AI and automation bring dramatic changes to contract negotiations, management
This has been as especially active year for new, emerging and disruptive technologies, especially around artificial intelligence and automation tools.
To put some perspective on the changes, here are four such technologies that I believe will have significant impact in the document and contract management space.
As voice-activated technology matures, we see this being used more and more as the primary interface for accessing information. The transition will start with routine tasks.
For example, rather than clicking through to a report or dashboard managers will be able to simply ask the voice bot to bring up the report or the relevant statistic, such as “Alexa: what is the total value of contracts up for renewal?”
The next stage will be more sophisticated analysis using voice-activated technology, such as “Alexa: what are the differences between our NDA and that of a potential partner?”
The advantages are efficiency and productivity, as it eliminates manual handling of a lot of routine tasks. A disadvantage is that it will take a while before these systems learn the nuances around business language and there are a lot of security and privacy issues that will need to be worked through.
For example, if they are recording conversations in meetings and sending back to the cloud, who owns that information? What happens if it’s compromised?
Contract Negotiation Using AI
We’re a long way from AI negotiating contracts. But AI can help in data analysis to ensure negotiators have the best pricing information or point out discrepancies in terms to guarantee that guidelines are being followed. In short routine tasks, this is important.
Certain consumer-facing companies that have tried negotiable pricing based on variables have faced a significant backlash. For example, soft drink vendors who raise the price based on weather conditions or airlines who priced based on how many times your IP address conducts a search.
In the short-term, AI will be useful in negotiating prices and the execution of commodity or transaction-based contracts, based on supply and demand. This is already being used on the consumer side by availability on airplane seats. The industries that will benefit the most from AI negotiation down the road are those with simple transaction-based business models such as retail and travel.
Robotic Process Automation
Companies are still managing their contracts ineffectively, which causes delays in review and approval cycles at best and significant revenue losses at worst. In fact, Gartner estimates that 85 percent of companies do not have an effective CLM system.
Robotic process automation focuses on engaging with existing systems via light-weight software to help businesses design processes that have routine inputs. The most effective RPA systems are highly configurable and built on no-code platforms to allow exact mapping to existing workflows and immediate flexibility when workflows change.
In 2019, we expect the contract management function within organizations to take advantage of RPA to speed contract cycle time and ease manual processes along the way. Organizations will select and deploy software that is configurable to manage their contract processes and create their own RPA “bots” by creating “rules” to guide the contract through a set of pre-determined steps to completion.
In 2019, AI will help drive adoption of these core contract management lifestyle (CLM) functions:
New contract generation – Today, businesses can save common contract clauses in a central repository and search them for use in upcoming contracts. If driven by AI, a draft of a contract might be proactively created based off an email flagged to the contract management system and drawing upon the full history of contracts for an organization without human intervention except for a final review. Natural language processing would allow legal departments to generate draft contracts using the right templates and clauses based on the contents of an email.
Risk scoring – Based on a set of parameters established by the company, contracts are scanned today and scored based on the level of risk they present. AI might take this even further by proactively suggesting alternative clauses, terms and edits to the contract to reduce the risk score.
Contract workflow – Today, contracts are scanned for key terms, which triggers a contract workflow. Powered by AI, the system will speed up review cycles by “learning” decision criteria based on agreements with similar characteristics and modifying the document to meet corporate legal requirements.