How Artificial Intelligence Is Improving The Contract Management Process

by Sarvarth Misra

Harvard Business Review tells us that “inefficient contracting causes firms to lose between 5% to 40% of the value on a given deal.” One of the biggest challenges organizations face is the sheer volume of contracts handled daily. When the number of active contracts is between 20,000 – 40,000; the typical enterprise is juggling too many data points resulting in a poor contracting process.

Many times I have repeated that “contracts are the lifeblood of today’s business transactions.” We have become a contract-based economy. No significant business deal happens without a well-articulated, formal agreement. And, it’s all for a good reason. But, we are at a stage with such a large volume of contract data, that using only an Excel spreadsheet will no longer suffice. Hence, my suggestion that artificial intelligence (AI) improves contract management processes.


Legal teams face many challenges in managing contracts. These include issues such as:

  • Sheer volume of contracts and AI technology is the new defining boundary between good CLM systems and the mediocre
  • Lack of uniformity
  • Managing updates
  • Tracking auto-renewals & expiry dates
  • Risk management


Anyone dealing with contracts on a daily basis knows that contract lifecycle management (CLM) software exists for this very purpose. My own company ContractPodAi, is a contract lifecycle management software. Yes, CLM software provides a good platform for managing contracts and dealing with the sheer volumes, tracking issues, and managing updates. But, AI technology is the new defining boundary between good CLM systems and the mediocre. Good AI improves contract management systems.


The benefits of AI are plentiful, and this includes AI for contract management. In terms of the challenges I mentioned above, an AI-powered CLM will answer them all. AI technology is the new defining boundary between good CLM systems and the mediocre

Unlike humans, AI systems don’t tire. They are relentless. An entire contract reviewer team would be hard-pressed to scan all 20k – 40k active contracts for an enterprise. Yet an AI like EV(R) built on the powerful IBM Watson AI platform – can.

AI-equipped CLM technology gives you a snapshot of your contracts. Combined with a strong analytics engine like PowerBI, you can quickly assess how your contracts are performing. In the snapshot, critical information like whether a contract auto-renews, the trigger auto-renewal and expiry dates, liability clauses, and renegotiated terms – are all available at your fingertips.


Today’s AI systems like EV(R) uses natural language processing (NLP) to search and understand the terminology in the right contractual context. This is important to avoid wasted time or misunderstandings. In this respect alone, we see how a powerful platform for AI improves contract management capabilities. And, context-sensitivity makes the data that has been extracted and analyzed more impactful. Above all, it streamlines the contract management process and boosts the effectiveness and impact of any legal operations team.

Best of all, today’s systems are fast. This NLP, contextual search, abstracting, and analysis of your contracts are done in real-time. Naturally, reviewing 50,000 contracts takes more time than a single agreement. But, for each agreement reviewed, it means a little less time wasted by in-house legal counsel resources. That’s good for the bottom line, and in following the ‘more for less’ modern business approach to the office of the general counsel.


The big challenge organizations face is the sheer volume of contracts handled daily. However, it is important to point out that not all artificial intelligence equipped systems are the same. One of the biggest stress points for customers buying AI-equipped technologies is the training cycle. It’s an easy part to overlook. Artificial intelligence networks require training. This phase is called machine learning. The machine must discover and learn which way is up, what terms are important, and the context of what it is analyzing. A big challenge organizations face is the sheer volume of contracts handled daily. AI improves contract management and helps with this issue

Machine learning can be a lengthy process, taking up to 6 months to fully configure, test, and train a new AI. For most of our customers, whether AI improves contract management is the result of how quickly it can be used. No legal team wants that added time and burden of having to train the AI on its contracts, after buying and deploying a new CLM.

So, sound advice in this regard is to always look for vendors offering out-of-the-box (OOTB) AI-equipped CLM technology. It means the AI part of the CLM is already pre-trained with hundreds of thousands of contracts. Then the service part of the offering is to have legal engineers tweak, adjust, and retrain the AI for your specific needs, and your specific contracts database. Leveraging this expertise shaves months of aggravation, frustration, and extra work on your already heavily taxed legal team.


My final important point on how AI improves contract management – is in breaking silos. Your organization isn’t one-sided. Neither are your contracts. There are many different teams that need contracting capabilities. There are the buy-side and sell-side traditional areas. Procurement and sales are your biggest internal clients. But don’t forget facilities, marketing, human resources, engineering, research and development, and other departments. Contracts can be found throughout the organization. As such, so are your system users.

A CLM that is intuitive to use, with a good user interface – goes a long way. It makes the contract request, and questions to legal – less onerous. This is especially true when the legal team is able to get back on questions faster, with the use of a new powerful tool. Make the contract request, sign-off, and question processing a quicker and easier process.

In that respect, there is no reason why other departments cannot benefit from your AI introduction to the organization. Getting sales, marketing, facilities, engineering, and other teams to use the AI-equipped CLM – means self-service starts to reduce the legal group’s ‘low-value’ workload. Giving access to the snapshot, and contract generation requests… means getting them involved in the contracting process. That means breaking the silos between legal, and the rest of the organization.


All told, solid technology like EV(R) powered by the IBM Watson platform means AI improves contract management. Today’s AI-equipped CLM’s (like ContractPodAi’s), make the general counsel’s job easier. It reduces the low-value time spent reviewing all details of a contract when extractions can speed things up. It provides better and faster analytics that let you better control your contracts while improving their consistency. You will also just get a better pulse on your contracts, which gives you peace of mind.

On whether AI improves contract management or not… the answer is YES – with the right system.

Sarvarth Misra

Sarvarth Misra
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