This article was originally published in the Autumn 2019 issue of The Record. Subscribe for FREE here to get the next issues delivered directly to your inbox.
What are the biggest challenges of traditional paper-based contract management? What proportion of firms operate in this way?
Research shows that the adoption of contract lifecycle management (CLM) software is strongest in heavily regulated industries such as pharmaceuticals and biotechnology, as well as industries with complex supply chains like manufacturing.
These numbers speak to the real issues with traditional paper-based contract management. In industries like pharma and manufacturing, a manual approach to contracting is a major liability, as it does not give centralised control over or visibility into what agreements are being entered into globally. If you are a global carmaker, for example, you need to know who you’re contracting with for thousands of parts, yet paper-based contracting means all that information is stashed away in a filing cabinet or on a computer desktop. Pharma companies, meanwhile, operate as a strictly regulated industry, and maverick contracting doesn’t only risk revenue leakage but massive regulatory fines.
So that’s the current state. Yet even industries that have been slower to adopt CLM software are quickly catching up: Gartner estimates that by 2023, 90% of multinational corporations will have a CLM solution in place, regardless of what industry they are in.
How can the cloud help to turn contracts from static documents to strategic assets?
Consider the fact that every dollar in and out of an enterprise is represented in a contract; contracts and the underlying data locked within them form the foundation of commerce. Cloud-based contract management allows companies to unify contract management across departments and geographies, improving visibility and eliminating silos. When all contracts live in a central, digital location, companies enjoy a single source of truth for all contractual commitments and obligations. Contract data can then be extracted for never-before-available insights into risk and opportunity.
And in cloud environments, open application programming interfaces mean that data in one platform can easily push and pull into other systems. So not only do users have deep visibility into contract data, but that contract data can actually be projected into enterprise resource planning, customer relationship management and supply chain management systems as well. So, for example, a salesperson can be in Microsoft Dynamics 365 and spin up a new sales contract that is 100% compliant with all internal controls without ever leaving that interface.
This was simply impossible when contracts were pieces of paper filed away in a cabinet or kept in a lawyer’s inbox.
What are the benefits of the Microsoft cloud in particular?
Additionally, many regions and countries have specific compliance regimes. Microsoft ensures that Icertis customers have the choice to deploy with confidence in their compliance whether their contract data is located in the US, the European Union, Germany, Japan, the UK or India.
Contracts contain some of the most commercially sensitive information in an enterprise and our customers need to trust that their contract data is handled and stored according to the most stringent security standards. Security is a key focus of Microsoft, which invests more than US$1 billion in security research and development and has a team of over 3,500 cybersecurity experts that work together to help safeguard customer data in the Microsoft Azure cloud.
How are you working with Microsoft to enable the digitisation of contracts?
The relationship between Icertis and Microsoft runs very deep. Icertis was born on Azure before cloud computing was the dominant paradigm it is today. And it has been exciting to see our platform mature and grow right alongside Azure.
Our suite of artificial intelligence (AI) applications leverage the power of Azure AI to enable the digitisation of legacy contracts at scale. The platform can now read contracts that are decades old, recognise individual clauses, parties and other metadata, and process the data as if the contract were written right there on the platform. It’s really cool. We’ve also been able to do very interesting things with Azure Cognitive Search, like use contextual information to surface contracts that may be subject to the GDPR in Europe.
More recently, we’ve been partnering with Microsoft to deliver the Icertis Blockchain Framework that could totally change how we look at contracts. We’ve piloted a solution for Mercedes-Benz Cars that will allow them to use the Framework to guarantee suppliers are complying with ethical and sustainability standards. Moving forward we envision this technology allowing for outcome-based pricing and self-executing contracts.
How are technologies like AI adding greater value to the process? How do you expect this to change in the future?
There is no question that AI will profoundly change how contracts are managed. Going back to Gartner’s research shows that AI will make contract negotiations 30% more efficient by 2023. What’s special about AI is that it allows companies to treat the dense legalese in contracts just like any other data, which totally changes what’s possible.
Of course, to unleash the transformative power of AI into contract management, you need access to a quantity, quality and variety of data to ensure the algorithms are trained properly. Icertis has an unmatched data set in the Icertis Contract Management (ICM) platform today with more than 5.7 million contracts and related artefacts in over 40 languages, from more than 90 countries across a range of industry verticals. This data represents thousands of contract types and templates, and a unique taxonomy curated from hundreds of thousands of clauses – all mapped to customers’ distinctive semantic structures within the ICM platform. With our AI tools, we’re able to train the ICM platform to unlock the power of data like never before.