19th December 2019
19th December 2019
By Sajel Mistry, Content Marketing at ContractPodAi
As 2020 fast approaches, it's important to look back and reflect on all of the changes and trends this past year. And when it comes to legal technology, there's a significant number of them that need to be addressed and understood. After all, technology is slowly taking over – for the better. This blog will highlight this year's major developments in legal technology and contract management. With changes in privacy laws around the world, the billions of dollars of investments in legal tech companies, and digital transformation, there's so much to be excited about!
This year, more than $1.2 billion was spent on artificial intelligence (AI) companies and legal technology in the United States. They raised $13.5 billion in the period between January and September 2019, alone. With more companies realizing the benefits of AI and legal tech in our advancing world, more and more startups are expected emerge. In fact, recent late-stage deals for about 75 AI companies totaled $3 billion, according to the National Venture Capital Association (NVCA).
This past year was big for ContractPodAi, especially. We received $55 million in series B funding led by Insight Partners and are one of the fastest growing AI-powered contract management software companies. Meanwhile, the world is starting to embrace AI-driven automation in order to simplify everyday working life. With AI start-ups moving beyond the experimental stage, they're an even larger attraction for investors. And this is only the beginning!
“Legal tech has greatly changed in the last 2-3 years because of the increase of start-ups into the marketplace," says Cara Walker, Esq. Senior Account Executive at ContractPodAi. "Historically, legal tech was coming from two major providers and now we're seeing the start-up market quick to adapt and provide tools and solutions for both in-house legal teams and outside attorneys and law firms. I’ve never seen such an ability to create and provide based on the needs of the legal profession. The start-ups have made a huge difference to what can be provided to the legal profession."
Privacy and security have always been an issue. And with increased technologies, it's scary to think that what we do isn’t really all that private. A few countries have tightened their privacy laws, which have to be complied with by the rest of the world. GDPR is a privacy legislation that came into effect May 25, 2018. In order to retain their consumers and clients, many companies are in the process of changing their security settings to be compliant with it. Still, many more have yet to do so.
Essentially, GDPR lays down rules for processing, storing and managing data from people in the European Union. The privacy law strengthens European Unions data protection to meet the new privacy challenges created by digital and emerging technologies.
Although GDPR is meant to protect EU citizens, it'll affect any company or organization that provides services to the EU or possesses personal data and identification for EU citizens.
If you're a company owner or part of one, make sure that you're GDPR- compliant or in the process of doing so. This will build consumer trust while giving you the competitive advantage over those that aren't compliant. Besides, who wants to pay the consequences – fines could add up to $7,500 per violation. Moving forward, companies and individuals that meet the GDPR requirements will continue to succeed while the ones who don’t will fail in the long run.
There's more than one approach to becoming more GDPR-compliant, though. Be sure to speak to your legal counsel so that you're certain to cover all aspects of the law and that everyone is on the same page. To reduce the risk of a fine, every organization must find out exactly what they must change within their company, delegate someone to do the job, and be responsible for updates and issues that arise.
The California Consumer Privacy Act prevents data from being collected and sold without Californians' consent or knowledge. Starting in January 2020, businesses and companies above a certain revenue have to reveal the type of personal data that they're collecting, what they plan to use the data for, and any third parties that the data will be shared with. Also, they must provide a discrimination-free opt-out to those who don't want their personal data sold or shared with others. Those who aren't CCPA-compliant risk receiving a large fine also.
Customers need to know that their identifiable information is safe. They need to feel protected when asked to provide personal information. If you're a company in the process of becoming CCPA- compliant, ensure that your employees understand the importance of privacy and the consequences that come with ignoring it. After all, privacy is integral to the security and trust of all clients and customers.
Both GDPR and CCPA target separate parts of the world, but the goal of each remains the same: privacy. It's important for businesses to comply with both laws in order to keep your consumer trust positive. Noncompliance with either can result in a heavy fine of $75-$100 per person per violation.
So although CCPA hasn't come into effect yet, make sure that what you're selling – like software – is compliant with these new rules and regulations.
