AI – Cloud-Based Contract Management Software
The contract lifecycle management (CLM) market is growing incredibly as validated by the Forrester Q1 Report 2019. But as the market is expanding, basic contract management technology is becoming outdated.
According to Ultria’s survey, around one in four large enterprises still do not use CLM software, and of the 75% who do, almost half of them have a maturity of 4 or below (on a scale of 1-10).
So, it is just the time to deploy a cloud-based contract management software. And for the ones already using it must embrace the modern technology — Artificial Intelligence (AI). CLM solutions leveraging AI take contracting beyond the horizon to give you a simplified and streamlined experience.
Global research and advisory firm Gartner predicts that the business value created by AI will reach $3.9 Trillion in 2022.
Still hesitating to implement new software? CLM-agnostic solutions like Ultria Orbit can help you implement AI-centric solutions without the need for costly data migration, user training, and implementation risks involved in migration from existing CLMs.
We have spoken enough about AI. By now you must be curious how AI can help in contracting and what are the capabilities that make it so appealing.
How does AI Integrate into Contract Management Software to Administer Contracts?
1. Ease of Authoring Complex and Varied Contract Types
Corporate legal departments create hundreds of contracts. Approximately 71% of in-house respondents reported that they saw increased workloads, yet 33% of in-house respondents said they reduced outside spending, as per the 2021 Corporate In-Housing Survey.
Many of these do not require specialized legal input. Thus, bringing more work in-house and leveraging technology spans the divide between legal and other business functions. Authoring contracts for different requirements can be complex with varied clauses and templates.
Here, AI’s context-based approach enables easy contract authoring with customizable contract templates and pre-approved clauses. The algorithms are trained to provide suggestions on alternative, missing, and fallback clauses based on comparison with defined standards. So, it not only speeds up the contract creation but also eliminates the use of improper contract formats or non-standard language.
2. Use of Machine Learning to Extract Contract Metadata from External Contracts
Many of our customers have moved from manual ways of digging into an external contract to a more intelligent AI-assisted parsing. Extracting metadata from contracts is another tedious task that your in-house lawyers and legal operations should not invest their time in. An AI-powered contract management software has built-in support for loading external agreements through the request-intake portal.
With strong AI technology like Natural Language Processing (NLP) and Optical Character Recognition (OCR) integration, your external contracts can be parsed extract contract metadata like contract titles, effective start/end dates, currencies, contracting parties, etc. and create a template with all the possible contract metadata for further processing – contract authoring, reviews, negotiations, approvals, and signing. This significantly reduces the time spent by your in-house legal teams on manual efforts.
3. Clause Comparison and Classification For Faster Contract Review
While reviewing contracts, AI compares clauses with the standard approved contract language and populates the percentage match of different aspects. It then summarizes the missing parts of the clauses which can be added.
Besides clause comparison, AI can classify contracts according to the type of clauses in them — be it MSA, SOW, lease, or contractor agreement. AI engine can even review and categorize your contract clauses as per the organization’s defined standards.
Not only that, it also identifies your contract clauses and maps them to standard clause examples to select from. It also allows you to edit or rename the clause category as per the desired language for ease of review.
Some advanced software can even discover new clauses. Owing to its learning capability, if a system is exposed to enough documents with the same set of new clauses, it picks them up and stores them in the clause library/repository.
4. Contract Analytics for Obligations Management and Risk Assessment
A typical Fortune 1000 company has as many as 20,000-40,000 active contracts at any given time (World Commerce & Contracting). Imagine the burden of contract compliance, hidden obligations, urgent audit requirements, and changing regulations that make these contracts vulnerable to unforeseen risks.
AI uses Natural Language Processing (NLP) to parse through documents, classify clauses, and highlight the risk factors associated with the contracts with the help of risk modeling.
With the Machine Learning capabilities of the software, it can extract metadata and pull a report on key performance indicators (KPI), service level assurances (SLA), milestones, and other parameters. This makes it simpler to understand various obligations or to identify all contracts bound by a specific regulation.
AI-driven contract analytics enables companies to analyze contracts more accurately and effectively. It provides deep visibility into risks, obligations, and opportunities in the contracts.
5. Accelerated Negotiation & Reviews for Efficient Contracting
An automated negotiation process with AI-led suggestions based on historic data accelerates contract-sign-off. According to Gartner, by 2023, AI will enable 30% faster contract negotiation for organizations that deploy leading contract management systems.
After negotiation, the review and approval stage often elongates due to multiple revisions. Learning from the organization’s transaction history, AI can review high-volume but low-edit agreements and suggest revisions to bring them up to the company’s standards.
There’s more to it. Without visibility into the workflows, stakeholders are often unaware of where the contracts are stuck. But with an AI-based CLM solution, all involved entities are brought into a single platform, highlighting changes in clauses, enables version management — speeding up review and approval which improves the turnaround times and increases accountability.
So, the speed, accuracy, and scale of AI-powered contract management solutions help free up the legal team from many tedious tasks and allow them to concentrate on more important aspects like increasing revenue generation. This further enables enterprises to maximize growth opportunities and increase their software ROI.
To dig deeper, don’t forget to download our eBook on how Artificial Intelligence can be a game-changer for contract management.