a departmental productivity app. The notion that the benefit of CLM comes uniquely from its use within legal, sales, or procurement functions is outdated and inaccurate. The business value derived from contract data increases exponentially by the number of users and uses of the data within the business.

One massively disruptive outcome of creative destruction – especially for CLM buyers – is market consolidation and an acceleration of industry mergers and acquisitions. With an oversupply of vendors struggling to differentiate their solutions, the CLM market is already experiencing an uptick in M&A activity. More vendors will change hands, as many late stage venture backed companies scramble to reach profitability and are unable to raise new capital. This begs the question – who are potential acquirers of CLM vendors? Let’s review them from A to Z.

Adobe – With a strong position in document management and foothold in the e-signature space, combined with effective channels and a large installed based in key verticals like SLED, a CLM application would add $30Bil TAM for Adobe and be a natural fit.

HubSpot already has an investment in Pandadoc (MGI 360 Rated) and it would be a logical extension of HubSpot’s expanding functional footprint. Already its added billing. Sales quoting and contract management from HubSpot would be an attractive add-on for HubSpot’s 200,000+ customers.

Intuit – With over 100 million customers, it doesn’t take too many individuals and small businesses paying a nominal amount per contract for Intuit to add $1 billion or more to its top line. The company has an existing partnership with LegalZoom.

Oracle has a partnership with Agiloft (MGI 360 Rated), and is in need of a modern enterprise grade CLM solution.  Given the size of the CLM market, adding a standalone contract management product would be a natural fit for the Oracle and NetSuite customer base and give Oracle a material boost to revenues.

Salesforce claims to CLM as part of its Revenue Cloud vision, and it needs something to breathe additional life into its overall AI strategy.  CLM is an ideal use case, and would be a smart defensive move as ServiceNow, HubSpot, and Microsoft all encroach on Salesforce’s existing markets.

With a reseller agreement with Icertis (MGI 360 Rated), the market is anticipating SAP’s purchase of the company. There is a decent probability (0.6) that SAP does purchase Icertis. Given its equity investment in the company, SAP would also benefit from an Icertis IPO.

ServiceNow – An emerging tech mega vendor, ServiceNow is ambitiously expanding its functional reach with mid to very large enterprises. Its marketing and channel strength would make it an instant powerhouse in the CLM market.

Stripe has built a sizeable business in billing and monetization, has formidable online marketing power and a vision that is growing beyond its historical core as a payments facilitator (pay-fac).  Stripe has made it very painful for low-end billing vendors – a similar outcome could await the low-end CLM suppliers.

Workday (MGI Rated) was the first mega-technology vendor to recently make an acquisition in CLM – picking up Evisort for approximately $310 million in cash.

Veeva Systems – Self-described as the industry cloud for life sciences, Veeva Systems is approaching $3 billion in revenues and has over 1400 customers including many of the most visible and valuable pharmaceutical and life-sciences companies. Regulated industries, especially pharma, invest disproportionately into CLM systems. A number of CLM vendors have strong vertical strength and customer bases in Veeva’s target market.

Zoho – While not the most highly visible company, Zoho is a $2 billion+, growing and profitable provider of infrastructure and application software primarily serving SMBs (although it also has very large companies as customers as well). The company already has a contract management solution in market. Given the company’s history of building everything itself and limited track record in acquisitions, Zoho is an unlikely acquirer.