Contract Management Systems Are Smarter Than Ever…
Contracts define a business: What it buys, what it sells, and with whom it enters into business relationships. Yet for many companies, contracts are viewed as a nuisance. Managing these critical assets brings to mind lengthy negotiations, multiple iterations, complex documentation, and decentralized paper-based or computer storage. The unfortunate reality for businesses is that inefficient contract management can lead to lost revenue opportunities and customer challenges.
These factors, coupled with the persistent need to achieve more with fewer resources, are the reason so many organizations have already turned to Contract Lifecycle Management (CLM) solutions as a way to help reduce the overall burden on commercial, legal, and corporate departments. Also, the unrelenting pace of today’s world has driven companies of all sizes, across all industries, to look beyond their current processes and technology solutions in search of ways to get ahead and stay ahead. Those who once viewed digital transformation as a future initiative are now regarding it as an urgent imperative.
Artificial Intelligence + Contract Lifecycle Management
The accelerated advancement of technology has brought CLM to an exciting point in history. These cloud-based enterprise solutions have long sought to drive efficiencies that result in cost savings, reduced legal risk, and stronger industry and relationships. But now, as we move beyond first-generation technology, the digitized contract data within CLM solutions is now being aggregated and analyzed, delivering strategic insights.
Applying Artificial Intelligence (AI) to contracts in a CLM creates a new pool of digitized data to improve the overall business. The capabilities of AI apply particularly well to many facets of contract management, such as automatically importing any and all legacy contracts into one intelligent, centralized database to allow for a complete picture of past and current contractual relationships and ongoing commitment and obligations. Once AI is utilized to unlock this data and create these data sets, AI can be further applied to create deep data visualization capabilities and provide unprecedented visibility into contract relationships and performance.
By way of illustration, an international technology company used AI to digitize more than 50,000 legacy contracts and greatly accelerate its contract approval process. This created a wealth of previously inaccessible data that helped its sales teams improve outcomes. The CLM system’s integration, insight, and automation made it possible to make proactive decisions on renewals, up-sell, and cross-sell, thereby increasing revenue and accelerating contract turnaround time.
Three Key Benefits: Speed, Compliance, Competitive Advantage
Business leaders and corporate executives are quickly discovering that today’s most advanced CLM solutions can truly improve agility, resilience, and competitiveness. Three primary areas where AI provides its greatest impact for a business are with increasing its overall speed, compliance, and competitive advantage.
According to industry analyst firm Gartner: “By 2023, artificial intelligence (AI) will enable 30% faster contract negotiation and document completion processes in organizations that deploy leading contract life cycle management (CLM) solutions.”
By integrating AI into CLM solutions, organizations can reduce cycle-time, mitigate risk and eliminate errors by automating key aspects of the contract review process. For instance, AI can read a third-party contract against a company’s standard agreement, identify deviations from preferred clauses and suggest acceptable language. This increased efficiency drives improved customer satisfaction, better partner relationships, and increased revenue opportunities.
Noncompliance of contract obligations negatively impacts performance and exposes businesses to substantial risks such as reputational damage and financial loss. Managing obligations, commitments, SLAs, and entitlements of contract clauses and terms manually presents compliance challenges. Failure to comply with regulatory and legal obligations set forth in a contract can have devastating effects for an organization. However, an AI-powered contract management process can be highly effective in ensuring obligations and regulatory compliance. For instance, AI can read through a portfolio of agreements to identify all the environmental and sustainability obligations of a supplier. After recognizing and extracting these regulatory obligations, AI can direct these obligations to the correct resources so that they can be monitored and fulfilled. AI-powered automation provides assurance that all required obligations and commitments are met across a company’s full contract portfolio and can be reported on.
Perhaps AI’s greatest value for CLM is its ability to help stakeholders, executives, and leaders make better decisions for the business. With AI, sales, legal, and IT teams can now identify the relationships between common entities hidden in contract data. Before AI-enabled CLM, data was trapped in static paper contracts; the ability to aggregate this data and mine for insights was manual and laborious, if not impossible. Now, with the power of AI, these data pools can be mined for these actionable insights that directly translate into immediate and long-term business value. More than simply negotiating the best terms and outcomes, AI is a strategic tool that sets organizations up to stay competitive in their market.
The Future of AI and CLM
As the world continues to provide unexpected twists and turns, the one thing we can count on is that change is inevitable. Staying in step with advanced technologies will give organizations the ability to respond to the current dynamic environment as well as prepare for the future. AI-driven insights are proving to optimize and accelerate business.
Consider the global pharmaceutical corporation that uses an AI-infused ICI platform with a combination of AI applications to address previously intractable contracting challenges and improve monitoring contract performance and value. The review time of third-party contracts sent by suppliers were reduced by up to 50% and processed 50% faster, minimizing risk and improving contract performance. Accuracy of attributes and clause extraction also improved more than 43% compared to manual processes. Industry leaders like this, who embrace AI-powered contract lifecycle management as a key component of their digital transformation strategies, are in position to evolve, grow, and succeed.
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