By Tom Dunlop, CEO & Founder, Summize.
Digital contracting is the latest buzzword in legal tech. Encompassing all aspects of the contract lifecycle from review to management, it has become a common process across many businesses. But what does it actually mean for legal teams?
What is digital contracting?
Digital contracting is the term used when the contract lifecycle, from negotiation to review, is accessed, edited, and managed through digital tools. It typically involves at least one cloud-based solution or app, depending on the requirements of the organisation and their existing tools. Additionally, with the movement of digital transformation, digital contracting often integrates with existing workplace tools, such as communication platforms, email providers and word processing software.
Digital contracting is a framework that changes a previously manual methodology into a collaborative and data-rich process, helping to connect both legal teams and business stakeholders to speed up legal processes and improve collaboration.
The history of digital contracting
Over the past decade, demand for digital contracting has increased across both in-house teams and law firms, driven mainly by operational efficiency as businesses seek to automate and improve manual processes.
Contracts have been around for thousands of years – and originally, they were very simple – but over time, their complexity has grown. The reality is that contracts are getting longer, with regulation constantly playing catch up with risk as new technologies disrupt societies. In business, they can slow everything down – turning legal departments into bottlenecks and leaving other stakeholders frustrated.
Technology now exists to automate the understanding of contracts, especially with the rise of digital contracting. It’s game changing. And it means that while contracts will continue to get longer, our understanding of them can actually improve.
The role of digital contracting in the virtual office
The pandemic reshaped enterprise IT almost overnight. The lockdown and changes from COVID-19 led to two years’ worth of digital transformation occurring within the space of two months as businesses invested in tools to facilitate remote working and collaboration. 70% of Fortune 500 companies moved to Office 365 in 20203.
This demand for cloud-based working combined with the changes in working habits and updates to business law, made it crucial for legal teams to focus on their digital processes and how they could use them to streamline their work. Remote and hybrid working made collaboration tools completely essential, and with it, the need for digital contracting skyrocketed.
What are the benefits of digital contracting?
The impacts of contractual agreements are business-wide, with important terms, dates and value often locked away within lengthy contract documents. For digital contracting to be effective, workflows should span the whole organisation as well as facilitating improvements in the legal team itself.
With the right technology, digital contract processes can be integrated into familiar tools and processes to suit modern ways of working. Not only does this assist with technology adoption across the organisation, as users don’t need to get used to another software or even swap between tools, but also reduces user friction by streamlining communication. Summize, for example, works directly within Microsoft Word and Teams, collaboration tools that are used by approximately 1.2 billion people around the world .
Digital contracting can even assist revenue generation by speeding up the sales cycle and introducing consistency to contracts, giving legal teams the control over content while empowering business users to self-serve.
As well as working across the whole contract lifecycle, digital contracting is also designed to support all commercial contract types. Users no longer have to swap between different tools for each type of contract and aren’t required to prioritise one document over another.
Why is digital contracting a game-changer?
As if the benefits above weren’t enough to demonstrate the value of digital contracting, it’s often described as a ‘game-changer’ in the way people do business.
A crucial, but often overlooked issue is that businesses still don’t know and understand everything that’s in their contracts. Many just don’t have the time or resource to review all their documents, which can still be a manual process. And in other businesses, sales and other business stakeholders have the authority to sign their own contracts, leading to inconsistency and hidden risk.
As we saw from the pandemic, these factors can lead to significant issues for all parties when a clause like force majeure is enforced or when either party is no longer sure of their responsibilities. But by using digital contracting solutions like Summize, it is easy to extract key information and turn it into actionable insights, automatically summarising risk, red flags, important dates, and terms.
A better way of managing the contract process is needed as contracts continue to grow in length and complexity. With legal teams often working to capacity, a new and improved way of simplifying the process is needed to facilitate the end-to-end contract lifecycle – and the solution for modern business is in a digital contracting solution.
The entire business can benefit from understanding contracts more effectively, with clear and simple processes acting as the digital legal front door. Businesses have already seen many of their departments digitally transform, with CRM, ERP, HR, and many other processes driving efficiency elsewhere in the business. Now, legal has every chance to catch up with its departmental counterparts with the introduction of digital contracting to frees the legal team to focus on adding true business value while automating manual, repetitive work.
Choose the right solution is crucial for digitally transforming the contract lifecycle. A solution which focuses on the user experience for both the legal team and the rest of the business, avoids lengthy training and implementation and integrates with existing tools and processes will offer the best chance of digital contracting success.
[ Artificial Lawyer is proud to bring you this sponsored thought leadership article by Summize. ]