The legal tech market is awash with AI tools that can be used to complete any number of contract-related tasks, from clause identification and extraction (where the software extracts specific types of clauses beyond those identified during standard due diligence) to contract review (where the software is used to analyse a contract against a standard) and management. However, with variety comes choice, and many firms are putting off adopting new systems simply because they do not have the time or resource to make the switch.
How are legal teams benefiting?
AI technology has the potential to genuinely improve the way in which firms and in-house legal departments handle contracts. Rather than relying on ad hoc methods of drafting, collaborating, storing and tracking contracts, practitioners can increase their control by centralising contract management through a single AI tool and automating routine tasks across the contract management lifecycle. This includes everything from automating contract creation and review to securing e-signatures and archiving completed contracts.
When it comes to drafting, AI software can provide standardised contract templates that guarantee the most accurate, up-to-date language. Moreover, tools such as CobbleStone’s VISDOM℠ AI and machine learning can be used to assess the language when adding new contracts to the system and to periodically screen old contracts for sensitive data.
Manual contract review is an arduous task that can keep eagle-eyed legal teams tied up for long periods. Throw data security into the mix, and it is no surprise that many practitioners are turning to new technologies to relieve them of the burden. Legal tech tools such as Kira Systems can automate almost the entire review process, reading contracts, identifying predetermined concepts and presenting the information in a user-friendly format. Indeed, many firms are experiencing the benefits of Kira Systems, not as an independent analyst, but as an aid to review. Although variables such as poor scan quality or unusually worded clauses still pose issues, the system directs users to the right place in a contract, from which they can refine and analyse the results themselves.
Contract management has also traditionally been an intricate, labour-intensive activity, requiring practitioners to track the terms, conditions, deliverables and deadlines for every contract under their supervision. Now, companies can upload their contracts to a central repository, where AI software automatically tags each document based on a predetermined set of criteria (eg, beginning and end dates, contracted parties and contract type). This enables the platform to provide a snapshot of current workflows and upcoming events, meaning that monitoring deadlines is no longer one of the most difficult parts of contract management.
Debunking the myths
Despite the obvious benefits, there are many reasons why legal teams are still reluctant to adopt automated contract management technology. Concerns range from the safety, accessibility and visibility of data stored in the cloud to the price of new software, the lack of control residing with counsel and the genuine effectiveness of modern processes. However, these issues pale in comparison to the risks involved in traditional management methods. Contracts stored in a filing cabinet, work computer or shared drive are not only at greater risk of being damaged or misplaced, they take longer to find and may be in breach of data protection rules. What is more, manual processes are subject to human error and delay.
Most contract management software improves the user’s control over documents. Automated databases are easily searchable and because there is no risk of documents being filed in the wrong place, employees need not interrupt general counsel’s workflow in order to locate items.
In fact, choosing not to automate the contract management process could lead to greater risks and unnecessary costs. Traditional contract management tools such as email and Excel are far more likely to impede access, visibility and security. Indeed, a study conducted by MarketWatch revealed that almost 90% of spreadsheets contain mistakes. Yet most companies continue to operate outdated platforms such as shared drives, email folders and document management systems, which compromise visibility and have limited access. Moreover, many rely on PDF and Word documents, which make tracking deadlines particularly challenging.
It goes without saying that these oversights can lead to disorganisation and inefficiency, which in turn lead to increased costs and lost revenue.
For those practitioners concerned about the amount of time and energy that it takes to introduce a new system, many tools offer out-of-the-box solutions that require minimal training and in-house expertise, making the transfer “more of a cloud-based ‘flick of a switch’ than a complex, organisational shift”.
Moreover, those with wider concerns that AI technology threatens to create an ominous legal landscape in which lawyers will someday become replaceable can be reassured by the fact that, while these tools reduce the need for human input, identifying the point at which AI intervention is necessary and then programming and monitoring such technology will continue to be the responsibility of the legal team.
Implementing the right software for your team
Convinced? Now comes the main challenge. While adopting AI technology may make perfect sense to you, encouraging colleagues to adopt new practices and convincing stakeholders or clients to fork out for the cost may not be as easy.
It goes without saying that the first step is to conduct thorough research into the best possible solution. With so many products to choose from, there is no one-size-fits-all package. With key considerations ranging from ease of use and advanced search capability to integration with related business apps and the potential for customisation, practitioners should determine exactly what it is that they need from the software – as this will vary depending on the size, nature and existing processes of the company – and the primary problems of their current contract management system. There is no point trying to resolve hypothetical issues. Instead, practitioners should identify the biggest and most important problems that they face – and focus on these. What is more, they should consider the needs of other departments. The more people who will benefit from the technology, the more likely the company is to invest.
Legal service providers may find that clients are inclined to opt for software that gives them more control over management processes. Tools such as ThoughtRiver Ltd’s Lexible use machine learning to tailor the platform to client-specific needs. This function aims to put the toolkit in the hands of the client, which can be especially attractive for practitioners looking to deliver innovative client solutions. However, this shift towards giving clients self-serve options could put counsel in a tricky situation when it comes to contract creation. Practitioners should consider the risk of having contracts generated without their input, and the task of determining who can use such tools and for which types of contract may be one that falls to in-house counsel in the future.
Once you have identified the best software for your (and your colleagues’) needs, educating stakeholders will be essential to addressing any concerns that may otherwise prevent them from giving the green light. Moreover, you should think carefully about the best time to introduce the change. Many legal teams go through an arduous software examination and selection process only to fail during implementation. Therefore, it is important to ensure that the appropriate support structure is in place once the technology has been installed. Having a strong team to oversee the project, catering for all workflows and providing user training are essential. If you can enlist additional support from the software provider (eg, further training or step-by-step instructions), even better.
Keeping pace with a changing practice
Although choosing the right contract management programme will vary depending on the needs of the company, one thing is certain: embracing legal tech is a necessary step. AI is opening the door for more streamlined processes, making contract management both more efficient and more cost-effective, and freeing up time for lawyers to focus on other – more interesting – areas of their practice.
With increasing numbers of firms and in-house counsel turning to AI, astute, cost-effective contract management is likely to become the norm, and you do not want to be left behind. Indeed, the growing demands for efficiency are unlikely to diminish, so it falls to legal teams to remain up to date with new technologies and processes if they want to get a head start on the competition. It goes without saying that no legal team can afford to lose business simply because it cannot offer the same innovative tools as competitors or – worse – because its contract management system is a mess.