A Match Made in Heaven?

What's the point of a CLM...?

Contract Lifecycle Management (CLM) and the expectations around it have changed over the five years I've been in this space. I have a story I like to tell that captures the nature of this change.

A few months ago I was co-selling Docusign CLM with a Docusign Account Executive (AE). It was relatively early in the sales cycle, but we identified the prospect's need for CLM. Their budget precluded them from Docusign's (much?) more expensive CLM+ offering which includes extensive Artificial Intelligence (AI) capabilities.

As soon as the AE and her sales engineer started demoing CLM, the prospect asked a lot of questions:

• "How do I get CLM to suggest edits for me?"
• "How can I analyze the risk factors of an agreement?"
• "How do I compare the terms in this agreement against my legal playbook?"
• "How can I review a short summary of this agreement?"

It became very clear very quickly that the prospect expected CLM to do a lot of what it simply couldn't at the time. The Docusign AE kept her cool and explained that the base CLM product could not offer this AI-related functionality. The more expensive CLM+ product could do some of it but CLM+ was beyond the prospect's budget range. I will never forget the prospect's response:

"What is the point of a CLM that doesn't have AI?"

Wow. What is the point of a CLM that doesn't have AI? Five years ago customers were happy to have a CLM system that generates agreements, manages negotiations, and stores documents in a centralized repository. Now potential customers expect CLM to be not only AI-enabled, but that the whole point of CLM is to be AI-enabled.

DocuSign and Lexion

Docusign's Challenge

In the days when CLM was all about document generation, negotiation management, and document storage Docusign CLM was a market leader. It continues to be a market leader -- and its core capabilities are still strong -- but the CLM landscape has changed over the years. Customers demand AI. Even small customers who cannot afford CLM+ want AI. And large customers want AI-enabled CLM that is inexpensive and easy to setup and maintain.

Honestly I was starting to get worried. While still a leader it seemed like Docusign was starting to fall behind.

Enter Lexion

Docusign had to do something, and on May 6, 2024 Docusign announced that something. It would acquire Lexion for $165m in cash -- a major investment that demonstrates how serious they are about incorporating AI not just into CLM but into their new IAM platform.

Why Lexion? Lexion was founded in 2019 by three nerds (as a fellow nerd I use that term in the most endearing way possible) who met at the Allen Institute for AI. At Lexion the trio built AI-enabled products to "free legal teams from menial tasks like filing contracts and manual reporting, so they can focus on what really matters: growing the business and providing strategic advice." And they attracted a lot of incredible talent to help them (ex-Google, Microsoft, Facebook, Amazon).

A great get for Docusign!

The Exciting Stuff

There is a lot of good the acquisition of Lexion can do for Docusign.

AI Product Leadership. The three Lexion co-founders Gaurav Oberoi , Emad Elwany , and James Baird will take on leadership roles at Docusign within Product and Engineering. These three have shown that they have what it takes to create enterprise-quality AI-enabled products and will add to Docusign's talent pool.

AI Contract Assist. Lexion has a Microsoft Word plugin that helps teams automatically review contracts and analyze them for risk. Where needed, the tool can provide AI-generated recommendations for edits. This is the sort of functionality clients expect from even base CLM systems.

ChatGPT-like Q&A Experience. With the prevalence of tools like ChatGPT, people crave the sort of hyper-intelligent and (dare I say) creative intelligence that those tools provide. Lexion technology enables users to better understand their agreements with ChatGPT-like Q&A functionality. Simpy type a question using natural language and the technology will respond.

• "What is the limitation of liability of this contract?"
• "Can you summarize our obligations regarding warranty?"
• "What would happen if we used our client's logo in marketing material?"

Democratization of AI. With Lexion, Docusign may be able to make robust AI-related functionality inexpensive and easy to implement. Teams from smaller organizations -- not just those in the enterprise space -- can take advantage of the benefits AI has to offer.

The Tough Stuff

Simply shelling over $165m to acquire Lexion is not a panacea. There is a lot of work to be done and some items I'll have my eyes out for.

Deja vu all over again. Almost exactly four years ago Docusign announced that it would acquire Seal Software to "deliver more AI and analytics capabilities, both now and in the future." What happened? Well, eventually Seal (Docusign Intelligent Insights) became the + in CLM+. As a smaller Systems Integrator (SI) partner my team didn't implement CLM+, partially because (as I understand it) it took a good amount of specialized knowledge to do so.

While CLM+ has been and will continue to be very valuable to Docusign customers, it is perhaps more expensive and tougher to implement than some clients would like. Will Lexion technology replace Seal? Will they stand as two different offerings solving two different use cases? Will they be combined to form some sort of super AI? I'm not sure. But I'm sure the nerds at Docusign will figure it out.

Telling the story. Docusign offers eSignature, CLM, CLM Essentials, CLM+, and just recently announced IAM which contains Maestro, an App Center, and Navigator. Lexion is a company with its own products -- some of which compete with Docusign: workflow, repository, sign, AI contract assist, and intake. That is a lot of products solving different aspects of the Agreement Trap. That's great! But how do they all fit? Which (if any) are superfluous?

Docusign will need to tell a cohesive story with their products. And that story will need to be consistent within Docusign and -- very importantly -- with their partners (like yours truly). I'm excited to see where they take this story and I'm looking forward to helping them with it.

A bit of catchup. For better or for worse Docusign took a conservative approach to folding AI into their products. As a large, public organization they could not take the "move fast and break things" approach of some of their smaller and less risk-averse competitors. Because of this, Docusign fell behind in the realm of AI.

This acquisition is certainly a step in the right direction. But Docusign will need to fold in the technology of another company into their products while many of their competitors have organically built AI capabilities into their core products. Can Docusign overcome this challenge? They have a lot of intelligent and capable people and I'm sure they can, but it will definitely be a challenge.

Conclusion

Docusign has made a big bet with their acquisition of Lexion. They know that they must incorporate valuable and user-friendly AI capabilities into their products and this acquisition is their way of supercharging that effort.

There will be challenges. Can they fold in Lexion-based technology even better than they did Seal? Can they tell a cohesive story with their products and make sense of all that they offer? Will they catch up to and surpass the capabilities of their competition? All that remains to be seen, but I'm optimistic.

If they can execute on their vision they will have some truly incredible AI capabilities in their already-solid products. They will democratize AI and provide value to organizations both large and small. They will live up to the promises of Intelligent Agreement Management and really start to unburden the world of the Agreement Trap.

Will they do it? Again, I'm optimistic.

Want to learn more about what this acquisition means? Want to learn more about CLM, IAM, and the agreement space? Have Agreement Trap challenges you face that you don't know how to solve? Reach out to me and I'd be happy to help. [email protected]