Ed Breault
Contract Intelligence – How to Gain Intel with AI-powered CLM
Supercharge your contract management with AI-powered contract intelligence, transforming agreements from burdens to business boosters. Legal, procurement, finance, and sales teams all benefit from unparalleled speed and accuracy in contract review, and processing documents in minutes instead of hours.
Gain strategic insights that reveal hidden opportunities, optimize negotiations, and ensure compliance with ever-changing regulations. Elevate your workflow across departments, mitigate risks effectively, and focus on higher-value tasks that drive business growth.
This article reveals how your business can benefit from contract intelligence solutions.
What is Contract Intelligence?
Contracts have evolved from static documents into dynamic assets that drive strategic decisions. Contract intelligence is a revolutionary approach that transforms these agreements into powerful sources of insight. At its core, contract intelligence uses advanced technologies to extract, analyze, and leverage critical data from contracts, turning static text into structured, actionable information.
A contract intelligence platform goes beyond mere storage, offering real-time analysis that pinpoints trends, predicts exposure, and provides actionable recommendations. This technology shifts contracts from being passive repositories to active contributors in business strategy, directly impacting operations and bottom lines.
The Evolution from Contract Management to Intelligence
The path from manual contract management to AI-driven intelligence reflects the rapid technological progress of our time. Originally, contracts were managed in physical filing cabinets — a system prone to misplacement, damage, and inefficiency. With the digital age came document management systems that moved contracts from paper to pixels. While these systems were a step forward, they merely digitized the storage problem without addressing the challenge of content analysis.
Next came keyword-based search, which allowed analysts to query digital contracts for specific terms. This enabled cross-comparison but still required a lot of manual effort. The advent of artificial intelligence and machine learning represented a quantum leap. Suddenly, contract intelligence software could automate tasks that previously had to be done manually, offering greater accuracy, speed, and cost efficiency.
Today’s contract intelligence solutions use natural language processing to understand contract language, machine learning to continuously improve, and advanced analytics to gain deep insights. This technology doesn’t just manage contracts, it interprets them and learns from each agreement to improve its understanding. The result? A contract intelligence platform that not only stores and retrieves but actively helps with decision-making, risk management, and strategic planning.
The Power of AI in Contract Management
Artificial intelligence in contract management is revolutionizing how businesses handle their agreements. Gone are the days when contract analysis was a labor-intensive, error-prone task. Today’s AI-driven tools can sift through contracts, identify key clauses, and extract essential data with impeccable accuracy, ensuring that every agreement, regardless of its complexity, is thoroughly examined.
But AI’s role doesn’t stop at extraction. As a contract analyzer, it goes further, transforming unstructured text into structured data that can be analyzed at scale. This data is then connected with the systems and processes that contract power, revealing trends, opportunities, and risks that were previously hidden. The result? Real-time, high-impact insights that allow companies to enjoy unmatched visibility into precisely the information they need.
Natural Language Processing in Contract Intelligence
At the center of this transformation is Natural Language Processing (NLP), a branch of AI that enables machines to understand, interpret, and generate human language.
These systems can break down sentences, identifying subjects, verbs, objects, and their relationships. They understand context, distinguish between similar terms with different meanings (like “party” in a legal sense vs. a social gathering), and even interpret ambiguities or implied meanings common in legal language. This capability allows the AI to accurately extract key information—like effective dates, parties involved, obligations, and legal clauses—transforming contracts from impenetrable text into clear, actionable data.
Machine Learning in Action
If NLP is the language teacher, Machine Learning (ML) is the personal tutor that gets better with every session. ML algorithms are designed to learn from feedback throughout the process, integrating that knowledge into the AI system.
Imagine you’re reviewing a new supplier agreement. Your contract intelligence software, trained on millions of contracts, quickly identifies standard clauses. But as it encounters your company’s unique terms, it might flag them for your review. You confirm or correct its interpretation, and just like that, it learns. The next time it sees a similar language in another contract, it applies this learning, making the right call without human intervention.
The longer a company uses a specific AI model, the better that model becomes at interpreting the organization’s particular types of contracts. It learns industry-specific terms, recognizes company-preferred clauses, and even starts to predict potential issues based on past contract performance.
In essence, ML turns your contract analyzer into a personal tutor, one that adapts to your unique needs, learns from every interaction, and progressively enhances its capabilities. This learning process ensures that contract intelligence isn’t just a one-size-fits-all solution, but a tailored, ever-improving tool that grows with your organization.
