Contracts are the lifeblood of any business and contain critical commercial, operational and risk data. This is why extracting data from contracts (Contract Analytics) has a very high value proposition relative to most of the things you can do with contracts. In fact, being informed by relevant data about your contracts is the key to many of the things people want to do with contracts.
While this seems like a fairly obvious proposition, the current reality is that most businesses operate with extremely limited contract data, even if they have already implemented a repository or Contract Lifecycle Management (CLM) product. Most have chosen to put the analysis and data extraction problem aside and to get on with automating templates, workflows, and playbooks as best they can. Many CLM implementations are phased to initially address only new contracts going forward and descope existing live contracts and contracts done on third party paper. The hope is that, as new contracts are generated based on templates and negotiated based on playbooks, the CLM will incrementally be populated with data from these contracts.
The “automate first” approach leaves many CLM buyers with a lot of legacy contracts into which they have little to no visibility. This ‘incompleteness’ can undermine the perceived success and ROI of many CLM implementations. Similarly, a lack of data about legacy contracts means that automation decisions (which templates and clauses to use, which playbooks to follow, etc.) will be less data-driven and based more on the impressions of a few individuals, which further increases the risk to success.
CLM implementations usually entail long, expensive projects, so everyone is eager to avoid failure. But there is increasing evidence that the majority of CLM projects fall short of expectations and leave people disappointed.1
The main reason for skipping analysis and jumping into automation is that there has not really been any ‘fit for purpose’ Contract Analytics solution available. While Contract Analytics products have been around for a while (often as part of CLMs) and have sold themselves as a panacea to this problem, buyers’ experiences with these products have been disappointing. They often require long expensive implementations with a heavy burden on clients who must explain their business and contracts to vendors, provide many samples of provisions and, in some cases, even train models themselves (or engage 3rd party consultants). Even after such painful implementations, the quality of data is poor with the identified/extracted contract content being limited, high level and noisy.
This is why Contract Analytics, as a product segment, is described by Gartner as currently in the “Trough of Disillusionment” in Gartner’s Hype Cycle.2 The lack of fitness for purpose of these products means that the review/analysis process has continued to be mostly manual with people reading through contracts.
Let’s suppose you did have access to a ‘fit for purpose’ Contract Analytics solution, with the following characteristics:
A ‘fit for purpose’ Contract Analytics solution provides many opportunities:
For companies which already have a CLM, using ‘fit for purpose’ Contract Analytics lets you do more in terms of automation:
Companies which don’t have a CLM can start their automation journey by using ‘fit for purpose’ Contract Analytics to first analyze their contracts which provides opportunities to optimize and realize the highest value of any subsequent implementation of a CLM or similar solution:
The bottom line is that ‘fit for purpose’ Contract Analytics provides great opportunities for low risk, high value ‘quick wins’. Doesn’t everyone deserve a ‘quick win’?
1 Gartner Says More Than Half of Legal Transformation Projects Underperform Expectation https://www.gartner.com/en/newsroom/press-releases/2021-01-26-gartner-says-more-than-half-of-legal-transformation-projects-underperform-expectations
2 https://www.catylex.com/blog/is-contract-technology-over-hyped; https://www.gartner.com/en/newsroom/press-releases/2022-10-20-gartner-says-many-legal-departments-are-underusing-mature-technologies