Empowering CLM With Contract Analytics

SPEAKERS

Ari Kaplan
Welcome to Reinventing Professionals. A podcast hosted by industry analyst Ari Kaplan, which shares ideas, guidance and perspectives from market leaders shaping the next generation of legal and professional services.

Ari Kaplan
This is Ari Kaplan and I’m speaking today with Arthur Raguette, the co-founder and executive vice president of Zycus, an artificial intelligence based contract manager platform. Hi, Arthur, how are you?

Arthur Raguette
I’m doing well, Ari. And how are you today?

Ari Kaplan
I’m doing well. I’m looking forward to speaking with you. So tell us about your background and the genesis of Zycus?.

Arthur Raguette
The genesis for Zycus really came when myself and my co-founder had gained access to Forrester and Gartner award winning contract platform and had identified the need to take this technology and apply it more broadly for other contract domains. Getting beyond the procurement or buyside, looking into sell side contracts, intellectual property, employment contracts, and really applying this beyond a procure to pay or source to settle suite and really being able to support legal operations and sales operations in addition to core procurement.

Arthur Raguette
Being able to make that change really meant that we needed to expand the core technology into areas that exceeded the typical authoring and repository kind of solution space and really look at the full lifecycle helping organizations with the intake or the request process may carrying that all the way through post award and into obligation and entitlement management to sort of optimize the value of their contract assets. It’s been a great experience for Zycus, and because of that expansion, we further realized the need to really embrace technologies like artificial intelligence simply to enable broader reach, higher adoption.

Arthur Raguette
And really, in many ways, ease of use and ease of access across a larger population of users in most of our customers.

Ari Kaplan
How does the software actually work?

Arthur Raguette
When people ask me that, I’m not quite sure that they’re thinking about. Oh, just a contract side or AI side. So let me sort of just set the baseline for contract management and how Zycus fits into that need space. First, we are a cloud based platform software as a service.

Arthur Raguette
We run an Amazon Web services with truly a global footprint and multilingual multi-currency, all the things that are expected. When you generally service multinationals or established companies, it’s scalable across browser types. Mobile devices. We have mobile apps out there. So the capability to reach the on the court case, even into the corner cases for most companies, is part and parcel. As a CLM and the L part, the contract lifecycle management really means that we need to support everything from request to renewal.

Arthur Raguette
So if I look at the life span of a contract, it typically begins with a business user needing to have something either authored and the generation of best first draft or in taking someone else’s contract and being able to disassemble and make sense of it. And putting that through their internal process. Typically, that’s a review and approval, maybe some red lines. And then the external negotiation process with the other party, whether it’s a customer, a supplier or a partner.

Arthur Raguette
And what the CLM does is help that entire process along. Getting to the point where you’ve got a negotiated document ready for signing, then even further than that, being able to then manage the performance of the contract against the operational data for the run side, if you will. So if we think about getting a contract signed as the billed and then the actual ope-rationalization of that contract being the run, it’s ensuring that the run matches the goals of the contract.

Arthur Raguette
Being able to enable that means an awful lot of data moves back and forth. A lot of insight, a lot of analysis has to happen. And in order to make that effective for most organizations, we need to provide assistance or assistive technologies. And ideally, we want to do that in a way that is not obtrusive. Although it may sound counterproductive, we really want the A.I. to almost be behind the scenes so that if we can deploy these solutions as we have, so that our customers almost don’t even realize that there’s artificial intelligence behind the process.

Arthur Raguette
But what they see instead is an easy to use intake form that almost intuitively knows what the next step should be or the ability to take a third party agreement and understand at its essence who in an organization should review it and what sections are more onerous than others and raise awareness that there are certain things that need to be done and to do this almost organically, naturally, rather than see some interjection of a robot or some other kind of almost foreign intrusion into your process, simply making it an extension of your normal operational environment.

Arthur Raguette
We really think that we’ve intertwined the best aspects of applied A.I. into this contract lifecycle process and further enabled each edge of the organization, the organization sides that are closest to their customers or suppliers or partners, distributors, what have you to be able to leverage a common good, the base knowledge and the infrastructure of a contract process to get their jobs better.

Ari Kaplan
Who is typically using it and for what type of matters are they applying it?

Arthur Raguette
When I think about matters or matters management, I think contract management is a little more of a subset.

