In these volatile times when business cycles are ambiguous and customer demands are erratic, enterprises are facing several challenges, such as poor contract visibility, procurement complexities, diverse sales, gaps in obligations management, licensing models, and poorly defined contract compliance processes. All these challenges cause a severe impact on the supply chain’s performance and a firm’s profitability.
The number of contracts business handles today is overwhelming, and processing them timely and efficiently is a challenge.
The number of contracts business handles today is overwhelming, and processing them timely and efficiently is a challenge. While contract lifecycle management (CLM) tools have existed for the last three decades, enabling organizations to digitize the analog processes, the solution providers have not been able to simplify the processes related to developing contracts, assessing risks thoroughly, negotiating, and concluding contracts.
Bringing data-driven automation
According to Monish Darda, Co-founder and CTO of Icertis, a contract management startup, there has been a growing amount of pressure on enterprises and their legal teams to reconcile, negotiate, and approve contracts promptly. And the erstwhile processes have been inefficient and contracts need to be digitised and dynamically monitored to track all obligations in real time, ensure regulatory compliance while also ensuring that the commercial promises are met.
“There are three critical attributes in any contract: terms and obligations of both parties, when the contract will terminate, and associated relationships of people and contracts. You would be surprised to find the time taken by reviewing third-party contracts. There are legal clauses, non-disclosure agreements, and what’s not. The legacy processes have been inefficient, time-consuming, and created unnecessary friction. AI can go and discover all these essential ingredients of a contract.
An example of this could be a sales contract with a car seller to deliver x cars on a particular day. However, what would be the implications on the buyer if the vehicles are not shown on the specified date? How will the contract terms, penalties, and conditions be determined on the per-day delay? Similarly, from the seller’s point of view, what would influence the contract if the payment was not received on time?
“You need advanced ways and technologies to analyze the contract risks and obligations while also realizing the full potential of their contracts,” states Monish.
Icertis says that it has been extensively leveraging the potential of emerging technologies such as analytics, AI, and ML to bring much-needed intelligence, trigger risk-based alarms and enable enterprises to tackle large contract volumes efficiently while also augmenting visibility and alleviating the impact of supply chain disruptions. “By bringing data-driven intelligence and automation, organizations can quickly review if the contract is correct and, based on various factors, get on the necessary negotiations,” Monish adds.
Icertis Contract Intelligence (ICI) platform leverages cloud-first APIs with intuitive user experience, and has been deployed extensively by leading enterprises such as Johnson and Johnson, Microsoft, Google, Cognizant, Wipro among others. The AI platform, according to the company, help enterprises reduce risks associated with missed contract obligations and ensure commercial compliance, track spending against the contract and seamless auditability for compliance reporting and SOW preparation.
Blockchain, more than a jargon
Blockchain has been jargon for a long time. There is much promise, but there is no direct or minimal implementation apart from cryptocurrency. Monish says that Icertis is leveraging the potential of Blockchain technology to deploy innovative and smart contract management solutions. In contract management, a blockchain contract is also called a contract. It is invigorating to see the potential of Blockchain when a transaction happens in a contract. The contract can also validate the transaction and make outcome-based evaluation a reality.
“A consortium is a limited number of people but more than two. And all of them don’t trust each other. You want to make sure that the same code is deployed and the community validates the transaction. Now your contract is the validator. Rules that define whether the transaction can go through or not. So, if you are buying something and you have to make a payment of say, US$100, then the contract can say, on the US$ 100, you can buy more things or maybe a 5% discount. The discount can be automatically calculated and paid in a trustless manner,” says Monish.
Monish further explains that Icertis’s Blockchain Framework, enables enterprises to keep the supply chain clean. “Ethical standards are essential for large and small manufacturers. So, how do you make sure that your supply chain is clean? Everybody is at least contractually signed to source ethically. And you can’t expose the supply chain. Going and checking 500 different vendors and their vendors is complex. So, Blockchain becomes very effective in saying that the contract you do, put it on the Blockchain, we’ll hide the actual people, you are working with, your vendors and their vendors, but we will expose all of the ethical sourcing and sustainable sourcing clauses. So, that people know that the sourcing is ethical and legal.”
The B2B SaaS unicorn continues to explore the potential of Blockchain to deliver enhanced CLM visibility to all its clients, suppliers and vendor relationship. (See: Finding the right strategy to gather customer feedback is a big challenge for B2B startups)
By Jatinder Singh
You can reach out to author at jatinder.singh@9dot9.in