PRESS: Generative AI turns spotlight on contract management

Commentary here in the Financial Times on contract management technology, given the various M&A activity in this segment.

What should be table stakes is still an untapped utility for many, who struggle on with manual processes and no data integration or strategic insight on contractual estate.

Next generation products will look at contract lifecycle through a different lens, and I'm excited for that phase of maturity.

Extracts below, full piece at the FT.

“It is important business technology, yet most people have never heard of it. Contract lifecycle management software — which helps to draft, store, search and manage a company’s commercial agreements — is widely used by lawyers and also by procurement and finance departments. But, in spite of the technology’s steady growth, and its pioneering use of artificial intelligence to automate information-intensive legal tasks, the market for the software has generally had a low profile.

…

In May, DocuSign, which began as an electronic signature company before diversifying, acquired Lexion, whose products include generative-AI powered contract management software. Around the same time, Icertis — another contract management software company — said it would partner with Evisort, a supplier with a strong reputation for AI tech. The partnership will include integrating their respective technologies. Signed up for a new direction: electronic signature company DocuSign is spreading out into other areas of contract management “I’ve been in legal tech for two decades and so I feel like I’ve seen a few trajectories of consolidation — and I do think this one is unique,” says Bernadette Bulacan, a marketing executive at Icertis and AI expert. She feels that contract management is “having a moment”.

More recently, in June, LexisNexis, provider of information and software for legal professionals, said it would buy Henchman, a software company specialising in generative AI document drafting. And Sirion, another contract management supplier, bought Eigen Technologies. Eigen uses AI to summarise and extract information from contracts, especially in financial services. Investors are interested, too. In May, private equity firm KKR took a majority stake in Agiloft, a contract management software supplier. The convergence of several tech and market trends has driven this increased interest in the technology.

According to a study published in 2023 by researchers from Princeton University, the University of Pennsylvania and New York University, legal services is one of the industries most “exposed” to generative AI — the latest wave of the technology. As companies look for digital routes to managing legal contracts, there is growing interest in incorporating generative AI into the software — subject to human oversight. And that will fuel further growth in the market, experts predict.

“There’s a lot of interest in generative AI . . . and if you look at all the predictions out there, the number one vertical to be affected by this . . . is legal,” argues Zach Posner, managing partner and co-founder of The LegalTech Fund, a venture capital firm that invests in legal tech start-ups.

Expect further consolidation around larger suppliers of contract management software, experts say. “The space itself is very fragmented,” points out Ajay Agrawal, chief executive and founder of Sirion. “Right now there are roughly 150 [to] 200 players just in [contract lifecycle management].”

But company lawyers — the customers — would rather have fewer suppliers offering broader technology that meets more of their contract needs, says Jennifer Swallow, an adviser on legal technology and former chief executive of LawtechUK, a government-backed initiative to help modernise legal services. “If you’ve got fewer players that are doing more things, then that’s much easier.”

Although contract management is a mature market, it is not yet saturated, figures suggest. Just over half (55 per cent) of corporate legal departments are using a contract management system, according to global research by Thomson Reuters. And most legal departments are in the experimental phase of using generative AI. Combining the two technologies will help contract management expand, experts believe. “There’s still a massive greenfield opportunity,” says Posner.

…

For some suppliers, the simpler and quicker way to incorporate this technology is to acquire a smaller specialist. “If you’re not an AI native business, you can take a lot of time to try and build that yourself, but you need money to do that [and the investment] funding cycle has been difficult,” says Swallow. “The next best thing is to buy a business or merge with the business.” Swallow predicts that consolidation among contract management companies will continue. And, as the software incorporates more AI features, she reckons lawyers will be able to fine tune their judgment, their analysis of supplier performance, and their ability to spot risks and opportunities in contracts.

“You’re able to be way more strategic . . . less reactive, more proactive,” she says.