December 6, 2021
By Memme OnwudiweReading Time: 4 minutes
It’s 2021, and AI is ready. Are you using it?
The last two years have been a doozy with an unprecedented curveball, within a tornado, within a hurricane for businesses. Survival depended on adapting to the new norms COVID presented, supply chain disruptions, regulatory changes (and then invalidations), and customers’ changing expectations.
What’s in store for 2022? 2023? 2030? I have no idea, but as a co-founder and EVP of Evisort I’m going to prepare my business and team to be as agile and streamlined as possible, so we have the best chance of tackling any challenge that comes our way.
Intelligence and adaptability are critical. Businesses will either be left behind by digital transformation or embrace it to keep their competitive advantage.
Business intelligence is critical to adaptability. Unfortunately, many businesses have a massive intelligence blind spot – their existing contracts. Existing contracts are the most important intelligence source in a business – contracts are data and data is the lifeline of a business.
The blind spot is getting bigger and feeding a long-term problem: when companies digitize their Contract Lifecycle Management (CLM) processes for generating new contracts they replicate their existing workflows without fundamentally improving them. This means sub-standard terms, pricing, and other trends get replicated in every single new contract. Pouring salt in the wound, businesses waste time and money negotiating the same clauses over and over because they didn’t analyze their historical contracts and learn from past negotiations.
Change is here and it’s due time that Legal, Legal Ops, and any team that works with contracts demand more from contract management technology.
Contracts are data. And because it’s 2021, your company has either started or has already transformed most of the business to be digital and data-driven.
Except. For. Contracts.
In-house legal departments have historically been viewed as a cost center and legal and contract management tech have lagged behind software for profit centers like sales or product.
Not. Any. More.
Legal and Legal Ops should expect to survive and thrive on the data buried in their contracts – instead of resorting to one-off anecdotes. Contracting teams should have access to analytics and insights in real-time. It should be as simple as uploading contracts to the cloud and using out-of-the-box dashboards that instantly break down your contract components and allow you to filter and drill down into vital information business leaders need, such as: what percentage of our contracts have a termination for convenience and when do they renew? Which of our contracts have non-standard negotiated language we should be aware of? Can we put their logo on our website?
Even more importantly you should be able to easily show the value added by teams drafting and reviewing contracts by automatically measuring and reporting on backlog trends, aging contract drafts, and transaction cycle times.
We need a new standard. That standard is Contract Intelligence.
For too long, AI has been a buzzword in legal tech – or any tech company for that matter. You’d be fired from marketing at a contract management software company if it wasn’t on your website. Vendors are vague and oversell clients who buy platforms only to find that they had to train AI algorithms themselves with frustratingly low levels of success.
AI has not been well defined in this industry for a decade, so let me be very clear.
In 2021 you should be able to upload any document to your contract management system and automatically track clauses, dates, fields, and metadata that can be easily searched and visualized in seconds – without lifting a finger. Furthermore, you should be able to access and analyze all your contracts and data – be it third-party paper or terms unique to your business allowing you to optimize future negotiations for efficient execution – learning and improving from the data-point derived wisdom in your historical documents.
We all need to start demanding Contract Intelligence from our legal tech vendors. It has three critical capabilities:
- Intelligent Contract Lifecycle Management – streamlined, data-driven deal-making tools and workflow processes that make contract request, generation, redlining, and approval workflows transparent, efficient, and optimized for execution
- AI-based Contract Analytics – answers to your most important contract questions and ability to visualize and report on vital contract info and key performance metrics without manual data entry, data migration, or IT involvement
- Central and Secure Contract Repository – a single source of truth for all contracts that works with your existing systems, without migration or IT involvement
Contract Intelligence enables businesses to learn from the past to improve the future. Legal, Legal Ops, Sales, Procurement, Finance, and IT teams can now instantly turn contracts into searchable data, answer any question about existing contracts, and optimize new agreements for negotiation and execution so you can make better, faster, less risky deals.
This isn’t pie in the sky thinking.
Businesses are transforming their contracting with AI today. When COVID-19 hit, NetApp, a provider of data management and solutions for the cloud, was challenged with hardware and supply bottlenecks. To respond to these unforeseen challenges, NetApp quickly needed to understand which customers would accept partial shipments and what recourse it had with key suppliers across most of its product and service lines across the globe. Agreements weren’t historically tagged with “partial delivery” terms and there were tens of thousands of contracts. Fortunately, NetApp transformed their contracting processes with AI and was able to search across all agreements to quickly locate specific provisions, enabling them to invoice for partial shipments while maintaining customer satisfaction. Within a week, NetApp was able to run a search on partial shipments across their entire contract repository—cutting 24,000 contracts down to 600, with 90 different variations of partial shipment provisions.
Okay, but what about creating and optimizing new contracts?
McKinsey estimates that AI technologies could potentially deliver up to $1 trillion of additional value annually for banks. Bank of New York Mellon, the bank of banks, uses AI to review new custodial agreements based on their internal rules, guidelines, and processes. They then use AI technology to automatically create customized initial contracts and digitally coordinate with the necessary internal stakeholders for approval of special terms. BNY Mellon then takes it to another level and uses AI to automatically flag non-standard language and alert the necessary legal team members to automate the decision-making process, allowing attorneys to focus on more strategic tasks.
Now is the time to transform and gain a competitive advantage
Law is changing, capabilities are available today that no one could fathom even five years ago. Today it’s exciting to use these tools, but tomorrow, it will be negligent not to. You need to go beyond digitizing your contracts and processes, you need to datatize them.