Transforming Contract Management & S2P with AI

Reza: Welcome to our conversation about CLM and Aavenir.

Jesal: Thank you. Glad to be here.

Reza: So, let's start with the first topic of our conversation, which is, what's Aavenir, and what does Aavenir do?

Jesal: Aavenir, as the name suggests, means "future" in French. So, we strive to provide the future of work, especially in the Source-to-Pay (S2P) and contract lifecycle management space. We provide AI-powered solutions for the entire spectrum of source-to-pay, starting from Sourcing and Procurement at the top to AP automation at the bottom.

That includes vendor onboarding, RFP management, contract lifecycle management, obligation management, and AP automation to make payments to our vendors from the customer standpoint.

We are hugely differentiated in this market space by three things. First, we provide these solutions on the ServiceNow Platform—one of the best low-code, no-code platforms, helping our customers achieve faster time to value.

The second is User Experience. Many of these S2P and CLM vendors are stuck in the late nineties or early 2000s. We are helping our customers understand the true trend of the 21st century, the new AI Era.

The third and final is AI. My first hire was AI, and we are an AI-first organization focusing on AI-powered, Source-to-pay solutions, including CLM.

Reza: That's brilliant! And knowing the organization, you, yourself, have 21-plus years of experience in the CLM space. It is the same with the rest of the leadership team. You must have seen contracts evolving from physical wet signature-based documents to what it is today, completely AI-driven.

Over the last few years, how have you seen customer expectations evolving, especially with the advent of AI? How have processes and roles evolved in this Source-to-Pay space?

Jesal: You're making me feel old when you talk about my 21 years of experience, but that's true. I have been around for a long time and have done contract lifecycle management, and you are right; when I started doing it, 'contract repository' was an advanced thing.

We walked through the contract creation, e-signature, and negotiations. Now, obviously, AI-driven contract management is the thing of today. Going forward, we see customers looking less and less at the standard table-stake features of contract creation, search, and report.

And that's required as table-stakes with better use and experience. But what they are now looking ahead is truly adding value to their day. If you look back 20 years, most of the existing processes are trying to automate.

Now, they are trying to use these new intelligent tools to expedite their work, reduce their risk, and, obviously, save costs as well.

In general, conceptually, they buy any software for that matter, for three reasons, right? To save cost, make more money, or stay out of the front page of the Wall Street Journal for any risk and compliance reasons, right?

So, focus on these three areas, especially with the AI trying to help the end users. In this case, if you look at Source-to-Pay or Contract Management, it helps those stakeholders manage their day better and their contracts better. Focus on the right areas and really expand and spend a lot of time across all the contracts, for that matter.

Reza: Got it, got it. So, with AI there is, of course, a lot of excitement, a lot of information out there. Organizations are still trying to figure out the right AI for them. What would you recommend to organizations regarding what AI is like at different levels of organizational maturity? How should an organization choose the AI?

Jesal: That's an excellent point. We have developed our own AI maturity model, what we call that. And what we have figured is that most customers spend more than 90% of their time in a contract management system, looking for the contracts. That's their most sought-after feature.

As simple as it sounds, that's the most sought-after feature. So, when you look at AI and AI in the CLM space, in this example, look at the solutions that help you find your contracts easily using AI. Then, you will go up in the maturity model.

Next is looking for the right elements—call it metadata, clauses, obligations—from your contract, especially if it is a third-party paper contract. That's a second layer of the maturity model.

Third, once you capture these two successfully, you go to the third one, where you can now do auto redlining, clause deviation, automated reviews, and stuff. Parallel to all of these is more of a standalone conversational chatbot where you can ask any legal assistant or even a downstream user a question about a contract and learn from that.

This becomes kind of a table-stake AI feature going forward that I see next year or the year after. I advise customers and a lot of our prospects as well not to try to go for the Big Bang. Do not try to look for everything in one go, but look at crawl, walk, run, and slowly go up in this maturity model.

Reza: Let's switch gears and talk about obligation management a little bit more. Today, a lot of emphasis is on the pre-signature and signature execution phases of a contract journey. But the real work begins after that.

So, what challenges do organizations face post-signature, and what are some of the risks associated with it? And what do companies really need to do to manage them?

Jesal: Excellent question Reza! You are right, I mean, we all talk a lot about pre-signature workflows, but the reality is that portion of the contract lifecycle management is just a fraction of the total contract lifecycle.

The real business starts after the signatures are done.

You work extremely hard in negotiating every term and bend every little word in your favour. Who remembers to track those obligations that you have agreed on that? A lot of people do. But all that is just manual; you must rely on people to do it.

That's where obligation management comes in. You extract the obligations from given contracts and put them into workflow to ensure that you are accepting the right obligations that you care about and tracking them.

For example, one of our customers, a telecommunications customer, is losing $100,000 a day because of missed obligations, and there are different kinds of obligations. In their case, it was SLAs, and there are financial penalties tied to that because if they can't track those obligations or financial penalties linked to that, it is a severe loss for them.

