What is Contract Analytics?

Contract Analytics is the analysis of contracts and legal agreements, with a particular focus on automated processing of the text of those documents.

Contract Analytics is the analysis of contracts and legal agreements, with a particular focus on automated processing of the text and wording of those documents. A Contract Analytics product is one which performs this analysis and presents the content of legal agreements in ways that are easier to consume by people and systems. An important feature of any Contract Analytics product is the ability to extract structured data from the unstructured text of contracts.

Other common terms related to contract analytics include “contract AI” (where the analysis is powered by some form of artificial intelligence), “contract review” (where the focus is finding certain issues across a portfolio of contracts), and “contract intelligence” (which is a play on “business intelligence” and tends to focus on post-extraction contract data analysis and presentation).

Any business with contracts can benefit from contract analytics. First, by translating complex legal language into simple business concepts, contract analytics allows many non-lawyers to understand key issues in a contract with less dependence on human experts. Second, by automatically processing a large volume of contracts much faster than people can read them, contract analytics can provide rapid and affordable insight into risks and issues buried within thousands of pages of legal documents. Whether it’s an urgent crisis or business as usual, contract analytics can answer questions about things you must do, things you must not do, and things you have the right to do if you choose. It can also reveal which contracts shield you from risk and which contracts expose you to risk (before it’s too late to mitigate or manage those risks).

In-house lawyers and legal operations teams use Contract Analytics to gain insight into the operational and risk-related terms of customer agreements, vendor agreements, partner agreements and many other contract types. Procurement teams use Contract Analytics to extract data from master service agreements, master supply agreements, statements of work, and similar contracts with suppliers. Sales operations teams use Contract Analytics to extract and track pricing terms and renewals for customer agreements and revenue contracts. C-suite and senior executives leverage the data from Contract Analytics to better understand customer, supplier and third-party risks and relationships.

Contract analytics is related to but different from contract lifecycle management (CLM). CLM is the cradle-to-grave process of managing contracts within a business, covering pre-execution contract requests, contract drafting, contract negotiation, contract approval, contract signature, and post-execution contract management, including data extraction, obligation management, and tracking of renewals, amendments, and other milestones. A CLM product may contain its own contract analytics features, or it may sit alongside and be integrated with an advanced Contract Analytics product. In some cases, a CLM may embed and white label a specialized Contract Analytics product as its data extraction engine.

In terms of maturity, Contract Analytics is an evolving category. Early products were able to extract some data automatically but often with inconsistent quality. Many vendors offered hybrid solutions combining software with human review services to overcome the limitations of their products. Gartner recently placed Contract Analytics in the “trough of disillusionment” on its technology adoption hype cycle. Nonetheless, the combination of legal language experts and improving AI tools and infrastructure is producing new, fit-for-purpose Contract Analytics products that work out of the box.

As contract analytics continues to mature and improve, we can expect faster performance, deeper and more accurate data, a new era of insight and measurement of contract value and risk, and a dramatic increase in data-driven automation of contracting.

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