Putting complex and often intimidating topics into context.
Chapter 8, Technology
No discussion on contracting process improvements is complete without focusing on technology. Scarcely a day goes by without an article, blog, or webinar on legal technology and, more specifically, about artificial intelligence (AI). There are many conferences and webinars about contract management systems—on selecting them, on what to use them for, how to derive greatest benefit, etc. Usually, those educational programs are provided or delivered by the contract management systems providers.
Technology is always at the core of any discussion about innovation, for example, but I maintain it should not be. Before any conversation about technology takes place, there should be an assessment of the current state of the people and processes involved in contracting, which is why this chapter follows my previous chapters on People and Process. Only after a thorough review takes place, and there is agreement within the organization that the right people are doing the right steps in the best order, should a discussion about technology begin.
For a PDF of this four-part series, click here.
Consider who should be part of the initial conversation. The worst thing to do is see a shiny demonstration and decide to start right then. That is not the first step. Reviewing solutions and scheduling demos should occur down the road. Start internally with key stakeholders, to understand what they need from a technology solution. Understanding these needs is the most important part of any technology implementation. If you are not certain about what your people need, you will deliver something that is not used and, therefore, is a waste of money and credibility.
So, let’s start with taxonomy. Contract lifecycle management (CLM) is a function. It is not a system, although some people, including much of the legal press, refer to CLM as a system. This only confuses people. People even think that you can buy CLM. Actually, they’re really trying to buy a CMS, which is a contract management system or CLM system. Taxonomy becomes important when you’re shopping for these things.
[Discussing complex Contract Tech landscape. See also Post 253 (Zach Abramowitz discussing contract tech sector)]
Technology is important, and it’s particularly important in one area: data. The best way to gather data insights is through automation. And that is one thing I recommend considering, if an organization is in a place where data insights are expected. If being a data-driven organization is a direction the C-suite wants the law department to go, then it’s probably time to invest in some type of CLM technologies.
Before any discussion of technology is fruitful, legal departments must first optimize their people and processes. In prior chapters we reviewed how every law department has to consider who are the right resources and which skills are needed for contracting work. Similarly, the workflows must be simplified before any tech is contemplated.
[Discussing how technological needs vary at each stage of the contract lifecycle, from intake to storage.]
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If I were to break down the different types of contract-related systems out there that I’m familiar with, and I’m familiar with a lot of them, there are those that offer a start-to-end solution: everything from the request and the intake all the way through to post-signature obligation tracking. My only caveat with those is they can’t be good at every phase of this lifecycle. They do not invest in the technology equally on every phase. Usually, they are better at some aspects than others, and the primary job is to make sure that what they’re best at includes the features most needed, because those are the top problems to solve. Always ask this: what problem am I trying to solve by looking at contract management systems?
[Discussing variants of large enterprise solutions to “lighter systems” more suitable for smaller, more agile departments; referencing figure 8.1, Contract Tech Landscape]
Other Solutions to Note
Let’s look at two other areas where contract management or contract-related systems are getting attention and certainly a lot of investment from venture capital funds lately.
One of them is contract review automation, and, full disclosure, I’m also an advisor to LawGeex. They were one of the first contract-review automation providers, and they use AI, as do the others that have now popped up in the area.
These use AI to bring the playbook to life, the negotiation guide to life. It’s interesting in that it does enable the speed of negotiation to increase, because think of it as a good first pass done by a robot, which means there is accuracy and efficiency better than humans doing the work alone. That’s a growing area. The tech is only going to improve and become more effective with time and learning. There is some interesting opportunity in that space.
The other solution that is now almost commonplace is contract term extraction or contract analytics. That is, using AI to identify particular provisions in a contact, regardless of what they’re called. It’s a smart system. It’s not simply a search, but it’s really fantastic for large merger-and-acquisition-type projects and for litigation matters where companies have to look through high volumes of contracts and extract certain provisions. ….
[Discussing role of technology in compliance, clause library management, template creation, and having the ability to “lookback” at work done; reviewing the massive inflow in VC funding into the contract tech area; outlining the tech selection process, including RFPs]
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Chapter 9, Metrics and Data
In 2019, I identified the seven best contract metrics to track and why legal departments need to focus clearly on contract data. [See Bassli, “The 7 best contract metrics to track—and why you need to start,” in The Modern Contract Handbook: Future-proof Your Contract Management.] Virtually every legal department has the ambition to be data-driven, but how to begin? And what data should be tracked?
Obviously, technology, even very basic technology, is needed. Contract data can raise a chicken-egg situation: do you need technology in place to get the data, or do you need a critical mass of data to justify acquiring the technology?
