AI Chat in Contract Management: How Does It Work?

Have you ever encountered the phrase "conversational AI" or "AI chat" and wondered what it is? Or have you asked what the difference between "ChatGPT" and "conversational AI" is?

Let’s begin with Artificial Intelligence (AI). In an Icertis commissioned survey of 500 CEOs worldwide representing some of the largest enterprises, 56% believe AI will spur greater business competition by minimizing gaps between competitors, and 80% of executives expect AI to impact their bottom line within the next five years. And 55% of these companies plan to train their workers on AI in 2024.

In this article, we will demystify conversational AI and the difference between it and generative AI, explore how businesses are using conversational AI, and how you can harness its strengths. 

What is conversational AI?

Conversational AI, or AI chat for short, is an artificial intelligence technology that enables computers to understand, process, and respond to human language in a natural, conversational manner. These technologies use machine learning to understand, answer, and even learn from our chats. Hallmarks of conversational AI include: 

1. Ability to Understand Human Language 

It interprets user inputs, which can be spoken words or written text. Natural Language Processing techniques are used to analyze the structure and meaning of the language. In other words, it can turn what we say (or type) into information the computer can grasp.

2. Contextual Processing

Conversational AI remembers and understands the context from previous chats. This simulates an essential part of human dialog: maintaining a coherent back-and-forth conversation.

3. Generating Responses

Once an input is understood, conversational AI generates an appropriate response. It selects or generates language relevant to the user's input and the ongoing conversation. To put it another way, conversational AI picks the words that best fit what you say and what you've said before.

4. Learning and Adaptation

Many conversational AI systems are designed to learn from interactions, improving their understanding and accuracy of response. This learning can be supervised, where it is explicitly corrected and trained by a human, or unsupervised, where it learns from patterns in data.

5. Voice and Speech Recognition

Conversational AI converts spoken words into text and speech synthesis, which converts text responses into spoken words. This represents an additional layer of complexity involving speech recognition.

6. Emotion and Sentiment Analysis

Advanced AI systems may also attempt to detect and respond to the emotional sentiment of the user's language to provide more empathetic or contextually appropriate responses.

Where can you find conversational AI? Today, it is used in various tools like ChatGPT, virtual assistants (like Siri, Alexa, and Google Assistant), and customer service tools. It aims to make interactions with machines as natural and easy as interacting with a human.

What's the difference between ChatGPT and conversational AI?

ChatGPT is a specific example of conversational AI developed by OpenAI. It's built on the GPT (Generative Pre-trained Transformer) architecture, which allows it to generate human-like text based on the input it receives. ChatGPT can participate in conversations, answer questions, write essays, create content, and more, by predicting the next word in a sequence based on the words that come before it.

Conversational AI, or AI chat, encompasses a wide range of technologies and applications aimed at facilitating human-like interactions between computers and humans. This can include chatbots, virtual assistants (like Siri or Alexa), and other AI systems capable of understanding and generating human language in addition to ChatGPT. Conversational AI can be based on a variety of technologies, including rule-based systems, machine learning models, and more advanced neural network architectures like GPT. 

In short, ChatGPT is a specific instance of conversational AI. 

What’s the difference between conversational AI and generative AI?

The difference between generative AI (GenAI) and conversational AI (CAI) is that generative AI produces original content and creations when prompted. In contrast, conversational AI specializes in holding authentic and useful two-way interactions with humans by understanding and responding in text or speech. Simply put, GenAI creates new content, and CAI has interactive conversations with humans. Both AI technologies are used in business to help maximize operational efficiencies and enhance decision-making.

Want to learn more about how generative AI is used in contract management? Check out this article for a closer look. 

How is conversational AI used in business?

AI chat is increasingly used in various business sectors, significantly transforming how companies interact with customers, streamline internal processes, and gain insights from data. 

