Editor’s Note: This co-published article covers high-level takeaways from a webinar hosted by Relativity. Watch the event on demand here to learn more.
In the evolving landscape of legal data management, integrating contract analytics and artificial intelligence (AI) is revolutionizing how businesses handle contracts and associated data. This transformation leverages these technologies to solve long-standing problems, highlighting that many challenges remain ripe for technology-enabled solutions, with generative AI leading the charge.
This article delves into the issues, the potential of technology to address them, and practical tips for implementing these solutions.
The Challenges in Contract Management
Contract management presents myriad business challenges, often tied to unstructured data. Consider these compelling statistics:
- 91 percent of enterprise data is unstructured.
- 11 percent of a corporation’s revenue is often lost to contract operations.
- Only 8 percent of the corporate workforce reports being unconstrained by contract-related workflows.
These figures highlight significant inefficiencies and financial losses due to poor contract management. Some primary use cases and challenges that contract analytics can address include:
- Transactional Challenges:
- Mergers and Acquisitions (M&A): The due diligence required for M&A is time-consuming and costly. Streamlining this process with contract analytics can significantly reduce time and expenses.
- Post-Merger Integration: Ensuring all contractual obligations are met and integrated efficiently can be daunting without advanced analytics.
- Procurement and Vendor Management:
- Decentralized Management: Organizations often handle payments, invoicing, and contract negotiations in a decentralized manner, leading to inefficiencies and missed opportunities.
- Obligation Management: Many companies spend substantial amounts negotiating contracts but lack visibility into their terms, leading to missed obligations and revenue leakage.
- Regulatory Compliance:
- Third-Party Risk Management: Financial institutions and other regulated industries face increasing scrutiny over their third-party relationships. Efficient contract management is critical to meet regulatory requirements and mitigate risks.
The Evolution of Contract Management Solutions
Traditionally, these challenges were addressed manually, requiring significant human resources and time. However, the advent of AI and contract analytics offers a paradigm shift. Here’s why technology is crucial:
- Efficiency and Accuracy: Automating data extraction and entry processes minimizes human error, reduces time, and ensures accuracy. For instance, extracting specific clauses from thousands of pages can now be done swiftly and accurately using AI.
- Cost Savings: By reducing reliance on manual labor, organizations can save significantly on operational costs. AI-powered solutions provide a scalable, cost-effective alternative to traditional methods.
- Enhanced Decision-Making: Advanced analytics enable better decision-making by providing insights that were previously difficult to obtain. This can lead to improved strategic planning and risk management.
Practical Tips for Implementing Technology-Enabled Solutions
For organizations looking to adopt contract analytics and AI, here are some practical tips:
- Start Small, Think Big: Begin with a specific, manageable use case that can demonstrate immediate value. Once proven, the solution can be scaled to address broader challenges.
- Leverage Existing Technology: Explore the technology already available within your organization. Often, existing tools can be adapted to new purposes, saving time and resources.
- Engage Stakeholders Early: Ensure buy-in from key stakeholders by clearly articulating the benefits and ROI of the proposed solution. This includes demonstrating potential cost savings, efficiency gains, and improved compliance.
- Partner with Experts: Work with experienced vendors who can guide the implementation process and provide ongoing support. Their expertise can be invaluable in navigating the complexities of AI and contract analytics.
- Focus on People, Process, and Technology: Successful implementation requires a balanced approach. Invest in training for your team, establish clear processes, and ensure you have the right technology in place.
Implementing New Technology in Corporate Environments: Best Practices and Insights
When integrating new technology in a corporate environment, the process involves more than just installing software. For instance, if a company plans to analyze hundreds of contracts weekly to extract data, the focus must extend beyond merely using the technology. Ensuring quality output is essential. One critical aspect is maintaining robust communication with the end client, a strength often demonstrated by experienced teams.
Effective communication with clients is crucial. This practice involves regularly updating clients on progress and insights, which fosters transparency and trust. Having previously worked in-house, understanding the client’s perspective and anticipating their needs ensures prompt address of any concerns.
Acknowledging that unforeseen challenges often arise during a project is important. The ability to adapt and communicate effectively about these issues is vital. Ensuring clients understand the implications of the project and its progress is key to successful implementation.
Managing Expectations and Building a Communication Framework
Technology, no matter how advanced, is not a silver bullet. Tools like ChatGPT and other generative AI applications, while seemingly straightforward, still require validation akin to older technologies. Managing expectations is critical: start small, avoid over-promising, and prioritize over-communication.
Organizations often have their unique terminology, creating communication barriers. Acting as a Rosetta Stone within an organization, simplifying complex concepts using analogies, and ensuring clarity in communication can greatly enhance understanding and collaboration.
The ecosystem approach, like the one Relativity Contracts brings, is part of a broader solution rather than a standalone tool. Understanding how technology fits into a larger system is crucial. While some contract elements can be automated, subjective nuances in drafting often necessitate manual intervention. Recognizing these limitations and having processes to handle exceptions is essential.
The Role of e-Discovery in Contract Analytics
e-Discovery expertise can significantly benefit contract analytics. The transition is smoother for those familiar with e-discovery, as many underlying technologies and methodologies are similar. Training is necessary, especially for those moving from litigation-focused roles to transactional work. Ensuring high-quality output early in the process is vital to gaining confidence in the team’s capabilities.
The Future of Contract Analytics and AI Integration
Generative AI, including tools like ChatGPT, is revolutionizing contract analytics. Its ability to accurately identify parties in documents and other complex tasks represents a significant advancement. While current technology requires refinement, its potential is immense. Regular testing and harnessing its capabilities can enhance efficiency and accuracy in contract analysis.
Generative AI is expected to coexist with legacy technologies, creating more job opportunities and solving complex problems. The evolution of technology, like the shift from WordPerfect to Word, reflects a broader trend of integrating advanced tools into existing workflows. This integration will enhance the capabilities of legal professionals and streamline contract analytics.
Use Cases and Applications of Contract Analytics
Contract analytics has diverse applications across various industries. In healthcare, rate comparisons between providers are critical. In financial services, reviewing side letters for equal investor terms is essential. Procurement, commercial lease reviews, risk management, and entertainment are other areas where proactive contract analytics can provide significant value.
The future of contract analytics will likely see greater integration of generative AI, enhancing transparency and providing deeper insights into contractual data. While chatbot functionality for contracts is not yet available, ongoing developments suggest that more advanced AI capabilities will soon be integrated, further simplifying and improving the contract analysis process.
Conclusion
The integration of contract analytics and AI is transforming how organizations manage legal data. By addressing inefficiencies, reducing costs, and enhancing decision-making, these technologies offer significant benefits. However, successful implementation requires careful planning, stakeholder engagement, and a balanced approach that considers people, processes, and technology.
As businesses continue to navigate this evolving landscape, those that embrace these solutions will be well-positioned to thrive in the future.
Contract Analysis Webinar: Watch On-Demand
In case you missed it, you can still watch Cimplifi and Relativity’s webinar—“From Insight to Impact: The Power of Relativity Contracts”—on demand to discover how leading law firms and legal service providers have revolutionized their operations using Relativity Contracts. This insightful session features real-world case studies, practical applications, and tangible results, showcasing the true potential of contract analytics. Don’t miss this opportunity to learn from the best in the industry and see how modern contract tools and techniques can transform your business processes.
Charles Post is an executive vice president at Cimplifi.
