Will AI displace or empower legal teams?

AI empowerment in legal departments

Dispelling the myth that artificial intelligence (AI) will render lawyers obsolete, the paradox lies in the fact that the first major AI capability making waves in the market – AI-based contract management systems (CMs) – will not displace legal professionals but rather empower legal departments.

AI is transforming contract management from simple document storage solutions into advanced platforms that offer intelligent insights, automation and efficiency. New contract lifecycle management systems (CLMs) are adept at digitally managing agreements through every stage of their lifecycle. These new capabilities will be seamlessly integrated into the broader ecosystem of generative AI-enhanced organisational technology solutions, aimed at optimising business processes. Embedded CLMs will supply essential data on contract performance, offering organisations actionable insights for informed decision-making. As a result, legal teams – custodians of legal contracts – will not only be guardians of the company’s legal health but also strategic partners contributing to its growth, innovation and risk management.

Evaluating performance

Contracts are the lifeblood of an organisation, underpinning critical business relationships with customers, suppliers, shareholders and employees. The value generated by a contract is determined by its negotiated clauses. But, after contract terms have been agreed, the underlying relationships are not concluded; rather, they are just beginning. Therefore, it is crucial to assess their real-world performance, evaluating if the expected value is realised, service levels are achieved, terms require modification or addition, or if a relationship should be renewed or concluded.

Contract management tools have consistently been identified as the critical component of business operations. They have traditionally offered functionalities like document storage, version control, contract search and reporting. These capabilities have assisted organisations in managing their contracts by centralising the repository, improving access to contract data and reducing the risk of contract loss or misplacement. However, these conventional methods tend to be reactive rather than proactive, failing to provide the advanced data analytics tools necessary for supporting strategic decision-making and enhancing contract performance.

Growth and protection

More recently, the arrival of AI and tools powered by machine learning has brought post-execution CLMs into the spotlight. Their capabilities offer a means to simultaneously accelerate business operations, enhance protection and optimise performance, while also minimising an organisation’s risk exposure by reducing overlooked obligations and bolstering compliance with legal standards.

These solutions are designed to automate the entire contract lifecycle. They include a real-time analytics module that enables insights into data such as cycle times, variations, savings, risks, contract renewal statistics, procurement and sales metrics on contract revenue and spending. Thus, through automated contract review, for instance, organisations can achieve the full potential of negotiated contracts through better enforcement of commercial terms.

Strategic insights

As legal data repositories expand and integrate with pools of data from various business areas such as finance and sales, legal departments will enhance their capability to analyse this data for strategic insights. The integration of CLMs, enterprise resource planning (ERP) and customer relationship management systems (CRMs) will forge a unified and cohesive data ecosystem, establishing a single source of truth for data across the organisation.

This improvement will come through the development of a robust data strategy and the upskilling of lawyers to more effectively understand and apply data in their legal activities. For instance, by processing and negotiating all procurement, sales, employment and other contracts on a unified platform, legal teams can extract data to analyse the outcomes of standard contract terms and their deviations. This analysis will enable the identification of opportunities to optimise future contracts, thereby improving overall business efficiency and legal compliance.

Driving success

In this evolving landscape, empowered by the strategic implementation of AI, legal departments will transition from their traditional role of safeguarding the company to becoming key contributors in driving business success and financial performance. Their impact will be measured in their organisations not only by the legal counsel they offer but also by their effectiveness in boosting growth and revenue. Through the integration of AI technologies, lawyers will evolve into sought-after value partners by businesses, fostering relationships where they are approached for guidance and collaboration, rather than being internally perceived as mere compliance gatekeepers.

Article written by Dr Corsino San Miguel PhD, LLB in Scots law and graduate in Spanish law, co-founded and led European Telecom Company before entering academia. He is now a member of the AI Research Group and the Public Sector AI Task Force at the Scottish Government Legal Directorate.

The views expressed here are personal.