NEW REPORT: The State of CLM and AI-Powered Contract Intelligence

Looking for Enterprise Efficiencies in a Down Economy? Start with Your Contracts

In today’s uncertain economic climate, the focus for most companies centers on saving precious cash, finding elusive revenue, and managing risk across the enterprise.

March 13, 2023 By Martin Mohr

In today’s uncertain economic climate, the focus for most companies centers on saving precious cash, finding elusive revenue, and managing risk across the enterprise.

Companies are paying particular attention to activities that must continue regardless of economic conditions and explore if there are ways to do those activities faster, smarter, and cheaper. 

Based on these criteria, contract efficiencies should rise to the top of many organizations’ agendas this year. Consider:

1. Will contracting continue in a recession?


Of course. In fact, contracts may become all the more critical for a business’s ability to survive.  
Contracts are the foundation of all commercial relationships. Depending on your industry, your supplier relationships, customer relationships, or both, are defined by contracts. In times of economic tightening, it becomes all the more critical that the terms of these contracts are visible to the organization and followed. No one wants to overpay a supplier. Or worse yet lose a customer, because they didn’t follow the contract.  

Furthermore, companies may need to expand their contracted services network as they source short-term resources in lieu of committing to full-time employees. In this scenario, contracts will prove the linchpin of these relationships and contract volume will grow.

2. Are there ways to manage contracts faster, smarter, and cheaper?

Absolutely. Contract management is one of the most overlooked sources of inefficiency in many businesses today.  

Contracts—which can be looked at as stores of relationship data--are often presented in dense legal language that companies assume can’t be digitized the way customer data or supplier data is. Therefore, they continue to be managed manually.

Contract management is one of the most overlooked sources of inefficiency in many businesses today.

This is why organizations themselves acknowledge contract management isn’t working: In a recent survey by World Commerce & Contracting, only 11% of companies said they consider their contracting processes “very effective.” 

WCC also found that there can be up to 20% in leakage between the value captured pre-signature and the value realized during the contract lifecycle post-signature – from hard leakage at invoice level through to soft leakage in terms of unrealized business gains.

Contract intelligence: The key to more efficient contracting

So the question becomes: how can companies get more efficient, and more effective, at managing their contracts? The answer is contract intelligence.

Contract intelligence is a new approach to contracts that leverages technology like artificial intelligence and natural language processing to convert contracts into structured and connected data. With contract intelligence, contracting becomes both more efficient and more effective, because the critical business information they contain can be quickly and easily surfaced and leveraged across the enterprise.

In good times, contract intelligence was a strategic advantage; in today’s market, it’s a must-have.

Leveraging AI to surface business insights

With contract intelligence, contracting becomes both more efficient and more effective, because the critical business information they contain can be quickly and easily surfaced and leveraged across the enterprise.

Consider a scenario where a professional services organization wants to understand which customer contracts allow for price adjustments based on inflation. If contracts are scattered across the business and stored as static PDFs or Word documents, collecting this information will take an enormous amount of time and effort. Even then, the company may not see everything. Given the input costs, the organization may not bother to run the analysis, potentially leaving significant money on the table.  

With contract intelligence, however, contract information is centralized for analysis, and AI trained on millions of contracts can rapidly identify clauses that contain price-adjustment language.

This isn’t hypothetical. Icertis recently partnered with BCG to help a customer respond to historic inflation with contract intelligence. Using AI, the company was able to analyze thousands of documents and surface contract language. The results were significant. Per BCG: "This joint analysis revealed that combining these measures allow IT/ITeS players to prevent revenue leakage to the tune of 1.5-3.5%." 

30% lower costs associated with contracts

Examples like this explain why studies repeatedly find that digital transformation focused on contracts delivers significant ROI in terms of time and staff saved: 

  • Aberdeen has estimated that administrative costs associated with contracts are reduced by between 25% and 30% through automation. 
  • IDC found that contract lifecycle management (CLM) can save an organization, on average, 9.44 legal FTE—with the savings far greater for large organizations.

Finding efficiencies faster

Organizations that have deployed contract intelligence systems don’t have to wait long to see their investments pay off. 

In one case, a U.S. software leader started its implementation focusing on non-disclosure agreements (NDAs). NDAs are critical for the business to operate, but fairly standard—meaning low-risk. This company has its NDA automation set up within 100 days, and thereafter saw 96% of the agreements approved without intervention from legal.

“We had seasoned commercial attorneys spending time reviewing NDAs. With contract intelligence, we have the right attorneys doing the right work – working on those multi-million-dollar deals. That’s huge,” says their Senior Director of Legal Operations.

Building economic resilience for the long haul

With an economic downturn looming, finding areas to increase efficiency throughout the entirety of the organization is critical – many of which can be found in contracts. Those contract efficiencies are essential to building a resilient business that can not only withstand a recession but come out with a competitive advantage. 

Want to learn more about how contract intelligence helps strengthen business during challenging economic times? Access our Contract Value Toolkit and start finding the revenue, savings, and risk hiding in your commercial agreements. 

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The Contract Value Toolkit

Contract Value Toolkit

Revenue, savings, and risk: It's in your contracts

Access insights from BCG, Forrester, and others to start finding the revenue, savings, and risk that is hiding in your commercial agreements. With contract intelligence, you can gain a 4% uplift in margin while better managing emerging risks.

Explore the Contract Value Toolkit