Legal functions at companies have been feeling the squeeze for some years, but the COVID-19 pandemic has accelerated the push to “do more with less.” Given how much time is taken up by contract drafting, it is no surprise that in-house departments are looking to the latest tech to make their lives easier. As a result of this, contract lifecycle management companies are having their moment in the sun.
The challenge of taking on increasingly larger workloads while grappling with reduced resources is nothing new for in-house legal teams. The past three years, however, have intensified this trend, with companies looking for various ways to tighten belts amidst an uncertain economy. Legal departments, thus, have had no choice but to look at ways to adapt to this environment, and one of the easiest ways has been to embrace technology.
As pandemic-induced disruptions impacted fields spanning supply chain management to labour rights negotiations, the importance of drafting water-tight contracts has been heightened. And given the sheer number of contracts that the average in-house team generates, contract automation has definitely come as a boon to them.
As a result, contract lifecycle management (CLM) - which creates, tracks, and organises contracts from start to finish - has become one of the fastest-growing legal technology solutions for contract analysis. According to a recent report by Thomson Reuters, more than one in two corporate law departments are currently using a CLM system. A further 41 percent are investing moderately to significantly in technology – a seven-fold rise in as many years.
“This almost-unanimous demand validates the rising necessity of technology within the legal landscape, a paradigm shift sparked by the pandemic,” the report says.
“We have seen a massive proliferation of CLM tools in the marketplace… Many of these are highly priced and focus on the top tier of the corporate market. This seems likely to be the way of the next 24 months and will quickly lead to a degree of saturation in Western markets. That’s not yet the case in Asia but it looks set to follow that path.”
— Daniel Walker, Zegal
Specifically, the CLM scene is increasingly flush with smart automation tools all claiming to represent the recipe to increase return on investment and deliver more strategic value to businesses.
“We have seen a massive proliferation of CLM tools in the marketplace,” says Daniel Walker, founder and executive director at end-to-end contract automation platform Zegal.
“Many of these are highly priced and focus on the top tier of the corporate market. This seems likely to be the way of the next 24 months and will quickly lead to a degree of saturation in Western markets. That’s not yet the case in Asia but it looks set to follow that path,” he adds.
However, almost one in four corporate legal departments has experienced failed legal tech solutions, with more than half conceding that the technology chosen was not the right fit for their organisation, the Thomson Reuters report says.
That means in order to put their names on the law tech map, CLM service providers need to devise solutions that can not only effectively spare clients from time-consuming grunt tasks, but also align with their objectives and culture.
In 2020, Zegal brought with it its optimisation speciality to aid Singapore Big Four firm Rajah & Tann in launching ReadyDocs. The law-as-a-service plat-form, shepherded by R&T’s tech spinoff Rajah & Tann Technologies (R&TT), prides itself on empowering small- and medium-sized business owners and startups.
“The CLM piece is ensuring that there’s an efficient process for agreement while monitoring the consequences of the contract and changes to the circumstances in which the contract is formed, and then pulling together all of the information about the large collection of contracts,” explains Michael Lees, chief operating officer at R&TT.
AUTOMATION FOR ALL
The history of contract automation goes back to at least the 1990s when “document assembly” systems such as Hot-Docs and Contract Express were facilitating contract generation by using guided forms and questionnaires to gather data on requirements. But users of that generation of software would scarcely be able to recognise contract automation in its current form.
“Zegal is leading a transition from what we would now consider as ‘manual’ contract automation, which requires varying degrees of human input and form filling, to a richer more automated work-flow environment,” says Walker. “This trend is only likely to become more embedded as businesses and firms think of legal process automation more as middleware.”
With digitalisation rapidly transforming more facets of economic activities, some up-and-coming CLM players are pivoting to a wider market that is no longer exclusive to law firms and in-house legal teams.
For instance, “our focus is to provide direct support to startup founders, who are likely not lawyers themselves,” says Hsiang Low, head of the Asia-Pacific region at SeedLegals.
The UK-founded platform has been shifting the centre of its gravity towards Hong Kong and Singapore, where startup companies are making a splash amidst a surge of private equity and venture capital investment and conducive policy environment.
“We’re here to fill a gap to serve the earliest-stage founders who may be tempted to rely on free templates they found on the internet. The way we have designed our solutions is to cater for non-legally trained individuals to be able to understand and create the legal documents they need to start, raise, and grow their startup,” says Low. “Everything is written in plain English, market-standard and local law compliant.”
SeedLegals says its mission is driven by the philosophy of breaking down the contract process, which is traditionally riddled with obscure legalese and thus is likely to be inaccessible to legal laymen. Moreover, during the manual toil of contract drafting, challenges often arise from ambiguities and omissions that could elude even veteran lawyers.
“Embedded within the automation on SeedLegals are guidance text and videos which help users better understand the terms and the contracts they are creating,” explains Low. “This allows founders to have more ownership and a better understanding of what they are agreeing to in their contracts, regardless of whether they have a legal background.”
Data and insights extracted from serving infancy-stage startups and investors also enable SeedLegals to recalibrate its offerings along the way, according to Low. “For example, by adding more variables to the terms that are being negotiated by startups and investors, we’ve made it a painless and streamlined process to create legal documents,” he says.
CONTRACTING THE FUTURE
All emerging technology faces some form of resistance. When it comes to in-house departments, Rajesh Sreenivasan of R&TT says he continues to see a sense of inertia towards tech use, even if it could genuinely make jobs easier.
“The general position of general counsel will be, ‘I just have enough resources to get the work done; There’s no time for me to take a step back or to stop the work and for us to completely rationalise the way in which we create and store contracts,’” he says.
And on the law firm side, as auto-mated solutions tasked with lessening the travail of mundane, repetitive tasks become more prevalent, lawyers fear that should they fail to upskill, they will be replaced by artificial intelligence, machine learning, or advanced software in the near future.
“There were many aspects of legal practice that could be improved through better technology and processes,” says Low. “Technology will help to improve the day-to-day lives of many lawyers - for example, by increasing the accuracy of reviews, automating repetitive tasks, accelerating research and drafting, and ultimately, streamlining the delivery of legal services.”
However, “there will always be a need for human lawyers to advise businesses,” stresses Low.
Adds Sreenivasan: “Lawyers have to realise that there is no value in the commoditised component, and it is in their interest to get that component auto-mated. The corollary to that will be the fact that we can charge on a premium basis for the actual work done.”
“We as lawyers are very well positioned to leverage this time that we have as professionals, and we shouldn’t let go of this opportunity,” he notes.
