As with everything the future of contract management is heavily influence by technological advancements and especially the evolution of AI and machine learning. Contract management enhanced by AI is already progressing by leaps and bounds . . . imagine what it will look like by 2025?
Here, we’ll take a look at the changing nature of contract management software, examine its importance for service-based businesses, project managers and legal teams, and predict what it will look like in five years.
Artificial intelligence (AI) is an emerging technology that will continue to have a significant influence on managing contracts. Specifically, its potential to make organizations more efficient and to allow crucial data to be extracted more readily will take center stage. AI is playing an increasing role in helping companies overcome many of the challenges to contract creation.
In this article for the Harvard Business Review, it’s noted that one of the biggest challenges of modern contract management is the sheer number of contracts that firms need to keep track of, which will only increase over the next five years. This can be especially time-consuming and problematic when a large number of contracts, each with different renewal dates, must be renewed routinely.
AI can sort through the vast amounts of data and pull out key information and contract terms, offering higher levels of accuracy and efficiency when it comes to identifying contracts up for renewal, thus eliminating the risks associated with contracts lapsing quietly in the background.
Most traditional Contract Lifecycle Management applications have limited search capabilities requiring strict parameters for the query to successfully locate the requested document. AIcan drastically improve CLM database searches by utilizing techniques derived from natural language processing, as well as information about users themselves, in an effort to better understand the meaning and context of each searchconducted.
Research shows that the average amount of time needed to create and approve contract data is 3 1/2 weeks. Highly trained legal professionals that used to spend hours on manual and low-value work can now, thanks to AI, take on more of a management role, focusing on resourcing and examining products that can help them become more efficient in the services they provide.
Looking ahead to 2025 and beyond, we know AI as it relates to contract administration is only going to get better. We already know that it can replace the need for an actual person to manually read the contract, extract the data, and track the obligations. But we will see more AI bots that will ask a set of questions as they relate to a specific contract and that contain the ability to input that data.
AI’s contract management solution is especially useful in the legal space. Machine learning will increasingly be used for legal research and pilot programs that attempt to predict litigation outcomes. The AI contracting process will continue to help lawyers automate repetitive types of tasks, such as drafting lower-exposure or lower-liability agreements and contract templates like NDAs. It will empower in-house counsel in areas such as predictive coding, thereby saving attorneys time through the utilization of data samples to identify relevant documents as they relate to e-discovery requests.
AI software will also get better at the automating processes and tasks, such as locating and collecting clauses for review as part of transactional due diligence. Contract management AI will continue to develop better metrics and more sophisticated analytics tools, enabling legal departments to streamline their workflows and to deliver legal services cheaper and faster. AI’s contract management assistance offers value for corporate counsel as it provides legal departments with more tools to increase their productivity.
Here are some more ways AI will assist with contract commercial management in the next five years:
- Voice activated technology: We will see voice assistants as the primary interface for business software, from routine tasks listing all active contracts up for renewal in the next few months to more complex tasks such as explaining the differences between your company’s NDA and that of a competitor.
- AI Contract Negotiation: AI can analyze contracts and ensure company policies are being followed. It can also point out discrepancies, with easy access, that demand attention throughout the entire contract. Contract managers can even automate pricing negotiations based on supply and demand.
- AI Contract Generation: Contract creation will be completely automated when a contract manager flags an email or a series of white papers. AI can pull the language from the email, interpret the context and meaning, and proceed to populate the contract with the appropriate contract clauses. It will also help with version control, contract expiration dates and contractual obligations.
- AI Risk Scoring: CLM systems can already scan contracts and flag language that could pose a risk to the organization. AI risk scoring takes things a step further, suggesting alternative clauses that can reduce the risk score and protect the organization and the business relationships within it. Such document management saves a legal team, sales team, or contract manager time in reviewing and editing sensitive contracts so they can concentrate on more complex tasks and negotiations.
Find out how AI will help your organization in the next five years. Schedule your free demo now! If you liked this article, then take a look at another post from Evisort on contract management for SOX compliance.