Additional Functionalities of Contract Intelligence Solutions
- Automatic smart tags: Admins can quickly set up smart tags for each template, which aids in visualizing those tags in search and the relationship graph. This feature makes it easier to tag a large number of agreements, reducing manual tagging errors and speeding up the identification of agreement contents.
- Approver guidance & to-dos: AI provides contextual insights and pinpoints specific clauses that need attention, making it easier for approvers to review and take action. This feature helps streamline the approval process, ensuring that approvers can quickly find what they need and focus on high-value tasks.
- Authoring assistant: Contract editors can use AI to regenerate alternative clause language, transforming complex legalese into clear, understandable text. This feature helps users deal with unfamiliar clauses and ensures consistency and clarity in contract language.
- Clause playbooks & guardrails: AI allows for the automatic running of playbooks throughout the contract lifecycle, setting nuanced conditions for review. This reduces bottlenecks and time delays during the review process, helping reviewers propose fallback language and ensuring contracts adhere to organizational standards.
- Custom AI model trainer: Organizations can train AI models to learn from their documents and existing language, allowing them to track any type of clause important to their business. This customization ensures that unique clauses specific to a business can be efficiently managed and tracked.
- AI review in Word: Legal professionals can automate routine review tasks directly in Word, minimizing the risk of errors and ensuring comprehensive analysis. This feature allows legal teams to focus their attention on critical areas, enhancing productivity and accuracy in contract reviews.
Benefits of Contract Intelligence Solutions
With contract intelligence solutions, you can revolutionize your workflow, speeding up contract review and uncovering strategic insights with unparalleled accuracy. Let’s see what benefits contract intelligence holds.
Speed and Accuracy
Consider a 100-page master services agreement (MSA) on your supplier’s paper. Traditionally, you’d spend hours combing through it, identifying key clauses, terms, and potential issues. With AI-powered contract review, this process is reduced to minutes. The system quickly scans the document, leveraging its vast training on millions of contracts to accurately pinpoint critical sections – be it indemnification clauses, termination rights, or renewal terms.
But speed doesn’t come at the cost of accuracy. In fact, AI enhances it. Human reviewers, no matter how skilled, can miss details after hours of reading dense legal text. AI doesn’t fatigue. It applies the same level of scrutiny to the first page as it does to the hundredth. Moreover, machine learning algorithms continually refine their understanding, ensuring that each review is more accurate than the last.
The result? Legal teams can review more contracts in less time, without sacrificing quality. This not only frees up attorneys for higher-value tasks but also accelerates deal closures and reduces bottlenecks in contract workflows.
Exposure Mitigation
Laws and regulations are in constant flux, presenting potential pitfalls for businesses. A contract intelligence platform is routinely updated to reflect these changes. When you upload a contract, it automatically checks against the latest regulatory requirements, flagging any non-compliant terms. This proactive approach dramatically reduces legal vulnerabilities and potential fines.
Similarly, the system can identify clauses that deviate from your standard terms. Say you’re reviewing a new NDA, and the AI spots an unusual indemnification clause. It compares this clause against your approved language, highlighting the deviation and even suggesting your preferred wording. This ensures consistency across agreements and prevents unwanted terms from slipping through.
Contract intelligence tools can also assess the favorability of clauses. They analyze language to determine if a term favors your company, the counterparty, or represents a balanced position. This insight allows you to understand your negotiating leverage quickly, guiding you to make informed decisions that protect your interests.
Performance Boosters
Consider a scenario where you’re preparing for a major supplier negotiation. You need to understand your current contractual landscape — what terms you’ve agreed to, which suppliers offer the best rates, and where you might have leverage. Traditionally, this would involve manually reviewing hundreds of contracts, a task that might take weeks.
With a contract intelligence solution, you simply query your contract database. The AI analyzes your entire contract portfolio in seconds, providing insights like:
- Average payment terms across suppliers
- Suppliers offering the most favorable indemnification clauses
- Contracts with upcoming renewal dates, offering negotiation opportunities
- Historical pricing trends, informing your negotiation strategy
Or consider revenue recognition. Finance teams often struggle to accurately recognize revenue due to complex contractual terms. A contract intelligence platform can extract all relevant clauses—delivery schedules, acceptance criteria, termination rights—and transform them into structured data. This data integrates with financial systems, ensuring timely and accurate revenue recognition, directly impacting cash flow and financial reporting.
Similarly, in M&A scenarios, the AI can quickly analyze thousands of contracts from the target company, identifying potential liabilities, assessing the value of recurring revenue contracts, and even spotting intellectual property rights that could enhance the deal’s value.