Law firms and legal teams realize that the manual work involved with their careers takes up copious amounts of time. In September 2019, investments in legal tech exceeded $1.2 billion. Some trends in the Legaltech world include shifts to the cloud, tech education, legal AI, cybersecurity and tech-supported diversity. Legal technology helps those working in the legal department to focus on more important tasks instead of reading and editing piles of paper. Using legal technology for contract management has also been popular because the task of reviewing a contract manually is tedious and prone to human error.
“Legal operations teams and legal departments in corporations are now frustrated from managing large sums of contracts every day," says Cara Walker, Esq. Senior Account Executive at ContractPodAi. "Contract lifecycle management is one of the fastest growing legal tech in the past 20 years. I have never seen a demand for such a product as CLM."
Legal professionals that adopt technology or contract lifecycle management will allow machines to outperform humans. According to Above the Law, future technologies for the corporate legal department include those that will improve efficiency, productivity, data security tools, technology that uses artificial intelligence, and contract management. The later has become a hot topic in the last year, as more and more people are realizing its benefits. In fact, the 2019 ABA Legal Technology Survey shows that nearly half of all lawyers (49 percent) have used legal analytics software.
As the world becomes more and more technological, artificial intelligence will only become more prominent. It's already helped countless industries to be efficient, helping to increase their overall profits. Using AI for contract management has also been embraced along with all other legal technology. By 2024, the AI in retail market is expected to reach $4.3 billion. In 2021, it's estimated that AI augmentation will create $2.9 trillion of business value and 6.2 billion hours of worker productivity globally.
There's still confusion between artificial intelligence and machine learning. In short, artificial intelligence machines are pre-trained and personalized to your needs and wants. Machine learning, on the other hand, needs to be trained over time. That means that the machine learns and adapts to your way of working and your needs. ContractPodAi is an artificial intelligence-based contract lifecycle management (CLM) solution that you don’t need to worry about training. And it already comes with thousands of contracts. According to the ABA Survey mentioned above, 41 percent of lawyers indicated that AI-based technology would be the most useful for increasing efficiency, and 24 percent of lawyers said that AI would help with document management and document review.
“It’s important to ensure that a system around contract lifecycle management has functional AI, and it is specific to the AI part of the tool, itself," says Mark Langsbury, VP Sales EMEA at ContractPodAi. "There’s a lot of vendors out there that say AI is incorporated in their software when it’s not. It’s the best thing people need to have in their CLM."
Digital transformation has been a hot topic this past year, with industries understanding the need to become digital in a technology-filled world. By the end of 2019, spending on digital transformation will reach $1.7 trillion worldwide.
Simply put, digital transformation is the process of automating everyday activities by using technology instead of only human labour. An example is using a software such as Salesforce for better organization, rather than an Excel spreadsheet. Digital transformation is a top priority for boards because they realize that their respective companies need to digitize in order to keep up with – and exceed – the competition. So, it's important to keep up with trends in technology and learn how to incorporate them in your everyday work life.
ContractPodAi's CEO Sarvarth Misra says that digital transformation is a starting point. That's because it takes time to determine the correct tech that your company may need. Some things that the general counsel should consider when managing implementation from a financial and resourcing perspective are:
Digital transformation makes everyday work clearer and easier. But humans in this sector won't be replaced altogether. After all, there's no replacing the human brain: artificial intelligence machines can only do 80 percent of human work. Instead, digital transformation is more about innovations in technology – those that we must adapt to so that we don't fall behind.
LIBOR stands for London Inter-Bank Offered Rate (The name has recently changed to ICE (Inter-Continental Exchange). It's the interest rate at which banks can borrow from one another. This rate is updated everyday by ICE, which takes the highest and lowest figures from every bank before calculating the average rate for that day. But with the end of LIBOR coming in 2021, banks will no longer have to submit their daily rates.
SOFR (Secured Overnight Financing Rate) will be “the new LIBOR.” SOFR’s rate will be based on actual transactions from an average daily volume of more than $1 trillion transactions in the United States, whereas LIBOR was based off of daily estimates.
Although LIBOR is based in London, it's used worldwide and referenced in millions of contracts between companies. The loans agreed upon in the contract use the LIBOR to calculate loans and agreement-based exchange rates. Contracts that end before 2021 are safe, but the contracts that extend beyond 2021 will need to be re-negotiated.
