Artificial Intelligence in Contract Lifecycle Management: An Overview

Discover how Artificial Intelligence is revolutionizing Contract Lifecycle Management by automating tasks, enhancing efficiency, and providing valuable insights for better decision-making.

Artificial Intelligence (AI) is transforming Contract Lifecycle Management (CLM) by automating routine tasks, extracting key details, and providing insights for better decision-making. This revolution minimizes errors, cuts costs, and enhances efficiency across all stages of contract management. Here's a quick overview:

AI in CLM: Enhances efficiency, accuracy, and compliance while offering data-driven insights and risk mitigation.
CLM Explained: From initiation to termination, managing a contract's lifecycle is crucial for maximizing benefits and minimizing risks.
AI Advantages: Automates manual tasks, ensures compliance, and provides valuable insights for strategic decisions.
Implementing AI in CLM: Involves building a business case, selecting the right vendor, and ensuring successful rollout.
The Future of AI in CLM: Predicts better use of AI for predictive analytics, blockchain integration, automated contract drafting, and personalized advice.

By leveraging AI, companies can significantly improve the management of their contracts, making the process faster, smarter, and less prone to human error.

What is Contract Lifecycle Management?

CLM means keeping an eye on a contract through its whole life:

Request/Initiation - When there's a need for a new contract or a change
Drafting - Writing up the contract's terms
Approvals - Getting the okay from legal and business teams
Execution - Signing the contract
Obligation Management - Making sure all promises are kept
Amendments - Making any needed changes
Renewal/Expiration - Deciding to continue or end the contract
Termination - Ending the contract

Old-school CLM uses lots of paper, emails, and spreadsheets, which can lead to mistakes. AI-powered CLM software puts everything in one place and uses smart tools to work faster and with fewer errors.

	Manual CLM	AI CLM Software
Process	Spread out	All in one spot
Speed	Slow	Fast
Accuracy	Easy to mess up	More trustworthy
Insights	Hard to see the big picture	Better at showing details

Importance of Effective CLM

Good CLM is key for:

Efficiency - Smart software does the heavy lifting quickly
Cost Savings - Saves a lot of money on legal fees
Compliance - Keeps track of deadlines and approvals to avoid trouble
Risk Mitigation - Helps spot and fix problems before they get big

For a medium-sized company, the right CLM software can save over $2.5 million a year and cut the time spent on contracts by half.

Stages of the Contract Lifecycle

Here's a quick look at what happens in a contract's life:

Request/Initiation It starts with realizing you need a new contract or to change an existing one. Teams talk it over and get the go-ahead.

Drafting Write up the contract using templates or from scratch. AI can help make a good first draft.

Approvals The contract gets checked and approved by everyone who needs to sign off.

Execution The contract is signed and becomes official.

Obligation Management The software keeps track of what needs to be done and when.

Amendments If things change, the contract gets updated.

Renewal/Expiration When the contract is about to end, decide whether to keep it going or let it expire.

Termination When it's time to end the contract, wrap things up and let everyone know.

Limitations of Legacy CLM Systems

Older CLM systems and doing contract management the manual way have a bunch of big problems that can lead to serious issues for companies:

Siloed and Decentralized Contract Data

Contracts and their info are often scattered across different places in a company
This leads to confusion over which contract version is the latest
Miscommunications happen because people might use old contract terms by mistake
Money gets lost because it's hard to keep track of changes and promises in contracts

Example: If a change in pricing gets missed because it's in a different system, a company could end up not charging enough for months, losing $750K.

Inefficient Manual Tasks and Workflows

Doing reviews and getting approvals by hand takes a lot of time
Keeping track of what needs to be done or when contracts need to be renewed using a spreadsheet is risky because mistakes happen easily
Reporting on contract risks or promises is done every once in a while, not all the time
This slows down how fast a company can grow or respond to things

Metrics: People spend about 15 hours a week just on manual contract stuff. And on average, it costs $32K to handle each contract.

