Contract Lifecycle Management (CLM) solutions offer increased efficiency and control for overseeing the all-important legal agreements upon which most business relationships are built. CLM offers greater agility, reduced risk, and faster execution than traditional approaches to contract management. Not all CLM solutions are the same, though. The recent developments in contract intelligence extend the value of CLM by performing a deeper contextual analysis of legal agreements, assisting contract management teams in delivering a broader spectrum of business benefits.
In a 2018 article in the Harvard Business Review, Thomas H. Davenport and David Brain emphasized the important distinction between process automation and process re-engineering. Automating a process is useful insofar as it supports increased efficiency. Process re-engineering promises something even greater, though; it opens up new opportunities for value creation. It helps us to work smarter.
While conventional CLM solutions focus on automation, contract intelligence is about deeper contextual understanding. Contract intelligence incorporates AI and machine learning to understand legal agreements at a deeper level, supporting vendor performance management, enhancing risk mitigation, and guiding negotiators toward optimal outcomes.
What is contract intelligence?
Contract Intelligence (CI) delivers automation and insights that help you guarantee that the intent of every business relationship is correctly documented, agreed upon, and ultimately realized.
Contract intelligence extends the capabilities of CLM by discovering, structuring and connecting the information contained in the agreements themselves. It uses natural language processing (NLP) and artificial intelligence to identify risks or opportunities, understand how performance is to be measured, and recommend actions that deliver business value.
Consider, for example, how a typical CLM solution might handle vendor contracts. A deal is negotiated, the contract language is drafted and refined – and a standard CLM system keeps track of fundamentals such as delivery dates and renewals. Other than that, the conventional approach simply organizes documents and workflows.
Contract intelligence goes further; it identifies the performance metrics a vendor is expected to meet or exceed. It integrates that information with other systems such as ERP. Contract intelligence empowers contract management professionals and others throughout the organization to monitor vendor performance and receive alerts when commitments are not being met.
By bringing this kind of information to the attention of contract managers, and by integrating data extracted from contracts into other business applications and processes, contract intelligence turns CLM into a power tool for uncovering opportunities for value creation.
Benefits of contract intelligence over CLM
Conventional CLM solutions simply automate existing contract management processes. Contract intelligence uncovers the truly important data points that other CLM solutions overlook. Using AI technology, CI extracts valuable information from contracts such as pricing sheets and obligations and makes it available through APIs for sharing across various operational systems.
This creates a level of transparency and accountability that simply cannot exist when contractual information remains locked up in a silo. Contract analytics provide insights into important metrics such as cycle times, risks, deviations, savings, expirations and renewals. Purchasing has access to valuable procurement and vendor performance metrics. Sales has visibility to contract revenue and spending. Whether you’re dealing with buy-side or sell-side contracts, contract intelligence adds multiple new dimensions of visibility.
According to the 2021 biennial Benchmark Report published by World Commerce and Contracting (WorldCC), contract intelligence offers four key categories of benefits.
Speed and agility result from simplification and automation removing friction from business processes. Intelligent clause libraries, automated risk analysis, and similar features make it possible to move faster than the competition, but with greater confidence. Important sales deals, for example, can be closed faster when advanced technology is applied throughout the negotiation and review process. ICI’s analytics can even help to identify bottlenecks in the contracting process, pinpointing issues that require resolution.
Contract value arises from a better understanding of performance metrics, plus an ability to monitor them. The aforementioned WorldCC study found that the best performing companies are 37% more likely to focus on integrated data-flows throughout the entire contract lifecycle, demonstrating a correlation between visibility to contractual accountability and overall business results.
Risk management efforts tend to focus on risk reduction in most organizations. Leading companies prefer a smart risk allocation approach that incorporates mapping and scoring. Contract intelligence increases visibility to risk using AI and risk scoring.
Increased profitability arises from the combination of speed, value-oriented metrics, and effective risk allocation. Simply put, contract intelligence enables companies to proactively manage their relationships and commitments, which ultimately leads to better outcomes.
Although the conventional approach to CLM can help to increase efficiency and speed, most CLM solutions simply cannot provide the deeper insights that drive these four key benefits in the same way that contract intelligence can. ICI is better at managing contracts because it is qualitatively different.
Intelligent contracting for the enterprise
Contracts define the rules by which every business relationship operates.
Across your network
Suppliers, partners, and customers and employees depend on your company meeting its obligations, and vice-versa. Contract intelligence which enables you to manage those agreements more effectively, affirming that all parties are living by the commitments they have made to each other. This helps to ensure full compliance, build customer loyalty, develop strategic supply chains that deliver maximum value, and create lasting employee relationships.
Within your business
On average, 25% of a company’s workforce works with contracts on a routine basis. With contract intelligence, those employees can get things done faster, and with greater precision and accuracy.
For sales teams that operate with complex deal structures and aggressive growth targets, contract intelligence provides for faster turnaround times and on-the-fly changes during the negotiation process, assisted by AI-powered guidance.
For buy-side contracts, ICI provides enhanced visibility to performance against obligations, integrated with ERP and SCM systems for real-time feedback to drive better business results.
CLM is the foundation - contract intelligence is the future
CLM delivers clear benefits by organizing, streamlining, and automating contract management processes, – but CLM ultimately serves as a foundation for something much more powerful, – contract intelligence.
Excellence derives from a commitment to continuous improvement. That requires an openness to thinking and working differently, not simply digitizing existing processes. Icertis provides CLM with built-in contract intelligence that drives business value in a myriad of different ways.
Learn more about how peak Icertis Contract Intelligence can help your organization. Contact us today for a free, no-obligation demo.