Contract lifecycle management has come a long way from the old days of drafting up a paper document, redlining in ink, and passing through endless review cycles.
Now, some CLM platforms leverage electronic signatures and digital storage to execute contracts faster — yet, they’re still unable to help you make data-driven decisions based on your contract data.
But this is where CLM platforms that offer contract intelligence shine.
Contract intelligence uses the power of AI to turn static contracts and agreements into valuable business assets. Instead of letting contracts collect dust, it gives you unlimited visibility into your contracts so you can avoid contract breaches, drive down costs, and boost productivity.
In this blog, we’ll explain why your organization needs contract intelligence, and how it works:
To make the case for contract intelligence, let’s explore why traditional CLM platforms often fall short.
For starters, here are three common challenges associated with outdated contract management platforms:
Why are these challenges problematic? Because they result in inefficient contracting processes, which can cause firms to lose between 5% and 40% of value on a given deal according to Harvard Business Review.
And that’s not all — according to a survey by Deloitte, other risks associated with outdated contract management processes include:
Of course, contracts will always have some inherent risk — but much of it’s preventable if you use contract intelligence to your advantage.
But how exactly does contract intelligence make easy work of mitigating risk and accelerating contract processes?
AI. Machine learning. What does it all mean, and how does it make contract intelligence work?
Let’s start with an important distinction: AI is the umbrella term for creating intelligent machines, whereas machine learning is a subset of AI that enables systems to automatically learn and improve from experience, without being programmed to do so.
It’s the machine learning component that allows you to extract key data from your contracts, and in return, review contracts faster, streamline negotiations, and gain visibility into your contractual obligations.
Here’s an example of how AI works in our own contract lifecycle management software, IntelAgree:
While the first step is tedious, it’s necessary: This is what will allow you to conduct granular, Google-like searches across your contracts, cut your review time in half, and unearth opportunities for negotiation.
Since contract intelligence is a relatively new concept, there’s still a lot of uncertainty surrounding it.
Here are some of the most common questions we get asked:
Not exactly. Since machine learning makes predictions based on data patterns, machine learning converts your contractual text into numerical data — in other words, the machine’s language. So, while machine learning is extracting your data, it’s not exactly reading and comprehending it – it’s converting it into numerical data, analyzing its patterns, then making predictions based on those patterns.
AI can find all different types of data: numbers, words, dates, or even entire clauses. Essentially, it will help you quickly find all the key metadata that would normally take hours of sifting through 100-page documents.
For common terms present in most contracts, the machine learning accuracy is typically high. For less common clauses, like those unique to a specific industry or to your organization, it requires some initial training — just like hiring a new team member.
Contract intelligence isn’t just a buzzword or a short-lived trend; it’s here to stay and make contract management easier in the process. To recap, AI-powered contract management software allows you to:
Curious how contract intelligence can reduce your risk and increase your team’s productivity? Schedule a demo with us today.