Tech Breakdown: Choosing the Right Contract Analysis Solution
More than just a simple business document, contracts contain a treasure trove of insight that organizations can use to mitigate risk, realize efficiencies, and deliver more value to customers. Since vital intelligence is typically veiled in hordes of unstructured documents, however, tapping into the strategic value of contracts can be an arduous undertaking.
On the road to greater insights, trading clunky manual methods for a fit-for-purpose contract analysis solution is a vital first step. But not all contract analytics tools were created equal.
Read on for the pros and cons of three types of contract analytics technologies, plus a few practical tips for choosing the right solution for your intended use case.
1. Advanced CLM Solutions
Apttus, Coupa, Thomson Reuters & Others
- Capabilities: Standard contract life cycle management (CLM) solutions assist in the creation of a contract, as well as managing the contract through different approval stages. Once a contract is signed, they are used to manage the lifecycle of the document, controlling who can access it and when it needs to be archived or revised.
- Pros: These tools are good at managing the file itself using file name and surface-level metadata to respond to search requests.
- Cons: CLM tools aren’t optimized to be able to do searches for specific legal clauses within documents, and they can’t easily identify all contracts that contain a certain phrase or term.
2. Automated Contract Review
LawGeex, Legal Robot & Others
- Capabilities: Machine-learning-enhanced contract review tools can increase the efficiency of the review process by reading and identifying specific clauses.
- Pros: They are able to access data within any contract and compare it to similar values in another contract.
- Cons: Automated contract review tools may not be able to work with unstructured data and the wide variety of file formats used across an enterprise. They may need to be augmented by file-analytics tools to find all contracts and convert them to a readable format.
3. Advanced Contract Analytics
Adlib Software & Others
- Automatically locates contracts in all repositories and converts them into fully searchable, digital assets.
- Classifies contracts by type, region, and party, and then extracts terms, clauses, and conditions so they can be analyzed and compared. These operations can be performed on an ongoing basis at scale, so that contract analysis can be done on both existing and new documents as part of business-as-usual processes.
- Can work with a variety of different file types and languages, and can handle the complexities of long, inconsistently formatted text-based documents.
- Allows enterprises to easily find and extract important values, even in documents that have evolved with different structures and wording over time—making them ideal for companies that have a long history of contract evolution.
- Provides visibility into contracts by leveraging extensive rules-based workflows to extract relevant data into summary views and dashboards that can display risk hierarchies.
- Can extract data for use in AI or analytics engines like IBM’s Watson, but doesn’t necessarily identify risk areas or make recommendations for action.
Choosing the Right Contract Analysis Software
Identify Needs, Match to Capabilities & Test
The first step in choosing the right contract analysis solution is to identify your needs. Consider goals like achieving and maintaining compliance, automating procurement, identifying business opportunities, or increasing efficiencies, and then look for the solution that provides the best fit. Be sure to trial the software before making a final decision to ensure it performs as anticipated.
Choose a Vendor Who Will Be a Good Partner
The best vendors act more like business partners, helping to ensure that the roll-out plan is effective and that it has an appropriate scope. The plan should match the level of business and IT maturity of the organization. It’s better to start small and scale than the opposite.
Be Wary of “Repository Lock In”
Some contract analysis solutions house all contracts in the vendor’s repositories, meaning organizations need to go outside their own systems to perform analysis. Look for a solution that can surface key insights from your contracts and pass them to your existing repositories.
Be Selective About Image-Based Technologies
In some solutions, the default process is to apply OCR to every document. However, many contracts are born digital and OCR would prevent access to key elements of the contract. Since a higher percentage of contracts will be born-digital going forward, it will be increasingly necessary to deal with files in their native format.
Automatically Manage Complexity
The right solution must be flexible and scalable enough to accommodate the sheer volume and variety of contracts—including regional differences, languages, file formats, etc. Ensure your chosen solution can access the full scope of your contract complexity and can perform at true enterprise scale for both back-file processing (dealing with your backlog of legacy contracts) as well as business-as-usual (go-forward) workflows.
A robust contract analysis solution can help organizations to identify risk and generate insights—speeding deal closure, improving processes, and optimizing terms. Companies that implement the right solution will turn their contracts into strategic assets, unveiling deeper levels of insight and developing a clear advantage over their competition.
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