Digitization of Contracts leads to automated Contract Management

Sarbani Maiti May 3, 2017

What is unstructured data?

The data set which does not follow conventional relational database model (RDMS) is called unstructured data.  Almost 80% to 90% of the data that every organization generates/has is actually unstructured and it is very difficult to process this data in the enterprise data management system. Unstructured Data comes in varieties of formats like word, text, pdf, images, audio, videos, emails etc. Sources of such data can be broadly classified into – People data: Data from Social Media like Tweet, Facebook, website traffic. Machine Data: Sensor data, satellite images, geospatial data, mobile data, data from various IoT devices.

Why Contract management?

Organizations now are struggling to handle the unstructured information. The volume and unstructured nature put them into a real big challenge when the processing takes place for such information. Apart from legal obligations, there is a need to build a robust automated contract management system which will help the organization to comply with the new/changing regulations and identify hidden risks and opportunities efficiently. Contracts contain commercial terms, payment terms, pricing, renewal information, obligations, incentives, risk, liabilities, which can be used by procurement, sales, legal, M&A, regulatory, facilities, and other divisions of the company for better performance. Hence contracts have become a valuable and rich source of information which can help the organization in intelligent decision making. Industry in focus: Financial Services, Legal, IT Services, Product companies, Healthcare. Contracts, compliance, and regulations practically form the basis of most of the transactions in these industries.

Challenges faced by organizations with manual contract management process

  • Human error & misses causing millions of dollar penalties to the firms.
  • Manual effort to rectify the errors.
  • Manual Audit process need several hours of lawyers & legal advisors
  • Manual effort to analyze the contract and delay in response to regulatory requirements.
  • Unavailability of the information due to silo-ed approach.
  • No visibility to the contract terms, legal clauses, values, commitments.
  • Hard to understand the legal terms hence no visibility to impacts in case of non-compliant. Scenarios (such scenarios may arise in future due to change in external factor).
  • Governance & Monitoring over time, loss of ownership.


Technology is providing smart solutions for managing the unstructured data. There are tools like OCR which converts the text, images to XML, excel, JSON and the other RDMS structure. Artificial Intelligence, machine learning, NLP are being used to automate contract discovery. Analytics tools along with Contract Lifecycle Management derive the actionable insights from contracts.

An Automated Contract Management System must be able to

  • Discover the contracts throughout the organization
  • Centralize the contracts so that information is searchable & accessible
  • Analyze the unstructured data in contracts when required  – like acquisition, mergers, litigations, legal & regulatory obligations, management requests
  • Understand the organization’s legal language and requirements
  • Find and compare non-standard clauses quickly & easily.
  • Expose the hidden challenges, risk & opportunities.
  • Integrate & exchange data with CLM, CRM, ERP, procurement, project management, service management and other enterprise organizational data management systems
  • Track & analyze contracts
  • Derive actionable insight

The automated Contract management System needs a deep understanding of Content Management:

  • Digitization of content
  • Content conversion
  • Content Tagging
  • Content Extraction
  • Workflow management
  • Content distribution

Artificial Intelligence in Contract Management

Artificial Intelligence is the capability to perform specific tasks as a human does and sometimes with better efficiency than human. And the intelligence comes from Machine Learning. Machine Learning is a process of using algorithms to parse data, learn from data and then make a decision. The machine is given access to a large amount of data, then the machine “train” themselves using the pattern, data & algorithm that give it the ability to learn how to perform the tasks. However, the success of an automated contract management system will not only depend on the digitization of contracts but also how to convert them into insightful action. The hidden information can become the base of organizational knowledge management system. Al backed contract management system is capable of Identifying the various clauses and terms, building a library of most commonly used clauses and capture important metadata (like terms, signature, risk, pricing, renewal dates, entities, etc.). The expansion of AI based systems in unstructured data space will increase and organizations can achieve more insightful and actionable outcome adopting such cutting edge technologies & platforms.

Sarbani Maiti

Has spent more than 17 years in IT industry, mostly in Capital Market domain worked for multiple technologies, platforms.