Lack of Data-Driven Insights

There's no one place to see all the risks or what you might owe because of contracts
This means companies might miss deadlines, have to pay fines, or miss chances to save money
It's hard to figure out where the big risks are or to know how bad they might be
Important decisions have to be made without having all the info

The Emergence of AI-Powered CLM

Understanding Artificial Intelligence (AI)

Artificial Intelligence (AI) is like giving computers a brain that can do things we usually think only people can do, like seeing, hearing, and making decisions. There are a few kinds of AI:

Machine Learning: This is when computers learn from lots of data and get better at their tasks over time without us having to keep teaching them. They can spot patterns and make predictions.
Natural Language Processing (NLP): This lets computers understand and work with human language. They can summarize texts, figure out the mood of a piece of writing, recognize names and places, and even translate languages.
Computer Vision: Computers can look at pictures or videos and understand what's in them, just like humans do. This is used for things like recognizing faces, spotting objects, and even helping cars drive themselves.

Type	Description	Common Use Cases
Supervised Learning	Computers learn from examples to make predictions or decisions	Sorting data, making predictions
Unsupervised Learning	Computers look for patterns in data on their own	Grouping similar things together, finding unusual data
Reinforcement Learning	Computers try different actions to learn the best way to do something	Playing games, optimizing tasks

Ironclad - Pioneering AI for CLM

Ironclad

Ironclad, started in 2014, uses AI to make managing contracts a lot easier. It can sort contracts, pick out important parts, and help you understand them better. Here's what it can do with AI:

Smart Search: Find contracts easily with questions instead of just keywords.
Workflow Automation: Set up rules so contracts go to the right people quickly.
Obligation Tracking: Automatically remind you about important dates and tasks in contracts.
Insights Engine: Show trends and risks in your contracts.

Ironclad makes reviewing and approving contracts much faster and reduces mistakes.

The Growth of AI in Contract Management

More and more, AI is being used to manage contracts. Its use grew by over 65% from 2020 to 2021. By 2024, most legal departments will likely use AI to help with contracts. AI makes reviewing contracts faster, from taking weeks to just hours. It also helps keep track of what needs to be done, analyzes risks, and finds patterns in contracts. As AI gets better, it will change how legal teams work, making them faster and smarter.

Benefits of AI-Powered CLM

AI-powered contract lifecycle management (CLM) solutions make managing contracts a lot easier and smarter than the old way of doing things manually. By automating tasks that are done over and over again and using data to make decisions, AI changes how contracts are handled, making things more efficient, accurate, and less risky.

Improved Workflow Efficiency

AI takes over the boring, repetitive tasks in managing contracts, which makes everything faster and smoother. Here’s how:

Faster contract reviews - AI picks out the important bits in contracts so legal teams can look at them more quickly. This means contracts can be reviewed in half the time.
Streamlined approvals - Contracts automatically go to the right people for signing.
Accelerated search - You can ask the system questions in plain language and find the contracts you need in seconds.

By cutting down on manual work, AI lets teams spend time on more important things.

Enhanced Accuracy and Compliance

AI helps avoid mistakes and keeps things in line with rules and regulations. Here’s what it can do:

Error checking - AI looks over contracts for any mistakes or things that don’t add up.
Regulatory compliance - It checks that contract terms follow the rules.
Version control - AI makes sure everyone is working from the latest version of a contract.

With AI, there’s less chance of making mistakes or facing legal problems.

Data-Driven Insights for Strategic Decisions

AI can pull useful information from contracts to help the business make better decisions:

Portfolio analytics - Keeps track of important contract details like renewal rates and discounts.
Risk profiling - Figures out how risky different contracts are.
Predictive forecasts - Predicts future money coming in or going out based on contracts.

This information helps in making smart choices and spotting opportunities or risks.

Risk Mitigation

AI can also help avoid problems before they happen:

Risk alerts - Lets you know if a contract might break company rules.
Dispute prediction - Tells you if a contract is likely to cause arguments, so you can fix it beforehand.
Renewal reminders - Makes sure you don’t forget to renew important contracts.

With AI, companies can see risks coming and do something about them in time.

Key Features of AI-Powered CLM Platforms

AI-powered CLM platforms make managing contracts easier by using digital tools, automation, and smart analysis to keep everything in one place, speed up the process, and help you understand your risks and opportunities. Here's a look at what these platforms can do.

Centralized Contract Repository

With AI CLM platforms, you get a single spot where all your contracts live. This includes:

Storing contracts online
Pulling important info from contracts
Searching the full text of contracts easily
Keeping track of different versions
Controlling who can see what

This setup stops contracts from getting lost and makes sure everyone's looking at the right version.

