A 2021 EY survey unsurprisingly revealed that 99% of organizations want to reduce contracting costs. Yet the survey also found that 99% of organizations lack the data and technology they need to improve their contracting processes.

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That was then; the here-and-now is all about cutting costs, improving performance, and netting better ROI from the right contract management tools and processes.

While traditional approaches to contract management relied on time-consuming manual aggregation and analysis, a process often fraught with inefficiency, modern resource-conscious approaches take advantage of purpose-built AI models for data extraction and analytics.  

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• In our first post in this series, we explored how advanced contract AI can contribute major efficiency gains to legal operations.
• In our next post, we walked through the value of knowing your contracts by gaining AI-driven visibility into your entire contract corpus. 
• Then we covered how customizable contract AI platforms can deliver expanded functionality and benefits over non-customizable systems.

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A more advanced contract AI platform—one that’s customizable and utilizes the right tools for the job (e.g., natural language processing, generative AI, and retrieval-augmented generation)—can empower legal and contracting professionals to deliver high-impact ROI.  

Let's dive into the transformative potential of AI-powered CLM that can deliver real returns on your investment.

Labor-saving ingestion and streamlined storage

When contracts and drafts are scattered across desktops, shared drives, and email inboxes throughout the organization, finding specific documents or clauses becomes time-consuming and frustrating.

AI-powered CLM software addresses this common problem with purpose-built Optical Character Recognition (OCR) technology. When users upload contracts, the AI extracts relevant data and stores everything in a centralized, searchable repository.

Your ROI? By centralizing contracts and reducing the time and resources needed to process them, legal departments can achieve significant time savings.

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Precise and rapid data extraction

AI-powered CLM software improves data extraction accuracy and efficiency from active contracts compared to traditional manual methods. Well-engineered ingestion tools extract key data points and clauses with precision, reducing human error and saving legal teams significant time previously spent on manual data collection.

Your ROI? Better data extraction gives you a more comprehensive understanding of contractual rights and obligations, which in turn drives data-driven decisions and responsible business growth. 

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AI-assisted redlining

Contract drafting and negotiation can be tedious and repetitive, often exacerbated by excessive redlining, which can breed adversarial relationships with counterparties. Generative contract AI offers a solution to both issues. Using AI-suggested surgical redlines instead of full clause substitutions, you can foster goodwill with counterparties and accelerate negotiations.

Your ROI? A report by Gartner predicts that by 2025,  AI-powered contract drafting tools with features like automated redlining will reduce contract negotiation time by 50%.  This translates to faster negotiations with fewer errors, resulting in more closed deals. It also provides significant time savings for legal teams, allowing them to concentrate on higher-value tasks.

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Third-party paper review

The review of third-party contracts often demands a considerable amount of manual work.  An advanced contract AI solution can automate a substantial portion of this process by automatically surfacing key terms and conditions.  

Your ROI? This cuts the manual review time required of legal professionals, leading to increased efficiency and cost savings.  

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Faster deal cycles 

Contract AI can accelerate every stage of the deal cycle.

As discussed above, generative contract AI such as automated redlining and AI-powered clause creation can significantly speed up drafting and negotiation.

And if you lead with intelligence – that is, your workflows are designed taking into account AI-driven insights from your own contracts – you can make informed decisions about who to designate for approval routing and eliminate potential blockers.

Then, once you’ve put pen to paper and stored your signed agreement, the data points extracted with your custom AI models will save your team countless hours when it comes to to renew or revisit the contract.

Your ROI? Speed up every phase of your deal cycles for internal efficiency and faster revenue recognition.

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Summary

AI-powered CLM software won’t simply improve specific tasks – it can entirely transform your contract management process. To recap some of the value drivers we’ve covered:

• Free up limited resources: By automating repetitive tasks like data extraction and clause review, AI frees up valuable time for your legal team. This allows them to focus on higher-level activities that require strategic thinking and expertise.
• Drive faster workflows: Automation and AI-powered insights streamline the entire contract lifecycle. Contracts are reviewed, analyzed, and approved more efficiently, leading to faster turnaround times for everyone involved.
• Improve business decision-making: AI provides contracting professionals with the data and insights needed to make informed decisions. Identifying trends and potential risks within your contracts permits strategic adjustments to optimize future agreements and safeguard your organization's interests.
• Recognize substantial cost savings: Better insights into your obligations translates to money saved. For example, if you are able to surface early renewal rebates or other similar entitlements in your contracts, you can start to drive down costs shortly after implementing contract intelligence.
• Seize untapped opportunity: AI-powered CLM software doesn't just save money; it helps identify opportunities to generate more revenue and increase profits. Equipped with full knowledge of the rights and obligations in your contracts, you can surface untapped opportunities for revenue growth and customer expansion.