Contract Lifecycle Automation

Published on: 3/31/21

 

 

CONTRACT LIFECYCLE AUTOMATION

In this episode of The Contract Lens Podcast, Matt Patel, COO and Co-founder at Malbek, chats with Alistair Maiden, CEO of Syke, about the benefits of contract automation. Alistair starts by sharing how contract automation can “oil the wheels” of the contract process by reducing the legal blocks and decrease contract cycle time. Using examples from his personal experience, he shares how contract automation can reduce the need for legal review, increase efficiency, and provide savings across an organization. Alistair then explains how what is in a contract is just as important as what’s not in the contract, and how contract automation coupled with AI can identify key risk areas of a contract and standardize the review process. So grab a glass of wine, and let's talk contracts!

 

Intro:
Welcome to The Contract Lens Podcast brought to you by Malbek. In this podcast, we have conversations with contract management thought leaders and practitioners about everything contracts and its ecosystem. Today's episode focuses on the benefits that can be gained from contract automation. We are joined by Alistair Maiden, CEO of SYKE, one of the fastest-growing independent legal tech firms in the world. Their mission is to transform the global legal industry by embedding the latest, innovative technology and removing unnecessary tasks, which in turn frees lawyers up to do what they do best, practice law. Prior to founding SYKE, Alistair served as head of contracts and data protection for the UK retailer ASDA. So now, it's time to relax, grab a glass of wine, and let's talk contracts.

Matt:
Alistair, very nice to be talking to you today. We're looking forward to this podcast. I hope you're doing well. Thank you for joining us.

Alistair:
Thank you.

Matt:
So today, the topic is contract automation, and I'll start with something about many organizations these days have already understood from variety of content that we see online and from different providers that technology, people, and process are essential. We all know that streamlining process before implementing technology is key. From your perspective, however, when someone thinks of or reads about contract automation, what does it mean when we say organizations should try to achieve contract automation?

Alistair:
That's a good question. I always break down the process of contract automation into triaging someone to the right contract template, which in itself is a big challenge in larger organizations, drafting the contract, negotiating the contract, getting it signed, getting stored in the right place, and then having the data available for management functions on an ongoing basis. I think it's broadened out. When I first started in the industry, it was all about contract automation, was all about the process of digitally drafting a contract. It was just a pure efficiency play or getting a lawyer to do it and maybe a self-service. But I do think it's now broadened out into that holistic end-to-end process.

Matt:
From a technology provider perspective, on the other side of things, we work with organizations and kind of what you said, how do we help the organization choose the right contracting agreement type? The right language? And in the old days, there was a legal team involved in drafting. Things were put together manually. Automation is all about speed, time to value. How do I get that document in the hand of the external party quicker? Faster? With the right terms so that there is less negotiation, but as you said, how can technology help the business users? Whether you were in IT, or procurement, sales, finance, legal, any department within your company, if they need an agreement done with the external party that they're trying to do business with, they don't necessarily know what provisions are needed, what type of template, it's too technical, too clunky and creates friction. Automation is all about, here's what I need with my external party, whether it's a customer or a supplier. Let the system take care of putting that document together. That automation is very powerful. And the reduced time of getting that document out to the customer is of immense value.

Alistair:
Definitely, I mean, essentially, I think what contracts automation enables you to do is rather than having like a flat word template installed on SharePoint or on intranet somewhere, maybe it's the right template. Maybe it isn't. Maybe you actually send it to third party. They mark it up and then send it back to the legal team. The legal team says, "You used the wrong template." So you need to start the process again. Maybe you're not actually using a template as a starting point. Maybe you're using a contract that you entered into before as the start point, even worse. What you do, you can replace all of that, and you can replace it with a curated content library. You can modularize that. So you can break it up into boilerplate, aspects, but also activity-specific aspects, depending on what you're buying or what you're selling and say from a user's perspective, contracts automation means just, as you said, you don't have to worry about having the right content.

Alistair:
You'll get through some kind of interview process, which in reality is a conditional logic decision tree. You'll give your answers hopefully, you won't be asked for too much free text. It will be a yes or no or select from these options. You don't have to worry about having the right agreement. Likewise, from a legal perspective, I used to be an in-house lawyer, and I was forever worried about contract quality. Say some of the examples I gave earlier where the wrong template being used. The other challenge with someone using an existing template, but also I was often worried I manage quite a big legal team, and there was a lot of legal stuff is quite subjective, actually. So there were different interpretations on the same issue, and how to draft the contract and contract automation enabled us to effectively agree on a position, an enterprise position. And then, once these contracts were automated, we could rely on the quality. And that was a massive step for us.