Contract Lifecycle Workflows

These platforms handle the repeat stuff, like making contracts, checking them, and signing off on changes. They can:

Create contracts using ready-made templates
Send contracts to the right people for approval
Help with editing and making changes
Send updates and reminders
Group renew or change multiple contracts at once
Let you sign contracts digitally

This speeds things up a lot and cuts down on mistakes.

Obligation Management

AI CLM keeps track of what needs to be done and when, sending alerts about important dates and tasks. You can:

Note down important dates and goals
Set up reminders for tasks and payments
Get alerts as deadlines get close
Look at how well you're keeping up with contract terms

This helps make sure you do what you promised and get what you were promised, too.

Risk Analysis

AI looks at contracts to find any terms that might be risky and suggests ways to avoid problems. It helps with:

Spotting terms that could be an issue
Figuring out how big the risks are
Warning you about risks before you sign
Keeping an eye on risks all the time

This keeps you safe from big problems and makes sure you're following the rules.

Advanced Analytics and Reporting

AI turns contract details into useful info that can help you make better decisions. This includes:

Tracking how well contracts are doing
Predicting future earnings or savings
Checking how risky other companies you work with might be
Finding chances to save money
Seeing how efficient the contract process is

By understanding your contracts better, you can negotiate smarter and make the most of them.

Implementing AI-Powered CLM

Building the Business Case

Before you start using AI to manage contracts, you need to show why it's a good idea. Look at how you handle contracts now and see where you can do better with AI. Think about how much time and money you can save, and how you can avoid problems. Show these benefits to the people in charge to get their support.

Look at your current process to see where you're slow or making mistakes.
Figure out how much time and money AI can save by doing things faster and with fewer errors.
Think about how AI can help avoid problems like missing deadlines or breaking rules.
Guess how much money you'll save in the first year with AI.
Work out the return on investment (ROI) for the next three years. Aim for a 20% or more ROI.
Share your findings with bosses to get the go-ahead.

Selecting the Right AI CLM Vendor

Choosing the right AI for contracts means looking at a few things:

AI Skills - Make sure the AI is really good at understanding contracts, organizing work, keeping track of important stuff, and spotting risks.
Easy to Use - It should be simple for everyone to use.
Works with Other Systems - It needs to fit in with the tools you already use.
Happy Customers - Pick a company that has helped others successfully.
Cost - Think about how much it costs, including setting it up and keeping it going.

Pick a couple of companies and try their systems with some of your contracts to see how well they work.

Rolling Out AI-Powered CLM

It's best to start small and grow over time:

Pilot - Try it first with one type of contract, like NDAs or service agreements.
Expand - Use it for more types of contracts once you see it's working.
Optimize - Keep making it better based on what people say.

Keep an eye on how much it's used, how fast things get done, and if it's helping avoid problems. Share good stories to get more people excited about using it.

Ensuring Implementation Success

To make sure AI works well for your contracts:

Executive sponsorship - Having a leader on board helps solve problems and supports the change.
Training - Teach everyone how to use the new system. Good support helps a lot.
User feedback loops - Listen to what users say to keep improving.
Change champions - Find people who are excited about the change to help spread the word.

With careful planning and the right approach, using AI for contracts can really make a difference.

The Future of AI in Contract Lifecycle Management

As artificial intelligence (AI) keeps getting better, it's going to play a bigger role in managing contracts from start to finish. Let's look at some of the ways AI might change things up in the future:

Better Predictions

AI will get even smarter at looking through old contracts to spot trends and guess what might happen next. This could help companies make smarter choices about risks, when to renew contracts, or when it's time to talk terms again.

More Use of Blockchain

Blockchain is a way to keep contract details safe and clear for everyone to see. It can also use smart contracts that automatically do certain things based on set rules, like making payments.

Writing Contracts with AI

AI will improve at writing contracts that are easy to understand and follow the rules. This could save a lot of time and cut down on mistakes.

Advice Just for You

AI will offer tips and insights that are tailored to what each company needs. This means better outcomes because the advice fits just right.

AI Everywhere

AI will be used more throughout the whole contract process, from writing to checking to managing risks. This will make everything much faster and more efficient by automating the routine stuff.

As AI gets better, managing contracts will become quicker, smarter, and smoother. Companies that use these new tools will have a big edge over the competition.

Get free trial access to product

Free Trial