If someone had said 20 years ago that you could carry a device with you to work whilst commuting or to watch your favourite shows, we might have laughed. But with such a fast-moving technology industry, we look at the work that we do differently. If something can be automated, it should be, as long as there are efficiencies to gain when measured against the effort to make the change. The role of the GC and the legal team is not just to protect the business and manage risk, but to do it efficiently whilst demonstrating value to the business. They are therefore often found managing change projects and being asked to do a lot more than provide legal advice. Whilst Legal as a sector is at the forefront of some technology revolutions, there are some areas where technology adoption is lagging behind.
The role of the GC and the legal team is not just to protect the business and manage risk, but to do it efficiently
Investors are Investing
There has been funding of over $500 million invested into Contract Lifecycle Management (CLM) products in the last 15 months alone. So, it is safe to say there are a number of investors banking on the sector to remain buoyant and provide an ROI for Venture Capitalists and the firms they represent. They are investing because they know that the market is a long way from the top of the bell curve, nowhere near plateauing out, and that there are still ‘green field’ prospects out there for their products. So, with such high demand for Contract Automation technologies (Contract Lifecycle Management and Document Automation), why have so many firms not adopted an automated approach to contracts yet?
There has been funding of over $500 million invested into Contract Lifecycle Management (CLM) products in the last 15 months alone
Tip of the Iceberg
Many in-house legal teams may put off implementing contract automation tools, because they see change management as incredibly difficult, with outcomes heavily dependent on factors outside of their control. Ironically, that position is mirrored by many legal teams’ current contracting position: without structured contract management in place (ideally supported by automation) there are a significant number of variables outside of a legal team’s control. Playbook terms are not adhered to, the wrong VAT rates are applied, the wrong currency is selected, and even the wrong stationery may be used. If the goal is to minimise these risks, the future of legal work must involve a move away from the manual application of playbooks to template-based Microsoft Word contracts.
For some organisations, the migration has already started, and contract automation is now business as usual. For these organisations, the process of executing a hard copy contract and manually inputting key terms into a spreadsheet or database (so they can, for example, set reminders against and analyse for risk) is squarely in the past; but this is not the case for many. This may be in large due to a limited understanding of the art of the possible when it comes to contracting.
The technology required to eliminate this manual work (and the associated risk that comes with it) is here already – hundreds of different solutions exist to reach the same output – a perfectly formatted, executable, and risk-free (or at the very least risk-managed) contract. Whilst business users are often only interested in the contract itself, leveraging contract automation technology offers significant additional value and data to the legal team, helping them to better support their organisation’s objectives, whilst simultaneously lowering the risk of contracting. For example, a well-implemented contract automation tool enables a legal team to – at the click of a mouse:
- Answer any question in regard to risk profile, renewal dates, interest rates and contractual position.
- Provide regular contracting MI, for example via a live dashboard or an automated report.
- Generate and manage data to seamlessly flow between systems, under strict governance rules, to ensure that you are not just avoiding siloes, but in fact adding value to other areas of your business.
Contract Automation is far more than just about outputting documents, that’s the tip of the iceberg!
The future of legal work must involve a move away from the manual application of playbooks to template-based Microsoft Word contracts
What is the future?
Legal work is evolving and so is the profile of the person doing the work.
Coupled with that, is an appreciation that the right technology can be an enabler, but that to successfully implement and see the desired return on investment, legal teams need to consider a number of other critical factors such as alignment with strategic objectives, change management, stakeholder engagement, resourcing and ensuring there is appropriate governance in place – both for the selection of automation tools but also their ongoing management. Engaging with vendors and partners who have the skills and expertise to approach technology implementation holistically, not only de-risks these projects and improves the prospects of success, but can save time and money in the long run and ensure a more joined up approach.
Digitally enabled Smart Contracts are a future consideration that many market segments will get to at some point in the future. However, some market segments are there already, and the chances are that you use digital contracts more out of the office than you do in the office. The evolution started a long time ago as contracts moved to Microsoft Word, to Contract Automation, and then to Blockchain-enabled Smart Contracts. It is fair to say that there is less of a jump in technology terms from Microsoft Word to Contract Automation than there is from Microsoft Word to Smart Contracts. Being able to describe the contract deliverables and playbook for Contract Automation will significantly aid the journey to Smart Contracts.
First published in The Lawyer on 24th June 2022