Alistair:
What it meant in practice was that even back in my practicing days, something like 80% of contracts would never touch my team because the standard could be self-served by a business user. It could just progress smoothly. Matt, as I think you intimated earlier, the business users aren't really interested in the contract. They just want to get a deal done. And so I think automating the contracts and the contracts process can really kind of oil the wheels of the process. It reduces the legal block.

Matt:
It does make sense. And in fact, I was going to talk about this point a little bit later, but let me bring it up since we just mentioned it the benefits of contract automation. I know there is a lot of publications about the benefits that you can achieve, but let's talk about real benefits, tangible benefits that we have seen organizations from your experience. And I'll share a bit about our own customers. You mentioned something about 80% reduction in time or efficiency by having less legal involvement and getting business users to get that contract executed. Can you share a bit of efficiency [crosstalk 00:07:43] savings?

Alistair:
I'll give you some examples. I've been working in contract automation since I was an in-house lawyer in 2012. And I've got a lot of experience in this particular area, there are lots of examples of where it hasn't quite worked, but I think when it does work when you get the combination of the right product and the right implementation support, some of the results can be spectacular. So I was looking at something that we'd done the other day, where it's a particular contract type that had been automated, but they were pre-assessing in the region of 7,000 contracts a year without even touching the legal team at all. Completely end-to-end automated process. Fantastic. We've got another client publishing. We've helped them. And something like 95% of their contract, they didn't touch the legal team. Again, massive win. Another client in FMCG, very well known brand, has reduced their contract cycle time, say that's the average time to conclude a contract from the point it is instructed.

Alistair:
They've managed to reduce their contract cycle time by 50%. And that has a massive impact on the business and their ability to realize savings and profits quickly. And we've actually done some analysis on the impacts of that example in some of our examples as well, that we worked on where we've reduced the contract cycle. And in a savings context, the working capital benefits are huge. We're talking millions of pounds or dollars. If you reduce your contract cycle time, by anything like the numbers that I've been talking about. It will pay for all of the money that you spend on the product and its implementation 10, 20, 30 times over. We spent a lot of time helping customers build business cases for this kind of thing. And actually, there's some great examples out there.

Alistair:
Another example, actually, I mustn't forget it is the World Commerce and Contracting. It has done some research, which estimates that if you digitally manage your contracts, say if you capture data about these contracts when they're concluded, and you made that data available for the ongoing management of those contracts, it can be worth an average of 9% of contract value through benefits into making sure that you're charging the supplier the right amount, say avoiding revenue leakage making sure that you're paying or being paid in accordance with payment terms making sure that you're delivering in accordance with key delivery dates or that you're applying service credits or monitoring service levels as appropriate. If you look at even a larger show organization, 9% of contract value is worth an astonishing amount of benefits of the P&L. I don't think that you need to look hard to make a business case in this era. I think it's almost I hate the phrase, but it's almost a no brainer.

Matt:
And speaking of WCC, which used to be ICCM absolutely very much involved and engaged with them even prior to, Malbek worked with them for over 10 years now. And they publish amazing content globally for organizations in a variety of industries. I think if I tear some of the examples to add to what you said about achieving the 70, 80%, 90, 95% efficiencies, which is incredible. Technology, the way it provides you that efficiency, and I'll speak from what we have seen with our solution, with our customers because we provide the CLM tools with some of those capabilities that allow you to reach that automation and efficiency. Basically, the contract administration or the legal team wants to provide provisions and terms with some options to the business users. So here are my default mandatory provisions. Here are somewhere we prefer this language. However, if the external party wants these other two options, you can have them. Some alternate provisions pre-approved documents.

Matt:
So it's putting the business user in control with self-service where simple things don't have to go back to legal for manual changes or approvals, but it reduces that friction reduces the dependency on legal for every change requiring approval. Once that automation is put in place and legal or finance or executive team is only bothered, so to speak or approval, when terms are outside the boundaries of pre-approved provisions. It reduces that overall bottleneck that in the manual world, you might have to assign every document you author to a large group of people, hoping someone reviews and approves it. Whereas with automation and technology, it's seamless. It is configured. It's set up in a way where the application then figures out who should approve and when you will not need approvals. Even the precursor, think about when a document comes in from third party, the amount of minutes or hours, if you calculate it, that you spend reading that document upfront because it's not your paper.

Matt:
It's a lot of time that legal teams have to spend just because it's third party paper, you have to read through the entire thing in case there is a few words, even in a simple force majeure clause. In that, you have to read the whole document word by word. With AI, which everyone knows is the word of the decade, I think everyone is aware AI is increasing its footprint and capabilities. With AI, you can expedite that to where if a third party document comes in, let the solution read and identify key areas of risk before legal team even reviews it. This way, instead of reading, word by word, you are already 60, 70% there were you only looking at the highlighted risk areas by the tool significantly, reducing the time you spend on that upfront review. This is where we've seen our customers indicate similar kind of efficiency. 60 to 70% is quite common, reducing the approval time and the dependency on legal.