Implementing Contract Intelligence
Transitioning from traditional contract management to AI-driven intelligence might seem daunting, but with the right approach, it’s a smooth process that quickly yields benefits. Here’s how to start using contract intelligence effectively.
Choosing the Right AI-Driven CLM Solution
Not all contracts are created equal and the same goes for contract intelligence software. When selecting a solution, consider these factors:
- Accuracy: The system’s primary function is data extraction and analysis. Look for a provider that uses both advanced algorithms and attorney verification to ensure high accuracy. Some vendors even offer accuracy guarantees.
- Data security: Your contracts contain sensitive information. Ensure the solution adheres to your security requirements.
- Industry-specific capabilities: Legal language varies across industries. Choose a platform trained on a vast library of industry-specific contracts to ensure a better understanding of your unique terms.
- Integration: The tool should seamlessly connect with your existing systems—CRM, ERP, and financial software—to provide a unified view of contract data across your organization.
- Scalability: As your contract volume grows, so should your tool’s capabilities. AI-powered CLM solutions trained on millions of contracts can adapt to your expanding needs without missing a beat.
Employees and AI Working in Harmony
Contract intelligence isn’t about replacing humans; it’s about empowering them. Here are tips for smooth adoption:
- Start small: Begin with a specific contract type, like NDAs or MSAs. This allows your team to see quick wins and builds confidence in the technology.
- Engage early: Include key stakeholders — legal, finance, sales, procurement — from the start. Their input shapes the system’s configuration to match your unique needs.
- Explain benefits: Stress how AI handles repetitive tasks, freeing employees for high-value work like strategy and complex negotiations. Highlight benefits like faster deal closures or better supplier terms.
- Provide training: While the AI learns from contracts, your team learns to work with AI. Offer sessions on tasks like running custom queries or interpreting AI-generated contract summaries.
- Encourage feedback: The beauty of machine learning is its ability to improve. Ask your team to validate AI’s interpretations. This not only refines the system but also helps users feel more invested in its success.
- Set clear roles: Define who will review AI-flagged exceptions, who will update contract playbooks based on AI insights, and who will act on contract analytics. Clear roles ensure smooth collaboration between humans and AI.
Remember, contract intelligence isn’t a replacement for legal expertise; it’s a powerful tool that amplifies it. By choosing the right solution and preparing your team, you’re not just implementing software — you’re elevating your entire contract management strategy.
Contract Intelligence in Action
Use-Case Example 1: Streamlining Supplier Agreements
Manufacturing companies traditionally deal with hundreds of supplier agreements annually. These agreements often require extensive manual review to identify key clauses and ensure compliance with company policies. By implementing an AI-powered CLM solution, manufacturing firms can streamline this process.
The AI analyzes contracts within minutes, flags deviations from standard terms, and provides real-time insights. This enables procurement teams to negotiate more effectively, reduce contract cycle times by 50%, and improve supplier relationships.
Use-Case Example 2: Enhancing Legal Team Efficiency
Technology firms often face challenges with lengthy contract reviews and maintaining consistency across clauses. AI-driven contract intelligence can transform their approach. AI systems using Natural Language Processing (NLP) and machine learning extract and analyze critical data from contracts.
Legal professionals generate summaries of redlined documents in seconds, assess clause balance and favorability, and ensure alignment with internal playbooks. This improves accuracy and allows legal teams to focus on strategic tasks, increasing efficiency by 40%.
Use-Case Example 3: Proactive Risk Management in Finance
Financial services companies need to ensure regulatory compliance across vast numbers of client contracts. Traditional methods are often inadequate for tracking and updating terms to meet evolving regulations. Contract intelligence automates the review process, using AI to detect non-compliant clauses and suggest updates.
The system’s continuous learning capability improves with each contract reviewed, providing accurate insights. This proactive approach to risk management reduces legal exposure and enhances compliance efforts.
Conclusion
Contract intelligence represents a paradigm shift in how legal professionals manage agreements. By harnessing the power of machine learning and artificial intelligence contract analysis, it transforms static documents into dynamic assets that actively contribute to business success. From accelerating contract review without sacrificing accuracy to proactively mitigating risks and generating strategic insights, contract intelligence amplifies the capabilities of legal teams and other departments working with agreements.As contracts grow in complexity and volume, traditional management methods become increasingly inadequate. Contract intelligence offers a forward-looking solution, one that not only handles today’s challenges but also adapts and learns, preparing your organization for tomorrow’s demands. By adopting contract intelligence, you’re not just optimizing your contract management — you’re future-proofing it.
