Are CLM and AI contract analysis tools converging?

The legal industry is increasingly embracing the use of artificial intelligence (AI) and machine learning (ML), thus enabling a more data-centric and efficient approach to what are usually time- and labor-intensive processes. AI/ML tools are proving to be extremely beneficial to contract lifecycle management (CLM), where technology thus far has largely only helped users store and organize legal documents. The emergence of AI-powered tools opens up the potential for far more effective contract management and analysis.

Contracting is one of the most common activities done by companies all over the world, but the sheer volume of documents generated from this process can be overwhelming. Keeping track of the terms and obligations across multiple contracts – including organizing, managing, and updating – is a major challenge, which is further amplified by the fact that there is no uniform template to contracts.
Drafting, executing, negotiating, and updating contracts all currently take up significant manpower. But AI-based contracting tools can sift through thousands of contracts quickly to find those based on specific criteria and extract data from these contracts for analysis faster than even a team of trained legal professionals.

Developers of AI/ML tools also have a lot of opportunities for growth within the CLM space as the use of such tech and the expertise to make them are still quite limited. As the need for both services increases, the two are beginning to converge.

CLMs move into AI:

Historically, CLM tools have been more geared towards just managing the workflow related to the lifecycle of a contract. Now, with the emergence of AI, more CLMs are incorporating this functionality into their larger platforms, either by purchasing existing AI companies or by building their own tools. Such a proposition adds value to the users of CLM software by giving them the tools to analyze their contracts for improved speed and efficiency.
Underscoring this is the February 2020 news that CLM player DocuSign is acquiring Seal Software for US$188 million to leverage the latter’s AI expertise. In early 2019, DocuSign had announced an investment in Seal Software, considered a pioneer in contract analytics and AI technology solutions.

AI expands into contract management:

We also see some movement from AI tools – they are starting to venture into the contract management space, slowly bridging the gap between the two service offerings. Instead of just sticking to a more analytics functionality, some AI players have expanded into end-to-end solutions for the legal space that could very well compete with more traditional CLMs. This means that they not only offer the functionality to extract and analyze data from contracts but also the tools to manage contracts right from the start of its lifecycle.
For example, ContractPodAi, touted to be one of the world’s fastest growing AI-powered CLM tools, uses IBM’s Watson to help streamline the contract management process. It currently offers a single ecosystem that spans the gamut of contract management functionalities. The CLM tool comes embedded with “the world’s first end to end artificially intelligent contract analyst.”

Licensing opportunities:

Not all CLM companies may want to buy up AI companies to take advantage of the automation and analytics functionalities. Instead, they can just buy licenses to use the AI tools. For example, companies like Apttus, HighQ, Prosperoware, SeeUnity, and Litera have integrated Kira Systems’ AI solution with their own tools for more accurate contract analysis.

As the entire legal industry starts to get comfortable with the idea of using AI-powered tools to ease the burden of paperwork, we can expect to see greater convergence of AI tech and legal service providers in the coming years.

Andrew Jardine

Andrew Jardine

Andrew provides advice to Cenza and their clients on how best to utilise legal services in conjunction with different legal technologies, achieving high quality and cost effective solutions. Andrew does this by leveraging his legal technology and strategy consulting experience gained during his time as an early stage employee at Kira Systems and while as a Consultant at Deloitte earlier in his career. In hisspare time Andrew publishes a legal technology podcast, “Legaltech Tapas”, helping people to stay informed about different legal softwares.

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