It has made inroads into crucial business functions and industries. Some examples include:

Customer Service and Support

One of the most common uses of conversational AI is in customer service. Chatbots and virtual assistants handle a wide range of customer queries, from simple FAQs to more complex issues—improving the efficiency of customer support and enhancing customer satisfaction by providing quick and accurate responses.

Sales and Marketing

AI chat assists in sales and marketing by engaging potential customers through personalized interactions—recommending products, providing detailed product information, and even guiding customers through the purchasing process. When it comes to marketing, it collects customer data, understands preferences, and delivers targeted marketing messages.

Human Resources

In HR, conversational AI streamlines recruitment by automating initial candidate screening, scheduling interviews, and answering frequently asked questions. It also facilitates employee onboarding and training and provides employees with quick answers to HR-related queries.

Supply Chain and Operations

Conversational AI monitors supply chains, provides updates, and alerts users to disruptions or delays. This helps businesses in optimizing supply chain management and increases operational efficiency.

Healthcare

In healthcare, conversational AI assists with patient triage, schedules appointments, provides health information, and even offers basic medical advice—improving patient care and operational efficiency.

What are the benefits of using AI chat to manage contracts?

Conversational AI is poised to revolutionize contract management. Imagine having a tireless assistant who can analyze contracts in seconds, flag potential risks, and even negotiate contractual terms. It understands legal jargon like a seasoned lawyer, but speaks your language, distilling complex clauses into plain English. Need specific information? Just ask! It can search and extract vital details, saving you hours of tedious hunting. And the best part? It learns from every interaction, improving its accuracy—becoming a personalized legal consigliere. AI chat manages contracts in a smooth and conversational format that helps users make informed decisions, mitigate risks, and close deals with confidence.

1. Contract lifecycle efficiency

Ask the AI anything about your contract, and it'll find the answer in seconds, with instant summaries of lengthy contracts. It turns long, complex documents into a format that’s quick and easy to understand, handling repetitive tasks like reminders and data extraction, freeing you and your team for strategic work. Drafting contracts is effortless, with the AI suggesting clauses and terms based on your business needs, contract type, and past deals.

2. Contract risk management

A tool that automatically flags contractual risks and the cost savings derived are another advantage. The AI catches legal errors and inconsistencies, saving businesses from costly disputes. It flags potential compliance issues, reducing fines and legal fees. When it comes to negotiations, the AI analyzes similar contracts to help secure the best possible terms. But the benefits go beyond saving time and money.

3. Actionable insights in seconds

AI chat unlocks valuable insights hidden within contract data. It reveals patterns, trends, and risks that would otherwise take hundreds of person-hours to unearth. It intelligently guides users toward informed decisions and proactive strategies. Knowledge becomes centralized, giving everyone in the organization a clear and holistic view of contracts. Employee satisfaction rises, and customer experiences improve, thanks to faster turnaround times.

How is AI chat used in contract management?

Companies that embrace the AI revolution to manage their contracts may be poised to leapfrog over their competition. Gone are the days when their contract managers manually pored over lengthy contracts line-by-line, searching for crucial information to help them analyze contracts, negotiate terms, and flag potential risks. With conversational AI, you can chat your way to a smarter, smoother, and more profitable contract management system.

While specific features may vary by software provider, here's a breakdown of how conversational AI can be used in contract management:

1. Automated Contract Queries

AI chat answers questions in plain English, saving time and the frustration of a document hunt. A conversational AI system can quickly provide answers to common queries, saving time and reducing the need for manual searching through documents.

2. Contract Creation and Customization

AI chat suggests clauses and terms based on the type of agreement and past contracts. Customize them with a quick chat to refine these suggestions, and within seconds, your contract is ready. 

3. Contract Negotiation Assistance

AI chat suggests negotiation tactics based on its analyses of similar contracts and outcomes. It can guide users through negotiation points and offer optimal terms—helping contract managers negotiate optimal terms with confidence.

