Many legal and procurement teams face the classic dilemma of whether to build a contract analytics solution in-house or purchase one from a third-party vendor. 

Teams that build homegrown solutions do so because they believe it will help them maintain full ownership. On the surface, building from the ground up can seem like a straightforward way to gain control and customizability. 

However, building in-house often means excessive costs, (much) longer timelines, and the ongoing burden of maintenance and updates. Counterintuitively, homegrown systems can lack the customizability the right provider can unlock. 

Critically, the most valuable features of an effective contract analytics tool are also the most costly and difficult to build and maintain:

• Advanced OCR that is capable of handling non-English languages, handwriting, tables, and edge cases for superior data.
    
• Proprietary, contract-specific Large Language Models (LLMs) that significantly outperform non-industry-specific LLMs at a fraction of the cost.
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• Customizable dashboards and reports that turn your contract data into actionable insights to drive business decisions.
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‍On the other hand, buying a contract analytics solution offers the advantage of speed, expertise, and scalability. With a vendor-provided solution, you gain access to a product that is already proven, supported, and continuously updated to meet the latest industry standards. This option allows teams to implement the solution quickly and focus on their core functions rather than getting bogged down in software development and support.

As we explore the pros and cons of each approach, it’s crucial to consider your organization's specific needs. Factors like available resources, business goals, and the complexity of your contract management processes will significantly determine the best path forward. 

This blog will help you navigate this important decision by outlining who should consider building a contract analytics solution in-house and who might be better off buying a solution.

Some teams have no contract lifecycle management (CLM) solution and spend far too much time searching for contracts and insights about their contracts. For them, inefficient contracting processes and lack of visibility into signed agreements can grind business to a halt.

Other teams find themselves stuck with CLM tools that only handle workflow basics and offer little post-signature value. Instead of delivering actionable insights, these systems force users to input data manually and use external tools like Tableau or Power BI just to make sense of their contracts. These piecemeal contract analytics solutions add complexity and often lead to worse outcomes than having no solution at all.

If this strikes a chord, chances are you need a solution that will give you quick and accurate insights into your contracts. Real-time data points surface financial data and uncover legal risks. Structured data that you can use to make business decisions—with easy-to-use dashboards and reporting.

Once you’ve identified the problem, you need to find a solution. For many organizations, the question becomes: Do we build it, or do we buy it?

Companies with unique workflows, intricate processes, or proprietary requirements might feel inclined to develop a contract analytics solution tailored specifically to their needs. This customization allows organizations to create exact specifications that align with their internal operations, something that off-the-shelf solutions may only partially accommodate. 

If you're looking for a point solution to support a discrete contracting process unique to your organization, building it yourself might seem logical. 

But before you dive in, consider these challenges:

• Hidden Costs: Building a contract analytics solution in-house is not just about the initial development; it involves substantial ongoing expenses, including maintenance, updates, and scaling efforts.
  
  Teams need to ask themselves if they have the resources to gather all contracts across various locations, digitize them, and create a centralized, organized system that extracts and structures the data within the contracts.
  
  Automating these processes with homegrown contract analytics is a high-cost, cross-functional endeavor demanding layers of AI development (e.g., OCR and enhancements, embeddings and RAG, complex security controls) that requires a dedicated team to build and maintain.
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• Dedicated Development and Maintenance Team: A homegrown contract analytics solution requires a team to manage continuous updates and integrations with other software, like Ariba or Salesforce. Without a dedicated team, maintaining data integrity and ensuring smooth operation can become overwhelming.
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• Limitations on AI: Top contract analytics providers have spent years layering AI into every layer of their product, with some providers going so far as to build contract-specific large language models to power precision contract analytics.
  
  Developing a contract analytics solution with robust OCR and generative AI capabilities for contracts demands specialized teams. Without these, organizations will face significant inefficiencies and the risk of errors due to limitations on AI capabilities.
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• Limitations on Other Capabilities: Homegrown contract analytics tools often neglect dashboards and reporting capabilities that turn contract data points into actionable insights because they’re simply too resource-intensive to build. 
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• Lack of Support and Expertise: A homegrown contract analytics solution lacks the designated support that vendor solutions offer. This includes onboarding, technical support, and legal expertise—critical components that ensure the system operates effectively and securely.
  
  Additionally, you’ll need 24/7 technical support and a robust quality control process, both of which require resources and expertise.

Consider building if your organization has ample time and resources

Companies with ample financial and human resources might consider building their contract analytics solution as a long-term project. This could be feasible if there’s no immediate need for the system and the organization is willing to dedicate a significant portion of its budget and workforce.