Actually, you don’t necessarily need advanced technology to start tracking; in reality, we still live in a world of mostly manual processes. That’s good news: it means that when it comes to contract data, you can get started any way that fits.
Key CLM Data Points
- The basics: how many contracts and what kind? …
- Turnaround time (response time & time to first and final draft) …
- Cost per transaction …
- Simplicity and readability … [many plug-ins provide these metrics]
- Dollar value …
- Obligations …
- Inside the contracts: deviations
Flagging deviations from standard contract terms is always valuable. Getting insight and metrics from inside the document is labor-intensive, but that’s where technology can play a key role, and there are many systems making progress with their document review capabilities. …
Data Collection is Still Not the Norm
Tracking and acting on these metrics can make a massive difference, not only to a legal team’s performance but to the business itself. However, the inconvenient truth is most legal teams are a long way from building a sophisticated understanding of their data.
[Classifying legal departments by their approach to data; discussing how to use data to set priorities for contract lifecycle management tasks such as template localization; noting that some legal departments falsely conclude that collection of data and reporting is only necessary if there is a problem, which is an attitude that will eventually create friction with the business.]
Tracking certain basic data points is simply good operational hygiene.
Chapter 10, Outsourcing
“Do what you do best and outsource the rest!” [See Peter Drucker, “Sell the Mailroom,” Wall St J., July 25, 1989.] Lawyers are great at handling contracts, but does that mean that they should? No. Some contracts should not be handled by in-house lawyers. So, let’s rephrase this popular adage to “Do what is worth your time, and outsource the rest!”
Outsourcing of legal functions is a concept that’s in transition; many recognize that there is a definite value proposition to using alternative legal services to scale and gain efficiencies. But old ways die hard.
As another saying goes, “It’s complicated.” Attorneys who provide differing legal services have (slowly) come to realize that they belong to a broader ecosystem encompassing legal service providers, regulatory influencers, customers with greater buying power, and other players who are forcing changes in the legal industry. Also, the legal profession is recognizing that it is actually an industry and not just a profession. This evolution into an industry implies there are varieties of commercial constituents who provide various services.
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The ALSP, the LPO, the LSP—however it is called—are critical to the future of legal practice. Some take issue with the use of the word “alternative.” As the legal industry continues to evolve, these service providers are no longer alternatives; they are key players. LSPs are core service providers, just as law firms are, for many corporate legal departments. So, let’s drop the term “alternative.”
In-house lawyers love their jobs because they are close to the business and involved in how it works. They know how businesses operate and how they outsource non-critical work. So, why don’t they learn from their business colleagues about how to operate the legal practice? It is, after all, a business. In-house lawyers are learning, and that is forcing a change in how legal services are delivered in-house. And over time, that change will flow to the law firms, too.
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Stratifying the Work
Before considering what work to outsource and to whom, legal departments should regularly assess if any legal involvement is necessary at all. Sometimes, Legal becomes a sort of a crutch for the business and finds itself overloaded.
Figure 10.1, [right] is my view on how work might be allocated and resourced between in-house employees and external resources, based on the complexity of the transaction. I created this graphic almost a decade ago, when I first began to consider outsourcing legal work in a different way.
[See Chapter 6, People, for a thorough discussion on the topic of Law Firm Managed Services.]
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Scalability [to deal with up and down in demands, which is difficult to stafff internally] …
Efficiencies [LSPs are built to optimize efficiency, including expert use of technology] …
Potential Saving [particularly when switching from law firms to LSPs]. ….
[Providing detailed guidance on what to outsource, outcome you are trying to achieve, selecting the right partner, and the planning and execution of the engagement, including governance frameworks]
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In a good relationship, the outsource team becomes an extension of the client team; they start to see more about the business and can inform the in-house team things about the business that maybe the in-house team wasn’t capturing by themselves.
There is now a real opportunity to expand the relationship, which is a great carrot for the outsource provider, and a huge value for the in-house team that is constantly going to handle more and more work. This is the way to approach outsourcing to an LSP.
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I hope this book provided some methodical and pragmatic approaches to the problem that almost every company has. Even if taken in bite sizes, the topics and recommendations in the book provide guidance that is sure to be impactful, even if done sporadically.
Any opportunity to ask the difficult questions about contracting philosophy must be seized and acted upon. Don’t wait for the C-suite to get so fed up that drastic measures are taken. Control the contracting destiny and define which transactional work the law department does. The business should not dictate attorney workloads. I implore every law department leader struggling with contracts to either make the time to perform some of these mental exercises or get help from someone to facilitate these critical internal decisions.
Kindle and paperback copies of CLM Simplified: Efficient Contracting for Law Departments are available on Amazon.