Why Legal Will Be the Next Frontier for Digital Transformation

While 8% of corporate lawyers have fully digitized their contract management systems, a vast majority of legal teams are yet to embrace AI-enabled technologies. Deirdre Leone, VP of Sales at ContractPodA, explains how contract automation can lead to huge cost savings and quicker creation of contracts. 

Automation has made its way into just about every industry, but for some, embracing this change has not been a priority. The legal industry, in particular, is falling behind in the race to digital transformation, with about 83% of lawyers stating that they do not use any form of automation in their contracting. 

However, the realization that the traditional way of doing things must change is starting to set in. The coronavirus pandemic, and the shift to legal teams working from home, has specifically played a role in highlighting the need for AI in contract management.

Even prior to the pandemic, it was time for a change in the legal industry. So now, more than ever, change is crucial. Some have realized this – in fact, 81% of lawyers have indicated that they either have or will now develop plans to implement, replace, or add to contract automation. Ultimately, AI brings immeasurable value to legal departments and entire organizations. But the three major benefits are time management, unlimited access, cost savings, and risk mitigation. 

Use of AI Tools Can Save Countless Hours In Reviewing Contracts

At many larger law firms, it is not uncommon for lawyers to work 50-60 hour work weeks. Because of this type of workload, time is a valuable asset. According to World Commerce and Contracting (WCCOpens a new window ), one-third of lawyers spend between 40-80% of their time on contracts. Many are reluctant to adopt AI due to the fear that it is replacing humans. However, when it comes to the legal sector, AI is not there to negotiate on a human-to-human level. AI is there to save legal professionals time, allowing them to perform more strategic objectives.  

For legal teams, perhaps the most time-consuming responsibility is manual review and management of contracts. This is often handled with tools, such as Excel or SharePoint. While reading contracts line by line, organizing files and paperwork, and maintaining due diligence of contract details and important dates, lawyers lose hours – perhaps time better spent on strategic work. 

In fact, according to The American Lawyer, it takes an average 92 minutes to review a contract. And consider this: at any given time, the average Fortune 2000 company manages as many as 40,000 active contracts. Ensuring these contracts are carefully managed and organized is absolutely critical to running a successful business. And adopting legal technology to eliminate time-consuming work not only benefits legal teams, but also the wider organization. 

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New Solutions Needed for Contract Lifecycle Management

Among the changes and challenges everyone has faced in 2020, the shift to remote work has impacted everyone – in every industry – the most. For many, the work-from-home (WFH) transition was made possible due to the amount of digital workplaces available. But for those relying on physical documents and files, like contracts, remote work presented an especially difficult challenge. Lawyers didn’t necessarily need unlimited access to contracts prior to the pandemic. Now, access via digital platforms is more important than ever before. 

Nevertheless, legal teams are beginning to explore new technology. As mentioned, tools such as Excel have been used for the management of contracts, while cloud storage has housed contracts digitally. But this is a small step on the path of digital transformation for legal teams. And these tools present their own contract management issues for legal teams. Alternatively, more significant and valuable solutions enable general counsels (GCs) and legal teams to not only access contracts anytime and anywhere, but effect change in contract lifecycle management. 

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Contract Automation May Result in Significant Cost Savings

Quite often, legal teams are viewed as a “cost center” within organizations. Each year, corporate legal departments oversee more than 10,000 contracts, and each of those contracts – on average – costs approximately $6,900 to generate. This is just the cost of commonplace contracts. More complex contracts can cost tens of thousands of dollars to create.

Simply making contracts easier to read, less costly to produce, and more standardized delivers cost savings that address the cost-center reputation corporate legal teams bear. However, the good news is legal teams are eager for change. Data shows that 8% of corporate lawyers have fully digitized their contract management systems already. And 90% of lawyers are at least open to automation. Contract automation leads to the quicker creation of contracts, reduces production costs, and ensures that agreement terms are vetted, while never losing sight of the company’s overall interests. 

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Risk Mitigation

Finally, by arming legal teams with the tools they need for success, AI is helping companies better leverage and manage contracts as true business assets, and reduce risk. As noted above, large companies have tens of thousands of contracts to manage at any given time. If legal teams are not adopting new technology to digitally transform, it is nearly impossible to ensure that every single clause is flawless. The consequences of these errors can be extremely high and, oftentimes, lead to lawsuits. 

With just about every business relying on legal involvement and expertise, it is no longer a question of ‘if’ legal will adopt automation, but ‘when.’ Contracts are arguably a company’s most valuable asset. Yet, the processes for creating, negotiating, storing, and managing those contracts are still highly manual and unorganized, leaving organizations with little visibility and even less control. 

Do you think contract automation is the need of the hour for legal teams? Let us know your thoughts on LinkedInOpens a new window , TwitterOpens a new window , or FacebookOpens a new window . We would love to hear from you!