If you’re looking for a point solution to support a discrete contracting process that is unique to your organization, it might make sense to build it yourself.

But Ask Yourself:

1. Have You Considered the Necessary Security Measures? Developing homegrown contract analytics solutions requires stringent data security protocols, including encryption and access controls. Top contract analytics providers invest heavily in data privacy and security, adhering to frameworks such as ISO 27001, 27701, and 42001. This is particularly important given the sensitive nature of contract data, which can be a target for breaches and ransomware attacks.
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2. Is Building a Contract Analytics Solution Efficient? Developing automation engines, creating routing workflows, and managing contract review processes are time-consuming tasks. The primary goal of a contract analytics solution is to enhance efficiency; if the process of building and maintaining the system undermines this, the whole effort could backfire.
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3. Do You Have the Necessary Expertise? Developing a contract analytics solution requires a team with deep legal, technical, and operational knowledge. Without this expertise, the system may fall short in handling complex legal language, ensuring data security, and keeping up with the evolving needs of the business.

For most organizations, buying a contract analytics solution from a reputable vendor is often the better choice. While building an in-house system may seem appealing to companies with specific needs, the reality is that most teams are better off leveraging the speed, security, and expertise that a vendor solution offers

Consider buying if your organization needs full visibility into its contracts

When considering whether to build or buy a contract analytics solution, it’s crucial to recognize that not all contract analytics solutions—and the AI that powers them—are created equal. 

Much of the conversation around AI tends to treat it as a one-size-fits-all technology, but in reality, AI is a diverse category of technology. The effectiveness of a contract analytics solution heavily depends on how well its AI has been designed, built, and tailored for specific use cases, including legal contracting.

Traditional contract analytics solutions were often developed primarily as workflow or repository solutions, with AI integrated as an afterthought. This approach usually involves bolting on generic, third-party AI solutions, which can result in limitations when analyzing complex contract data effectively. By contrast, AI-native solutions, like those from companies that started with AI at their core, can offer deeper insights, greater accuracy, and more seamless user experiences.

And, critically, contract data becomes exponentially more valuable when teams can visualize it in robust dashboards and reports. Effective vendor-built solutions include fully customizable dashboards to open up accessible insights for teams across the organization.

Consider buying if your organization needs speed and scalability

Buying a contract analytics solution allows companies to implement a system quickly without the extended timelines associated with in-house development. A third-party solution is typically ready to deploy, enabling legal teams to start benefiting from automation and enhanced contract management almost immediately.

Key Benefits:

• Cost-Effectiveness: When you factor in the hidden costs of building—like ongoing maintenance, staffing, and development—buying a contract analytics is usually more economical. Vendors spread these costs across many customers, providing advanced features and support at a fraction of the cost of building them from scratch.
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• Expertise and Robust Features: Contract analytics vendors bring specialized expertise in legal technology and contract management. Their solutions are developed with compliance, security, and industry best practices in mind, often including features that an in-house team would struggle to replicate.
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• Dedicated Support and Continuous Innovation: Unlike homegrown solutions, vendor-provided contract analytics solutions come with dedicated support teams that provide onboarding, training, and ongoing assistance. Vendors continuously update their products to stay ahead of legal trends and technological advancements, ensuring your solution evolves with your needs.

Consider buying if your organization prioritizes impact over development

If you need a customizable solution that delivers immediate impact and ROI, buying a contract analytics is the clear choice. With the right contract analytics solution in place, legal teams and their business counterparts can immediately divert attention from contract treasure hunts and manual processes to focus on strategic initiatives.

Other Critical Considerations:

• Vendor Fit: It’s crucial to evaluate potential vendors carefully. Look for those with a proven track record, a comprehensive feature set, and the ability to provide a high return on investment. Resources like our Key Questions for Evaluating Legal Tech CLM Vendors series (part 1, part 2) can guide your evaluation process, helping ensure you select a solution that meets your specific needs.
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• Try-Before-You-Buy: To ensure the solution’s accuracy and usability, test the system with your contracts in a Proof of Concept before fully committing. This try-before-you-buy approach allows you to validate the vendor’s claims and assess how well the solution handles your data.

Ultimately, the decision to build or buy a contract analytics solution depends on your organization’s unique needs, goals, and resources. 

However, for most, buying offers a faster, more scalable, and cost-effective path to a robust contract analytics solution. By choosing a vendor with the right capabilities, you can avoid the pitfalls of homegrown systems and immediately start driving impact with a proven, AI-powered contract analytics.

Ready to further explore the benefits of buying over building? 

Schedule a demo today to see how an AI-native contract analytics can meet your business needs right out of the box.