The Future of Contract Management: Top Trends and Predictions for 2023 and Beyond
By Daniel Walker, Updated: 2023-05-25 (published on 2023-03-29)
As the world becomes increasingly digital, contract management is transforming. Traditional manual processes are being replaced by more efficient, data-driven systems that leverage AI and automation.
This post will explore some top trends and predictions for contract management in 2023 and beyond.
AI and automation
AI and automation are rapidly changing the way contracts are managed. Organisations can streamline their workflows and reduce errors using AI-powered contract management software, freeing up time for legal professionals to focus on higher-level tasks.
For example, AI can be used to identify potential risks and issues in contracts, automate contract creation and approval workflows, and extract key data from contracts for analysis.
The global market for contract lifecycle management software is predicted to experience substantial growth, increasing from $1.5 billion in 2018 to $2.9 billion during 2023, at a compound annual growth rate (CAGR) of 13.5%, as indicated by a report from MarketsandMarkets.
This expansion is fueled by the rising use of artificial intelligence and automation in contract management. A case in point is Zegal, an AI-powered contract management software that leverages machine learning to help organisations generate, handle, and analyse their contracts.
With Zegal’s software, crucial information like contract start and end dates, renewal dates, and key clauses can be automatically extracted from contracts and kept in a centralised database. This simplifies the job of legal professionals in overseeing contracts and monitoring important dates and details.
Contract data and analytics
The data contained within contracts can be valuable for organisations, providing insights into customer behaviour, supplier performance, and market trends. However, extracting and analysing this data can be time-consuming and resource-intensive.
We expect to see an increased focus on contract data and analytics in the near future, with more organisations leveraging AI and machine learning to extract insights from their contracts.
According to a report by McKinsey & Company, organisations that leverage data analytics in contract management can achieve cost savings of up to 15%, reduce contract cycle times by up to 50%, and improve compliance by up to 90%.
Organisations can identify potential risks and issues by analysing contract data, tracking contract performance, and making data-driven decisions. One example of a company that uses contract data analytics is IBM.
IBM’s contract management system uses AI and natural language processing to analyse contract data and identify potential risks and issues. For example, the system can flag contracts that contain non-standard clauses or unusual terms, allowing legal professionals to review those contracts more closely.
Blockchain-based smart contracts
Blockchain technology has the potential to revolutionise contract management by enabling the creation of “smart contracts” that are self-executing and enforceable.
Smart contracts can be programmed to execute automatically when certain conditions are met, reducing the need for human intervention and streamlining the contract management process.
In the coming years, we expect to see more organisations adopting blockchain-based smart contracts for various use cases. A Grand View Research report predicts that the global smart contract market will experience significant growth from $13.7 million in 2016 to $300+ million by 2024.
The rise is due to the growing use of blockchain technology and the need for more secure and efficient contract management.
Provenance, a blockchain platform for supply chain management, exemplifies the use of blockchain-based smart contracts. These contracts enable Provenance to trace goods from suppliers to manufacturers to retailers, ensuring compliance with contractual agreements by all involved parties.
Smart contracts trigger automatic payments, fund releases, and record updates as goods move along the supply chain, improving the process’s efficiency and transparency and minimising the risk of fraud and other illicit activities.
Contract lifecycle management (CLM) manages a contract from its inception to its expiration. CLM involves several stages: contract creation, negotiation, approval, execution, and ongoing management.
In 2023 and beyond, we can expect to see an increased focus on CLM, with more organisations adopting CLM software to improve their contract management processes.
The global Contract Lifecycle Management (CLM) market is projected to reach over $5 billion this year. This is attributed to various factors, such as the escalating complexity of contracts, the necessity for improved visibility and control over contract performance, and the rising implementation of artificial intelligence (AI) and automation in contract management.
A prominent example of a company utilising CLM software is ABB, a worldwide technology firm specialising in power grids, electrification, and automation. ABB’s CLM system enables the company to handle its contracts throughout numerous business units and locations, providing a centralised repository for contract data while streamlining contract workflows.
Collaborative contract management
Collaborative contract management (CCM) is the process of managing contracts collaboratively and transparently, involving all stakeholders in the contract management process.
CCM involves creating a collaborative environment where legal, procurement, finance, and other departments can create, negotiate, and manage contracts. We expect to see an increased focus on CCM, with more organisations adopting CCM software to improve collaboration and transparency in contract management.
According to a report by Gartner, by 2024, 60% of large enterprises and 90% of midsize enterprises will have adopted CCM software to improve collaboration and transparency in contract management.
The need for greater collaboration between departments, the increasing complexity of contracts, and the growing importance of contract management in overall business strategy drive this growth.
CCM software enables organisations to collaborate on contracts in real-time, track changes and approvals, and manage contracts from a centralised dashboard. This makes it easier for legal, procurement, and other departments to work together to create, negotiate, and manage contracts.
Contract management will future-proof companies
In conclusion, contract management is transforming as organisations adopt AI, automation, data analytics, blockchain technology, CLM, and CCM to improve their contract management processes.
These technologies enable organisations to streamline workflows, reduce errors, improve compliance, and make data-driven decisions. As we look ahead to 2023 and beyond, we can expect continued growth and innovation in the contract management space as organisations seek to gain a competitive edge in an increasingly digital world.