Legal contracts are the lifeblood of a business and play an integral role in business relationships, be it clients, third-party vendors, business partners, or even service providers. However, these contracts are not often given their due i.e. once executed, they are usually filed away, instead of being managed across their lifecycle.
This challenge is currently being resolved by contract lifecycle management (CLM) providers, who help centralize contract storage in a way that strengthens compliance while automating the creation, execution, and management of any type of contractual agreement. However, remote work and distributed workforce models have made contract lifecycle management that bit harder.
A significant part of contract management is contract extraction that refers to pulling structured information from contracts and storing that against contract records for easy retrieval, assessment, and aggregation.
Year after year, corporate legal departments allocate precious resources—both in man-hours and budgets—to extract these key data points from legal documents stored throughout the firm’s system. An exercise that is greatly flawed because it is costly, prone to manual error, and puts a drain on already limited internal resources.
Weigh your options: In-house vs outsourcing
Pros and cons of managing contracts in-house
Question contract managers often ask themselves is if they should allocate resources internally to facilitate contract extraction and metadata management. However, the question you should be asking is: What’s the point of investing in a brand-new CLM when the data being imported is incorrect?
Meeting high accuracy standards for extracted data requires manually comparing every element visually against the original contract. You need trained lawyers and an astringent quality analysis process that guarantees consistent and accurate results.
To do the extraction in-house, you’ll need to:
- license the software
- learn the software
- train/configure the software for the data points that you need to extract
- sort your documents
- match masters and addendums
- get a team of lawyers in place
- train the team of lawyers on the software
- have a good process in place to ensure accuracy and consistency of data
If the volume of contracts to be reviewed is low with a quick turnaround, an in-house team will get the job done. However, if the contract volume is relatively high and also complex in nature, you’ll need to hire resources, which is both time-intensive and expensive exercise.
Pros and cons of outsourcing contract management to specialists
When contract managers outsource contract extraction and metadata management to specialists, they can leverage operational expertise at a fraction of the cost. Outsourcing services firms are not only more affordable, but they also have the scalability and flexibility to meet varying workloads. With project experience in CLM platform implementation and integration, specialists ensure higher data consistency and accuracy.
The biggest challenge of working with outsourcing companies might be with respect to project dependency and deadline management. These risks can be mitigated by setting clear expectations (goals) and outlining key performance metrics (SLAs, accuracy, etc.).
While considering an outsourcing specialist, choose a vendor with demonstrable expertise in contract extraction/migration and a proven track record of CLM partnerships
Today, contract managers and corporate legal departments are already swamped with low-value work, which is doubly challenging due to remote work. It is no surprise that outsourcing to a full-service specialist firm, solely focused on contract migration and management is quickly becoming a key way for companies to achieve, drive, and sustain a competitive edge in the industry.