Arthur Raguette
Fortunately, because of how we got started, which was very much focused on the buy side or procurement technology then expanding in the core into both sales as well as intellectual property licensing and employment, or H.R., that we tend to really have customers who have very strong legal operations or very strong contract operation centers that are separate from the sales organization or the procurement organization or H.R.. It’s almost like a center of excellence for contract management, though largely when we think about the use cases and the configuration of our tool set of the platform.

Arthur Raguette
We generally do spend oh, let’s say 40 percent of our time with the core legal ops team, maybe 20 to 25 percent focused on the sales organization, and then 15 percent to 20 percent on the procurement team, with the remainder falling across different other business groups from a profile perspective. Almost all of our customers are multinational, typically have either headquartered in North America or have a pretty strong legal presence here in the U.S. and they are generally deployed enterprise wide and in multiple languages across multiple countries.

Arthur Raguette
This makes for a very interesting partnership with our customers where we had to really see how they do business, where they do business, and helps us really configure the software for the different cultural or business processes that they may have as they traverse the globe.

Ari Kaplan
How is the working from home environment changed how your customers leverage your software?

Arthur Raguette
I think it’s both a combination of a work from home that we’re all under today, but it’s also the anticipation of slightly slowed business climate.

Arthur Raguette
So we’re seeing probably a slight dip in new contracts authored. What we are seeing and this is great insight because we saw it from a platform usage perspective, is a greater amount of, I’ll say, deep analysis, going beyond metadata, going beyond performance information, but getting into clause analysis around things like force majeure or termination for insolvency or what’s my termination for convenience. These are organizations that were certainly well established and had good playbooks, had good templates, but really wanted to go back and see, OK. We started with the template that had X, Y and Z in it when it was negotiated and executed. How much of that survived? And they’re using this to really focus on revenue, resiliency. How much revenue can I count on which customers may be at risk or where do I have upcoming renewals or relationships where I need to double down our efforts and make sure that those are going to happen? And then flipside also is supply chain agility. Given the current climate, folks are interested in optimizing liquidity from a pure financial perspective. So that means they need to make sure that I’ve got my income managed and I know where that revenue is going to come from but just as likely, what can I put on hold or do I have relationships that I can effectively pause orders for the next two, three months to make sure that everyone recovers and get back to the new normal, whatever that happens to be in a more sane way. An interesting byproduct of that as we work with some of our customers, some of them, the repositories are so large that they’ve asked us, can we do some work on the back end to help them with some of that clause analysis?

Arthur Raguette
And that’s really helped us create a derivative product. We often think of Zycus, myself included, as one of the two co-founders, as a contract lifecycle focused organization that has an A.I. component to it and back in November, we launched a secondary product called Merlin, which is really pure play contract analytics, exploring Metadata extraction clause analysis, whether it’s within our core CRM or whether it’s against another repository or document management system. We found that by packaging, if you will, some of the analysis methods around force majeure or around different kinds of termination or renewals.

Arthur Raguette
But basically those dimensional questions around revenue resiliency, your supply chain agility that we could then offer both to our current customers of fast track to get the answers they needed. But then also to those folks who haven’t quite made the leap to say that they need, want or going to buy a contract lifecycle solution and may still be in that earlier stage maturity where they’ve got an electronic filing cabinet of some sort. Right. Some kind of document store, either in cloud or on Prem, and then be able to apply the orbit A.I. engine against those contracts to identify these contracts have force majeure.

Arthur Raguette
which can be invoked. These have force majeure but you’re missing pandemic or epidemic. Here are termination for convenience contracts on the supply side. But you’ve got a 90 day notice the kind of information that would take perhaps a team of people X amount of time to go ahead and derive. It’s so much easier just to crank up the C.P.U and G.P.U’s in our data center and drive that kind of information out and then present in a meaningful and solid way to our user communities.

Arthur Raguette
While many are probably shirking back from work from home and people are less than productive, we’re finding that demand for a good chunk of our services and our software is actually on the uptick. Which I do not take for granted at all. We certainly value that. The only other interesting tidbit is that the mobile app downloads are off the chart. So folks who are still looking to stay on top of contract approvals, clog level approvals, electronic signatures, even though we’re all working from home. Some of them are pacing in their backyard and her just as comfortable coming off of their Android devices.

Ari Kaplan
What can AI do and how does that align with the expectations of what it should do?

Arthur Raguette
It’s an aspect of automation called RPA, robotic process automation and this is taking routine tasks and automating the process. So this is fill in the blank. Automation for requests or streamlining a data entry process. This is very low risk. It’s very high reward.

