Increasing interest rates and inflation can have an impact on a company’s value, operations, financial health, and as a result, overall success, and businesses should be both flexible and agile to adapt. Leveraging AI can help them protect themselves from the negative impacts of rising prices by ensuring contracts are structured to account for inflationary pressures.
We had a very informative chat with Sujay Rao, Chief Product Officer at Sirion, and discussed the ways smart enterprises can leverage AI contract lifecycle management (CLM) to adapt to inflation.
- While rising interest rates and inflation shake the industry, inefficiencies can cost companies 20% to 30% of revenue. What would you advise companies to do to adapt to this uncertain environment so that they won’t miss out on revenue?
With interest rates rising and inflation still plaguing the global economy, businesses that can’t adapt quickly miss out on critical revenue. Companies are vigorously searching for ways to defend their bottom line and ensure cost efficiency. You could make a solid argument that commercial contracts are key to achieving these goals. Poor contract management itself costs companies north of 9% of their annual revenue; so we see CLM as an essential technology that can help businesses not only optimize spend and revenue recognition but also pivot contracts quickly to respond to market signals.
- What is the role of Artificial intelligence in CLM?
The current generation of AI-led CLMs is already great at data extraction and risk discovery, which are essential for the pre-signature contracting process. In addition, AI in the flow of contract drafting is now capable of drawing on past data to accurately prescribe legalese that ensures better contracting outcomes.
The launch of ChatGPT in late 2022 changed the way enterprises can use AI in contract management. The ability to generate contracts with a simple prompt does hold quite a lot of promise. The potential of generative AI models, particularly large language models (LLMs), in transforming contract management cannot be overstated. It provides valuable support for critical functions such as contract generation, contract analysis, and legal intelligence. However, LLMs without precision data are ultimately fascinating toys with limited scope for practical application in real-world problem-solving. Making LLMs enterprise-ready requires additional fine-tuning with domain and use case-specific datasets.
- AI & Machine Learning (ML) tools are transforming the way operations and contract processes are managed. How can smart enterprises leverage AI and contract lifecycle management (CLM) to adapt to inflation?
We generally understand inflation to be a condition in which people and businesses are compelled to spend more to acquire the same unit of value. CLM is a powerful tool to counteract inflation because AI-led contracting automation enables enterprises to do more with less. With an AI-powered CLM in play, companies can save significant time and cost associated with consolidating, digitizing, and making their contract corpus accessible on-demand and extensively searchable. For example, a question like “Which of my contracts are set to expire over the next 3 months?” would have conventionally taken days to answer, but with the right CLM tool, we can get to the answer in mere minutes—and reap adjacent insights into renewal triggers and conditions in the same breath. Ultimately, this helps a business spend less time on solving tactical problems and redirect resources to achieve strategic growth.
CLM platforms – especially the ones with AI under the hood – are more than just automation tools that will help you gain cost efficiency during a period of economic inflation. They’re great at using AI to surface risks hidden deep within contracts, such as unfavorable payment terms that could adversely affect your cash flow or a missing data security clause that could lead to a regulatory fine.
However, only a select few CLM platforms have the technological depth to enable post-signature contract performance management, which is really your bulwark against inflation. Sirion automates obligation compliance and service level fulfillment monitoring. In conjunction with contracted rate cards and performance data from third-party systems, that data can be used to validate incoming invoices, discover discrepancies, and help enterprises realize hard dollar savings in tough economic times.
- Can you give us some examples of AI/ML applications that Sirion offers businesses through their digital transformation journey?
A large part of Sirion’s value proposition is built on meeting customers wherever they are on the digital transformation journey. That’s because every customer has a unique story to tell about why they wanted to introduce CLM into their technology stack. A lot of them just needed to kickstart their transformation initiative and begin with small, measurable wins. Their goal was to break down data silos so they could gain 360-degree visibility into their buy-side and sell-side relationships. Sirion enabled them to integrate with and ingest contracts and related information from adjacent systems such as ERP, CRM, and P2P. Sirion’s AI then extracted critical embedded information from these contracts – such as metadata, obligations, service levels, and rate cards – into a centralized, searchable repository, which became their single source of truth.
Moving forward, we can work with customers to extend Sirion’s capabilities to automate their contracting process, bringing in AI to drive authoring and risk discovery during negotiations. Together, Sirion’s contract authoring capabilities underpinned by a no-code workflow, help enterprises reduce time to contract by up to 90%, delivering significant efficiency gains and overhead reductions.
Countless enterprises are leveraging Sirion’s AI and post-signature contract performance management technology to achieve significant business outcomes. For example, one of our customers – a leading investment bank – achieved savings opportunities worth $8.8M through the identification of supplier non-compliance with contractual/financial obligations. A leading telecommunications company in Australia identified incremental revenue opportunities worth A$5.75M through effective tracking of delivery performance in customer contracts. These are only a couple of examples of Sirion providing significant benefits that go right to our customers’ bottom line.
- Do you think AI and ML will replace lawyers in CLM?
No. But it will make their jobs easier. Legal teams need deep visibility into the enterprise’s contract portfolio to be able to discover and assess risk before it can jeopardize their company. Sirion CLM empowers them to accelerate time-to-contract while lowering risk and leading the charge for standardizing contract language and streamlining contracting processes across the organization. This frees legal teams from repetitive manual tasks and allows them to focus on more strategic work.
What most interests me is the next phase of AI development in CLM. LLMs that have been indexed on publicly available internet data don’t deliver much value in the enterprise space. And that’s what all of the CLM providers with open AI integration are bringing to the market: LLM based on a lot of indexed – and unnecessary – cloud data.
There are several issues that enterprises are carefully watching as CLM AI continues to evolve. The first is trust. Can your AI model explain why it provided you with that data? Can it cite its sources? Very few LLM models actually do that.
Another major concern from the enterprise perspective is security. Does your AI provide data protection and data confidentiality provisions? Is your data securely stored on your virtual private cloud? In addition, enterprises are in need of AI that not only offers quick time-to-value but is also cost-effective. CLM providers that promise to host your data and then retrain the model are delivering gestation periods of multiple months just to index your own enterprise data.
I think that lawyers at companies that have deployed a CLM platform with best-in-class AI with ML that’s anchored by deeply trained legal AI models and precise training data will tell you that it’s a tremendous asset for their work. The bottom line is that AI-led CLM enables them to work faster with better data and deeper insights into contracts, making them better attorneys.
