A third-party, multinational survey highlighting key findings in contract outsourcing and automation.
Contract automation: Combining machine learning and contracting
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Contract automation has become a popular term across industries. And artificial intelligence (AI) and machine learning (ML) have come a long way in the past decade. However, there’s still mystery lingering around the topic. What is contract automation, and what problems does it solve? Let’s take a look.
What’s contract automation?
Contract automation encompasses technology that reduces manual tasks associated with legal agreements. Yet, professionals often have trouble defining contract automation because several types of solutions exist.
First, there are point solutions. These deliver a specific tool or service and target a narrow aspect of the contract lifecycle. They tend to be very good at solving a particular problem.
For example, there are contract automation solutions that create contracts by pulling information from another source — a form, spreadsheet, or chatbot — eliminating the need for manual data entry. As a result, a simple agreement might be complete while an experienced lawyer finishes more complex contracts.
Second, there are end-to-end solutions. Some platforms help businesses with the entire contract lifecycle, from the first draft to expiration or renewal. Contract lifecycle management (CLM) software offers various automation features, real-time collaboration, and visibility into contract negotiations, execution, obligation tracking, enforcement, and renewal.
What’s the history of contract automation?
Contract automation started with storage. Central repositories, initially in a network and now in the cloud, significantly improved the contracting process. They enabled businesses to better store, organize, and track their executed contracts and ongoing obligations.
Next came improvements to the search feature of those repositories. CLM solutions focused on making their search features faster and more accurate through Natural Language Processing (NLP), Optical Character Recognition (OCR), and other AI. Business people and lawyers can now quickly find any document they need without remembering the exact file.
By now, contract automation has evolved to include many more capabilities. Depending on an organization’s needs, it can take advantage of:
- Contract generation (Autofill)
- Predefined contract terms
- Clause libraries
- Contract templates
- Notifications during the negotiation process
- Alerts for pending and completed actions
- NLP that extracts material information from contracts
- NLP that highlights ambiguous language
- Improved collaboration and editing environments
- Accurate version histories and audit trails
- A vast array of integrations, including Word, email, and e-signatures
- Alerts for contract renewals and date-driven events
There are various types of contract automation software, and ultimately, it’s up to an organization to choose the right vendor. Not every contract automation provider offers the same features or levels of service. Whatever the business’s contracting needs, there’s a solution to solve its problems.
What problems does contract automation solve?
Contract creation and CLM are time consuming when businesses handle them manually. Worse yet, the various tasks are prone to human error. Simple mistakes can have significant consequences, particularly if someone inverts numbers, misspells a name, or forgets to accept a negotiated change in the text.
High-volume routine contracts create other issues. These are relatively low-value tasks that pull professionals away from strategic tasks and the core work of their organizations. Overall, there’s tremendous room for improved accuracy and efficiency within these business processes.
Meanwhile, contract automation offers a variety of benefits, including:
- Reducing low-value, manual tasks
- Improving efficiency
- Improving the speed of negotiations
- Reducing the overall turnaround time of transactions
- Improving accuracy and reducing human errors
- Improving relationships between parties
- Improving visibility through contract lifecycle
- Improving contract management and enforcement
- Lowering the cost of using internal resources or outside counsel
What’s the future of contract automation?
Contract automation will evolve until most businesses take advantage of contract intelligence. While contract automation reduces manual tasks throughout the contract lifecycle, contract intelligence is a more advanced approach to CLM. Businesses will pull and take advantage of data from their many agreements. Coupled with other information, organizations will use structured contract data to improve business outcomes and reach their goals.
Another likelihood is smart legal contracts (SLCs) — not to be confused with blockchain. As contracts are increasingly digitized, the parties will turn all or some of the contract provisions into code, automating aspects of contract performance. SLCs are years in the future, as it’ll take lawyers and business people time to translate contract provisions into machine-readable language.
Learn more about Document Processing by Ontra
Learn how contract lifecycle management (CLM) has evolved with technology, including automation, and how Ontra complements CLM solutions.
An effective contract tracking solution can be a powerful way to let your business focus on the impactful, engaging work that matters.