Artificial Intelligence in Contract Management: 5 Things You Need to Know
Contract Management Software
Across functions and industries, executives are excited about the potential of artificial intelligence – or AI – to transform key business functions. According to a report from Deloitte about the state of AI in the enterprise, businesses believe that the improvements AI can deliver are an important way to help them compete in today’s fast-moving marketplace, with software representing one of the easiest paths to AI adoption.
Among the top benefits, executives say AI is helping them to optimize internal processes and make better decisions. And while these findings are not focused strictly within the contract management function, the opportunities artificial intelligence technologies provide to help businesses manage their portfolios of vendor and supplier agreements, employment contracts, and other key documents are equally great.
But in order to develop an artificial intelligence strategy for contract management that delivers on expectations, it’s important to understand both the capabilities and potential of AI as they pertain to the discipline of contract management. Before you get started, here are five key things you need to know.
1. Digitization can unlock the benefits of AI
Artificial intelligence, like any digital technology, relies on computers to access and utilize the data that exists within contracts. But computers can only do this if the contracts themselves exist in a format that is machine-ready – meaning the text can be read and processed by machines. That means that if most of your contracts exist only in paper format, you'll need to make them machine readable before you can benefit from the efficiency upgrades and other process improvements AI can bring to your contract management capabilities. Digitization also unlocks other key benefits, from a better ability to manage contract milestones to improved stakeholder access to vital contract-related information.
The first step to incorporating AI technology into your contract management process is scanning and entering your contracts into a centralized, searchable online repository. Launching a digital contract repository is a multi-step process, but it’s also easier might than you might think – if you haven’t yet done so, and want to reap the benefits of AI for managing your contracts, migrating your documents is the most important place to start.
2. AI can make the task of launching and organizing a document repository easier than ever
Now some good news: while converting all of your paper agreements to an electronic format and getting them all organized might sound like an arduous task, existing artificial intelligence technologies can help to reduce some of the pain. Before AI, after you scanned each individual contract, the next step would be to look within each file to determine its contents and manually tag and categorize each one accordingly.
But once documents are in a text-based, searchable format, AI technologies are now capable of performing this step for you. To take advantage of this innovation, as you look for dedicated contract management software to help manage the process, it’s important to seek out a solution that offers functions such as automated tagging. This means your software goes into each file, determines what’s inside and tags it appropriately so you don’t have to – vastly reducing manual workloads.
3. AI can reduce contract risks
From improperly-filed contracts that can’t be retrieved when they are critically needed to missed milestones such as automatic rollover or termination dates, contract management is rife with risks that can cost businesses money and jeopardize key relationships. AI can help to reduce these risks simply because automating tasks such as tagging and milestone notifications makes it less likely they will slip through the cracks or get lost in the paper shuffle. Furthermore, automation can help drive greater value from contract management functions by reducing time spent on manual tasks, freeing up contract management teams to perform more thorough post-mortems, analysis, and other tasks.
4. AI requires human oversight
If you think technological advances around artificial intelligence mean contract management can run itself, now's the time for a slight reality check. AI does present an exciting opportunity to reduce manual tasks associated with contract management - but it's still important to take some time to review automatically generated tags and other information to ensure contracts have been entered appropriately.
5. AI won’t replace your job
Artificial intelligence provides powerful tools for reducing manual tasks and improving accuracy, but computers are not capable of the sophisticated thinking and analysis that contract management requires. In other words, while technology can make your job easier, it won't make you redundant.
In the future, AI bots might be able to assist in the drafting of better contracts – for example, by analyzing the language of past contracts and measuring various terms against actual contract performance. But the nuanced nature of contract management means experts will always play a key role in the process. Computer formulas are based on known scenarios – meaning if X happens, do Y. But the strongest contracts must account for unforeseen and unusual situations, and in order to do so, they require sophisticated human thinking that also considers factors such as ethics and brand values. So fear not: while AI has the power to improve key challenges of contract management, humans will continue to play a vital role.
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