Alistair:
I totally concur with that. I think using AI to review contracts is also... I think there's a risk play there, which I think is quite important. So we do a lot of work training legal AI to recognize third party contracts. And one of the things that is abundantly clear to us on all of these projects is that attorneys and contract managers within the organization of our customers are not at the point that we started project. They're not reviewing. They're not all reviewing the contracts in the same way. And it gets back to that point I made earlier where it can really can be quite subjective. And I think in that subjective variance lies risk. There's a great opportunity, I think, to standardize the review process in some of the best examples that I've worked on. When a third party paper comes in, it's uploaded to the system, and the system will scan the contract.

Alistair:
Therefore, contents within the contract which create risk. But it will say for things that are missing from the contract, and that's quite an important point. It's not just what's in it. It's what's not in it that could be important.

Matt:
Absolutely.

Alistair:
And it will actually then use that data to power ongoing workflow. So it's not just about an immediate time saving for the attorney. How we use it is to power ongoing workflows. So we will give the contract to risk score, and based on that risk score, it will either say, "Okay, you can carry on." Let's say this is a simple NDA is nothing unusual in here. Knock yourself out, go and get it signed, done, no need for legal support. Maybe it's a low-risk contract, but it does have something that needs some attention and maybe remediation. Maybe it goes through a legal process outsourcer depending on the geography. It might be someone in India or Eastern Europe. He will then liaise with the third party to remediate it and then that process is happening at a lower cost. Maybe it's something that can be dealt with by a digital playbook, which has been automated within the system itself.

Alistair:
So the user can actually have a go at self-remediation, but there might be a final tier where it's a contract. There's something in the contract that is obviously really high-risk. Maybe it's exclusivity or some kind of penalty clause. And there, we can triage it right through to the right lawyer within the customer's organization. And I think that is really powerful because it's reducing risk. It's getting the contract to the right resolution, is doing it quickly. In fact, it's doing it instantaneously, and I'm sure you know Matt, but when we were doing that manually, you could be talking weeks, sometimes even months, just to give you that process just because we were never just dealing with one contract. We always had 10, 20, 30, 50, 100 contracts in our to-do list. I always tell the story that I personally, before automation, I personally approved over 1,000 contracts that were emailed. This is a great opportunity for automation, I think.

Matt:
Definitely, and what I'll ask you next, Alistair is based on your experience working with organization. And as a final thought, when customers come to you, small or large or mid-sized organizations, there's a lot of choices when it comes to a CLM technology. How do you help them narrow it down? And can smaller organizations adapt and automate contracting much easier, faster than a larger global, more complex organization? Is it really possible for larger enterprises to achieve this?

Alistair:
Really good question. For purely selfish, I guess, implementation perspective, it's great if you have a relatively small customer who actually doesn't have any documents to start off with say, you've almost, it's like powder snow. You can just really enjoy yourself, get it done quickly. Everyone's happy. It becomes more challenging the more you have to deal with legacy, documentation process, people, politics, positioning, and I think as you go up the organizational size enterprises are really challenging. How we deal with enterprises is we actually treat them as a single entity. We break them up into their constituent elements that might be regional. It might be even in some cases, individual countries like the US.

Alistair:
It's often works to treat that as a separate organization business unit, as well as the buy-side sell-side, even with really large organizations, we might split procurement into direct procurement and indirect procurement. And that's probably the optimum way to do it where you manage it in bite-sized chunks. It's not that we don't feel as though we could take on a beast of an implementation across an organization. It's just the amount of change and also the cost, frankly, might be off-putting.

Matt:
Great insights, Alistair. And I think hopefully, the audience benefits from this. Looking forward to future discussions with you and in closing for our listening audience, Alistair, if you want to share any information on how to reach you or the site team, if they want to discuss this, how you help organizations achieve some of these efficiencies and automation, or you do have any upcoming events, please share.

Alistair:
Sure. So look, the best way to contact me is through LinkedIn. I'm quite responsive. We also have a contact form on our website, which is www.syke.tech. So, please, please, don't hesitate to reach out and get in touch. I will say I do a lot of kind of academic speaking as well. I'm a lecturer at the University of Manchester, so you might be able to catch some of banter in that context, but thanks, Matt. It's been really good experience talking to you, and I look forward to talking again soon.

Matt:
Thank you so much. Enjoy your day.

Alistair:
Cheers. Bye.