4. Instant Contract Summaries

AI chat makes contract management more accessible for all employees, regardless of their level of legal expertise, by providing easy-to-understand summaries and guidance. Gone are the days of manually poring over long contracts to surface crucial details. With AI, contract professionals can get instant summaries of lengthy contracts, even hundreds of pages long. 

5. Reminders and Alerts

Never miss a deadline again. Let AI chat track critical contract dates and milestones, such as renewal dates, payment deadlines, or delivery schedules—proactively reminding relevant parties of important dates to encourage timely action.

6. Contract Compliance

AI chat checks contracts for compliance with laws, regulations, and company policies—alerting users to potential risks before they become legal problems.

7. Redlines and Version Control

AI chat can assist in tracking contract redlines, maintaining version control, and providing clear audit trails of changes made and by whom.

8. Integration with Other Systems

AI chat can be integrated with other systems already in use— such as CRM, ERP, or project management tools— providing a holistic view of your contracts in the context of other business activities. In short, chat with the AI to get a bigger picture of your contracts across different systems, without jumping between apps.

9. Data Analysis and Insights

The AI analyzes contract data to show you trends, risks, and hidden opportunities. Find the most negotiated clauses and common compliance issues, and spot patterns in the contract lifecycle.

10. Language Translation and Localization

For businesses working with international contracts, AI chat can assist in translating contract terms and adjusting them to be appropriate for different legal jurisdictions and cultural contexts. This helps contract managers ensure that the contract complies with laws and regulations in every jurisdiction.

Essentially, AI chat turns contracts from static, siloed documents into a strategic advantage by helping users work smarter, save time, and make better deals. It's a legal superpower in your pocket – ready to chat whenever needed!

Consider Icertis

Companies worldwide are already harnessing its power to streamline their contract lifecycle management. They're automating tedious tasks, getting instant legal insights, and closing deals faster than ever. So, how can you take advantage of the AI revolution and give your organization a competitive edge?

We're pleased to introduce the suite of contract lifecycle management tools that will give you all the chat capabilities mentioned above-- the Icertis Copilots. They cut through lengthy, hard-to-understand legal documents— and deliver insights, accelerate contract reviews, automatically assess risks, and more to drive your business forward. 

Sum it up with the Interactive Insights Copilot

The Icertis Interactive Insights Copilot engages directly and rapidly uncover insights via pre-defined, hierarchical prompts and free-form prompts that highlight key provisions and identify related contract information. With role-based summaries based on a unique combination of secure data sources, Interactive Insights Copilot helps increase the speed and effectiveness of negotiations while providing instant answers to critical business questions.

Derisk your contracts with the Risk Assessment Copilot

The Icertis Risk Assessment Copilot Automates high-volume contract reviews by comparing contract attributes against your specific risk criteria to ensure required clauses and approved language are present in every agreement. Risk Assessment Copilot earmarks agreements that don’t require further review and identifies and helps you address missing or noncompliant attributes, so you can focus on growing your business.

How are Icertis Copilots different than ChatGPT?

Many companies offer legal AI through a wrapper around the underlying ChatGPT model. How is Icertis different? Icertis Copilots combines the power of Icertis proprietary AI and large language AI models to derive insights from your contract data, your enterprise data, and the Icertis Data Lake to deliver powerful business outcomes not possible before. This means our customers get the flexibility and ease of ChatGPT combined with advanced Icertis AI to derive deep commercial, legal, operational insights from their contracts. The combined technology accelerates the drafting, negotiating, and execution of commercial agreements and ensures the full intent of those agreements is realized in the real world. 

Enterprise-grade security

Security is the key reason we developed our AI technology on Microsoft Azure OpenAI, and not directly with OpenAI. It guarantees use of the data security and protection layer Azure provides. 

Built on Microsoft Azure, the Icertis Copilots keep your valuable contract data safe and secure. Your data never leaves your subscription, and more importantly, it is never used to train the underlying GPT models used to deliver the AI chat. 

Ready to start using AI chat to manage your contracts? Schedule a demo of the Icertis Copilots today to learn more.

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