Arthur Raguette
It’s a great way to streamline and take cycles out of your contract negotiation and signing process. But it’s not truly A.I. for the purists. So I tend to move that slightly aside. The second is, if I look at pure A.I., the ability for software to learn, to react, to input differently each time it sees something new. That is a place that when you do it well, it can help with best first draft generation. In other words, take parameters from a user or from a calling program assembling in a unique way. Understand it and then generate an agreement or an agreement framework that can then be passed off for additional human entry or in a simplified world, send it out for signature. That exists and runs today and is a very realistic expectation for AI in contract management. Another might be, and it’s one that I think we’ve seen some really great value in, is the ability to read and understand, not just text and patterns and the things that you expect out of natural language processing and semantic passing and structural analysis of a contract.

Arthur Raguette
And yes, we do all of that when it comes to understanding the third party paper and matching paragraphs to your clause library or suggesting alternative text. That’s all good production ready stuff. But that next step is understanding the intent, getting beyond a paragraph and understanding what did the author really mean? Did they mean that this is good or this could be good or this is bad? And that requires just a slightly more fine tooth comb, if you will, to mine that kind of information and bring it forward.

Arthur Raguette
So these are things that a data scientists can implement and that makes for a really, really strong and very great story. But the reality for most legal and contract teams is they don’t have data scientists. There’s sort of a worldwide shortage of data scientists, depending on whether you read The New York Times, The Wall Street Journal. So what we’ve done and this is really the right way to use A.I., is to provide machine learning as a front end to your algorithms.

Arthur Raguette
So in machine learning is a way that you can feed or train your A.I. algorithms without having to code them. You simply provide examples. You provide feedback. And this allows the citizen scientists, someone who understands the business of your company, who understands your contract terms, understands your playbooks, and allows them to provide feedback that the software learns from and that the software will actually adjust itself on. This is really where the practical artificial intelligence application lives. The ability to have a system that learns from the things around it.

Arthur Raguette
No different than a child or a well trained pet will by watching others and understanding what is right and what is wrong. Good A.I. does just that. And to that end, people who expect that as long as they’re willing to spend a little bit of time to train the environment, to train your pet, so to speak, with rewards that last few years.

Ari Kaplan
Where is contract management technology headed?

Arthur Raguette
There are a couple of things that we’ve seen that bode well for contract technology, and largely it is of increased use of A.I. certainly will help make some of this happen.

Arthur Raguette
I believe that extending artificial intelligence into a more assistive or intertwined environment will create more dynamic frameworks for authoring for generation of docs. I think it will also help with collaboration so that in those more complex business arrangements where there are multiple parties engaged and where there may be a need for collaborative negotiation, that the appropriate use of AI can provide rules. Let’s give you some guidance. Keep you on the path. Keep you from falling off the edge.

Arthur Raguette
Allow the applications to bring people in and keep them on goal and on point and also maintain cadence so that things can happen in a more clean way. I believe this kind of environment is very close where we’ve seen some great use cases today for intake and best first draft even third party disassembly of content where it simply happens and as we launch new versions of our A.I. engine within the Zycus iContract, our customers don’t realize, per say, that there’s something new.

Arthur Raguette
They just realize it’s better. It’s a little smarter. It’s a little smoother. It understands and anticipates better. That’s how it should be. And I think that’s a trend that we all hope we will see more of. There’s that aspect and that helps us get to the negotiation point of a contract. But it’s not just about getting the closing cycle of a contract accelerated. I mean, yes, if you’ve got an average revenue per day per contract, you want to be able to get those days in or if you’re working on the negotiation saving side and you know you’re going to save X thousands or hundreds of thousands of dollars per day. Once the contract decide, you want to get those things to happen quickly. As we think about some of those numbers, it’s probably just as important to get the best value out of the remainder of the contract. That’s really what I see as another go forward proactive risk analysis, and that is dynamic and uses the machine learning environment so that as we look at trends or specific conditions and have reactions as humans to software, we will pick on that and effectively improve its ability to get in front of it and provide both predictive analysis, but also sort of reinforce some of those rules and rails to keep the authoring and negotiation cycle on par.

Ari Kaplan
This is Ari Kaplan speaking with Arthur Raguette, the co-founder and executive vice president of Ultira, an artificial intelligence based contract management platform. Arthur, thanks so much.

Arthur Raguette
All right. Thank you, as always.

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