Worldwide, more than $370 trillion of existing financial contracts make reference to LIBOR, and about $200 trillion are in U.S dollars. That means these contracts need to be addressed as soon as possible.
Finding references to LIBOR is quite a lengthy process. It's costly, too. But these efforts must begin now, as 2021 is right around the corner.
The end of LIBOR doesn't have to be strenuous or a negative turning point. By using artificial intelligence, you can quickly identify the contracts that reference LIBOR without having to go through each one manually. Still, now is the time to adopt contract lifecycle management. The companies that have already will have an advantage when LIBOR comes to a close, as they'll be able to quickly adapt to new contracts with the companies that they're working with.
Artificial intelligence is the ultimate solution for removing LIBOR from all contracts. AI-powered contract management systems will get you to the stage where you can renegotiate your deal, without the stress.
Seeing the advantages of using new legal technology, legal teams and in-house counsels are beginning to adopt contract management software in the workplace.
Contract management software allows you to have a single system for all agreement-related records. It saves you from manually reviewing a contract. With contract management software, you can find exactly what you need by filtering out what you want, be it a date, auto-renewal date, keyword, or name. The search bar is your best friend!
“Contract management is so beneficial to businesses, and it’s great to see companies leverage it," says Derek Karpel, Esq, Account Executive at ContractPodAi. "It has such a huge impact on a business and their ROI, and as someone working in this industry, I enjoy being able to witness that satisfaction.”
Contract management software is for mid-large sized businesses and in-house counsels that need to better organize thousands of contracts.
"Contract management is very beneficial and important to legal departments and legal operations in naming them a true business partner with the rest of the company," says Cara Walker, Esq. at ContractPodAi."I'm an attorney myself, and historically, legal departments played a role that didn’t make them business consultants. They were only legal consultants. Adopting a contract management system is allowing them to input to the business and it is clearer to see what is helping and what is not for that corporation."
The average fortune 2000 company has 20,000-40,000 active contracts at a time. And to keep track of all of those, a contract management system is just the solution.
Adopting contract management software simplifies the lives of lawyers and in-house counsel members. It makes the review of contracts more accessible and less time-consuming. By using contract management software, you'll improve your ROI by allowing your lawyers and in-house team to focus on tasks that need attention, rather than looking through hundreds of pages manually. The benefits are instant, as work that used to take up most of your time is now being done by a machine.
"The sheer growth of companies that are getting into contract management is pretty impressive," says Derek Karpel, Esq. Account Executive at ContractPodAi. "I think its a perception that the legal market is slow to adopt technology and it's now great to see legal folks in the community readily adopt technologies that have a true meaningful impact on their business. People are asking more sophisticated questions about CLM, and there's a huge growth in awareness and knowledge in technology that can help the legal industry."
Generally speaking, contract management software provides the best results possible. But how do you know which one is the best for you? When a solution has artificial intelligence integrated in it, it means that the machine is pre-trained and ready for use out-of-the-box. A prime example of contract management software is ContractPodAi, which is integrated with IBM Watson E: V artificial intelligence.
“In the early days, businesses out there would choose a supplier, move forward with them and then highly customize the machine and change the solution," says Mark Langsbury, VP Sales EMEA at ContractPodAi. "What ended up happening was this was very time consuming, costly, and added pressure to the IT team. There’s been a shift in the market toward functional out-of-the-box platforms. Out-of-the-box platforms means things are implanted quicker and this will move the customer to a better place in the CLM process. There’s a large shift in the decision-making process as well, and lawyers are more understanding and understand the need for legal tech more. Now, they truly recognize CLM is part of legal function environment so they are more willing to adopt that whole process."
By purchasing a software that's pre-trained and uses AI, you can skip the extra task of training the machine and learning how to use it, yourself. Ultimately, the machine will teach you, or do the work for you!
In saying "goodbye" to 2019, we can't help but to be amazed by all of the technological advancements that have happened. And with the start of the new decade, we look forward to even more developments, particularly in the legal technology industry. Keep an eye out for our predictions in legal technology for 2020 report. We love this stuff and can’t wait to share more with you!
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