Look at the other organizations that help work with IT service providers. Their bunch of SLAs is tracked as part of that, and they want to track those SLAs. Those are contractual obligations that they want to track and make sure that they adhere to from their end.

These are important elements of obligation management that they should care about and track. Absolutely. Yeah. And that's when you really get the value out of the contract.

Reza: Right. Absolutely. Perfect. That leads me to my next question, which is about large enterprises. Resilience is a metric that the boards keep a close eye on for large organizations, right? Organizations have GRC and third-party risk management processes to ensure they manage risks and compliance.

For most of them, the vendor or the supplier, third parties are the weakest link. So, how do you see the strong CLM solution, the CLM and obligation management solution, helping an organization's overall risk and resilience score?

Jesal: That's a great question, Reza! GRC or TPRM (Third Party Risk Management) is an important consideration for most organizations, especially when discussing our top two general counsels, chief compliance officers, or chief risk officers, which many organizations have now. CLM is an important part of that.

So, it's a bidirectional relationship from CLM to GRC. For example, CRM feeds some of the important metadata and nonstandard clauses that increase risk into the GRC. For example, your general going-in clause includes the state of New York as a jurisdiction, and as part of the negotiation, you agreed to the State of Texas.

Now that there is increased risk for you as an organization, that risk has to be fed into the GRC. Similarly, post-contract, let's say there are certain things that you agreed to as part of the SLAs and financial penalties that you agreed to as part of your contract. That risk has to be fed into the GRC.

On the other hand, once you know your relationship with that third party and, in this case, the vendor, you start measuring the supplier's performance. Once that supplier crosses a certain threshold to be considered risky, you want to ensure that the next time you do the contract with them, you include certain clauses that cover your bases. That information goes from GRC into contract lifecycle management.

So, that's a bidirectional relationship in which GRC and CLM work better together and reduce or help you manage your resilience score considerably.

Reza: Well. I think perfect. That becomes critical for large organizations, especially when you have a large scale of operations and thousands of vendors. I think insights from a strong CLM system help you keep your business safe and keep the lights running.

Jesal: Absolutely, right.

Reza: Perfect. As we know, Aavenir has been working on cutting edge technology, bringing a lot of AI innovation to our product and solutions. So, what are some of the key innovations that Aavenir is today working on to address the evolving needs of the S2P and CLM market?

Jesal: As I hinted in response to several questions, Aavenir differentiates on three elements. The first is the platform, which is ServiceNow, because it is a low-code, no-code platform. More importantly, as part of that, we offer faster time to value for customers.

So, innovation in faster time to value: How do we accelerate our implementations for our customers? That's one area that we are innovating heavily on.

Second is the user experience. That's another big one because the biggest challenge for most CLM, not even CLM or S2P, but for most enterprise solutions, is user adoption.

By having better user experience, make it intuitive. We help our customers make sure that their users adopt the new solution, new processes better.

And finally, AI, I mean, there is a ton of work that's being done, partly it is being we are leveraging what ServiceNow is doing, but bulk of that is we are innovating our own AI outside of ServiceNow, making sure that our LLM models are trained for specific contract management and S2P use cases which help our customers directly without really worrying about general LLM models. So, many innovations are happening in those areas.

Reza: This brings me down to my last question. Many organizations are out there starting the journey of evaluating S2P solutions. What is your advice to an organization looking to start a CLM Journey?

Jesal: To be honest, the function features are standard. Those are table stakes. I'm sure everybody knows what function feature they are looking for, especially given their stage of maturity as an organization.

So, my advice to them is four things.

One, focus on the platform upfront. I've seen many organizations think about the platform as an afterthought. We should think more about the platform first, depending on which system you need to talk to, and which is your preferred platform.

So, think about the platform first. Second, make sure that you are on your journey with your vendor. A lot of times, I've seen customers think, "Okay, I bought this product from a vendor, and they'll come and enable the system for me." That doesn't work that way.

You have to stay with them. It's always a crawl, walk, run approach. As part of that third step, I recommend focusing on the process first. You don't want to automate the bad processes; you want to ensure that your processes are streamlined.

If your processes are fine and good, that technology solution will accelerate your success. But if the processes still need to be updated, you cannot evolve from them. Your technology solution may make it worse.

And last but not the least, is focusing on user adoption. Buying solution is a first good step, but the second biggest focus area that organizations should have is User Adoption. They should have internal metrics to ensure that users adopt this new solution.

Guess what? None of these devices is different from any other enterprise application you buy. So, it's more than buying a contract lifecycle management or S2P; these are best practices for procuring any enterprise solution.

Reza: Wonderful, wonderful. Thanks. Thanks for that advice as well. Thank you very much for your time. It's a pleasure having a chat.

Jesal: Absolutely glad to be here. Thank you.