As Artificial Intelligence continues to get mindshare and generate interest with many real and some exotic applications, it also presents major opportunities for how enterprises manage their contracts.
How? We at Icertis have published a fewthoughtsonthematter.
Now, a new report from Forrester Research, "The Forrester Wave: Contract Lifecycle Management for All Contracts, Q1 2019," enumerates AI capabilities that will have the biggest impact on how companies will accelerate, protect and optimize their business by rethinking their approach to enterprise contract management.
1. Contract Authoring
According to Forrester, smart, AI-enabled contract wizards are a prominent emerging trend in Contract Lifecycle Management (CLM) software. These CLM AI wizards can offer advice and even qualitative analysis:
"An AI-enabled wizard is based on the learnings from many other contract requests that would provide a much more interactive guidance, along the lines of:
- What is the business purpose for the contract;
- What are the most common contract terms we have used for similar business purposes;
- What are the additional variables we need to include based on contractual experiences with similar vendors;
- What are the lead and fallback provisions we ought to include in the negotiation, etc."
In short, this AI capability can not only improve the contract authoring: It can, if used correctly, actually improve contracting outcomes.
2. Natural Language Voice Commands
Natural language voice commands, with BOTs and virtual agents, are revolutionizing the way we interact with technology (right, Alexa?), and that includes interactions with CLM software.
"Using virtual agent AI tools, some CLM vendors are creating a conversational way for users to interact with the system to initiate a contract or review or approve a draft," Forrester reports. With these capabilities, interactions with contract management systems can be faster, simpler and more efficient as never before.
3. Tagging and Sorting of Contracts
"A challenge for every CLM system is how to import existing contracts or contracts from a counterparty and apply the appropriate metadata tag to the relevant clauses in those imported contracts," according to Forrester.
With AI, this process gets much faster. AI can understand natural and contract language and then "do this metadata tagging on an automated basis," Forrester reports. With advanced Machine Learning applied to one of the largest contract repositories on the planet, the digitization of contracts by converting them to live contracts is transforming how some of the largest enterprises in the world unlock value from their contract repositories.
4. Better Agility to React to New Challenges
One limitation to even well-managed contract repositories is that tagging systems cannot anticipate emerging challenges like new tax laws or regulations. Therefore efficient multivariable search capabilities are required to surface contracts that may be impacted by these new conditions.
AI tools can solve those problems by using semantic analysis to parse contracts for relevant conditions.
"CLM vendors are starting to use semantic analysis with natural language processing to find clusters of related words that are relevant to the issue and in close proximity, surfacing them, and then applying new metadata tags to these clauses," according to Forrester.
In May Icertis joined Microsoft to showcase how this capability could be used to identify contracts that may be subject to the European General Data Protection Regulation and other data protection regulations around the world.
5. Advanced Analytics
"In a typical contract, 10% of the language describes what is supposed to happen in the business relationship, and 90% of the language assigns responsibility for who would be liable if things go wrong," Forrester reports.
In other words, a big part of the contract pertains to risks, obligations and entitlements. With AI, companies can dig into these risks, obligations and opportunities at scale for better contract performance.
"AI tools for natural language processing, semantic analysis, and machine learning can be used to find and surface contract language buried in these contracts that could be used to address (or not address) unanticipated risks, create unintended obligations, or suggest new ways to benefit from existing contracts," Forrester writes.
As this report makes clear, AI presents enormous opportunities for contract management. By being able to understand contract language better, these systems can surface risk and opportunity in large bodies of contracts like never before.
We are just beginning to understand the huge impact AI is going to have on contracts – transforming the foundation of commerce!
To learn more, check out our portfolio of AI apps.