Companies have a large volume of contracts that they have to deal with daily. To create, review, maintain, and track contracts, companies need teams of trained personnel. Yet, most of the time, contracting does not get the importance it deserves. A study suggests that bad contracts could cause companies to lose up to 40 percent of the business. This is where AI contract review software can help.
Of course, there are still companies who balk at switching to automated AI systems. But if they want to be a step ahead of others, AI is the way to go. AI systems are already being used in some places.
This begs the question: “Will the use of AI contract management upset the way businesses currently operate?”
The Scenario Before AI Contract Management
Businesses have a huge number of contracts. These contracts need drafting, execution, storage, organization, retrieval, review, updates, and renewals. Contracts can also suffer from a lack of uniformity. Besides this, most companies do not have a proper database of contracts and the clauses in them.
Thus it is difficult to keep track of contracts that need refurbishing and renewal. In the existing scenario, companies need lots of manpower and man-hours to keep on top of things.
Using artificial intelligence (AI) software for contract management saves time, energy, and manpower. But, there are both upsides and downsides to using AI systems. Let’s have a look at each of them.
The Pros and Cons of AI Contract Management Software
On the upside:
- AI systems can help create reliable and consistent contracts. This is because such systems can pull up relevant and complex clauses in real-time.
- Fast AI systems help increase the number of contracts you can settle and execute in a given time frame. This saves man-hours spent in searching, analyzing, and organizing information. Besides, computers can work non-stop without taking any breaks which is a huge plus point.
- AI systems do need human intervention to review contracts, but they can help in cost reduction by about 50 percent which is another big plus.
- Automated contract software uses natural language understanding, a type of machine learning (ML). This can identify risks in contracts that would take a lot of time if done by humans.
- Computers enable automating repetitive and mundane tasks, saving money and time. Humans may not enjoy doing the same thing over and over, but computers do not complain. Computers handling repetitive tasks enables staff more time to work on important issues.
- AI systems make it possible for companies to analyze important data in real-time. They can locate and pinpoint contracts that need to be re-negotiated or renewed. Or those that need to reviewing and revising. This fast retrieval and analysis of contract information can help important, strategic decision-making.
- AI can identify different types of contract types based on the drafting style. Advanced systems can even identify text in different languages.
- By limiting access to sensitive information, AI systems could help in data security. Most systems would have ways to grant access to selected people. Yet, no system is without loopholes.
- Computers work at high speeds non-stop. This allows easy and fast review and renegotiation of contracts. Computers are also ideal for customer interaction. Sophisticated AI systems can handle customers from different time zones with ease.
- AI systems reduce the possibility of contractual disputes, by creating consistent, uniform contracts. The system can “learn” from past mistakes and avoid pitfalls.
But on the flip side:
- For an AI system to make a difference, a company would need made-to-order software. Custom-made systems can cost a lot, and this is something that smaller companies may not be able to afford. The high cost of creating custom software could be a reason not to switch to AI systems.
- AI software is created by people and is prone to errors, like any software. As such, you would still need humans to check for mistakes and errors.
- Even though AI systems learn as they go along, they lack creativity. It may not be a good idea to use AI systems for creative jobs. Creativity is a human trait, so it’s best to let the staff do any creative work.
- Sometimes the AI system is so good that a company depends too much on it. This could cause disruptions and problems in case the system fails.
- Even though AI systems can help keep data secure, there could be loopholes. This could endanger sensitive company data. Of course, you can plug loopholes provided you find them in time.
These are a few of the pros and cons of moving to AI contract management. As we move into 2021, companies will have to decide whether to use existing systems or AI systems. Will they prefer the high cost of a large workforce and man-hours? Or will they prefer faster, but expensive, AI software with a smaller workforce?
Are they willing to depend on humans or AI systems to handle their contracts? Will the creativity of humans prevail over unimaginative AI systems? Will real-time AI data analytics trump laborious searches by humans? Will companies prefer using secure computer systems or risk data pilfering? Will using automated customer interaction prevail over humans interacting with customers?
All of these tough questions require tough decisions.
There’s no doubt AI contract management will make it easier to create and maintain contracts. Yet, the efficacy and accuracy of such AI systems still need tweaking and testing. Of course, with constant research, AI systems will improve over time. The advantage is that computers can work non-stop for long hours without breaks.
Computers also revel in performing mundane, repetitive tasks. But, the use of AI systems will need a smaller workforce. This could lead to companies downsizing.
The use of AI contract management systems will disrupt the way companies work in the future, though it may also lead to higher productivity and efficient contract management. But with how AI are already used and is evolving, soon they will be an important part of any business.