How Is AI Shaping The Contract Management Landscape With Matt Lhoumeau

Made with speech-to-text software, so a few words may be off.

0:00You're listening to the Contract Heroes podcasts, your one-stop shop for all things contract management. And now here are your hosts, Marc and Pepe. Hi, everyone, and welcome to another episode of Contract Heroes. Matt, thank you so much for joining us today. We're really looking forward to chatting about some, uh, different things than what we've, we've spoken with other folks about in the past. Uh, before we flip things over to Pepe to get an understanding of, uh, what those topics will be, uh, we'd love to get a little bit more information on your background and how you, you came to be in the contract lifecycle management space. Well, I came into this space because I had a bad experience with contracts about fifteen years ago. I was working at that time for the second biggest telecom company in France, and the CEO asked me to go through founder contracts with vendors that we had just to save millions of dollars.

0:55And I basically realized at that time that all the contracts were, uh, basically managed manually. I had to spend six months just looking for them in the file cabinets of the company, and I had to read them one by one to build an Excel spreadsheet to understand what we... where we were with these different contracts, the commitments we made, just a renewal date, sometimes things like this. And then I spent months sending work documents back and forth to hundreds of people to renegotiate these contracts. And I realized at that time that it was a terrible job, that no one should be doing this manually. Uh, you know, fifteen years ago, we already had software, and that's how we basically decided to, uh, start building Concord to make sure no one will have to go through what I went through fifteen years ago. That's great. And so- And Matt, so just curious, I know that most of your career has been in France and in Europe, like, have you seen any difference now that you moved to the Bay Area, es- especially on how companies see their contracts? Yeah, I mean, I've been actually, most of my career has been in the US. I've been in the US for ten years when we built Concord.

1:50I think the changes that I've seen, honestly, I've seen them in, in Europe and in the US, it's about the same. I think there is a massive evolution right now about how people think about contracts. I think, you know, even ten years ago when we started, contracts were all about legal. It was legal teams managing contracts, and now what we see nowadays is that most of these contracts are actually managed by CFOs or COOs, and legal is less and less involved. So that would probably be the biggest change that I've seen over the past ten years. Yeah, and that's a good point, and that's exactly how we want to kick off this conversation because, you know, like, companies still think about contracts are owned by legal, but in reality, the commercial or the business teams are the ones who really want to take advantage of the informations inside the contracts. What we really like to talk and/or say is that contracts are the manuals of the commercials relationship, either if you're on the buy side or on the sell side, and we know this is a big part of Concord CLM.

2:51The AI is taking over a lot of this part of the, of the operations. And we want to talk about, like, what are, like, some of the advantages of leveraging AI into different parts of the operations of the company, and especially in three different ones, uh, compliance work, in financial work, and of course, sales or procurement. So in your experience, Matt, and with your customers, like, how have you seen companies using AIs to mitigate risks related with all the compliance work that companies have to, you know, have a really, you know, to monitor all these regulatory obligations? I think what's interesting about AI is I don't think AI is fundamentally changing things. I think it's just accelerating what we've already seen. So AI, you know, has been around for, let's call it two years now. It's really started to be adopted by companies over the last year or so. But none of the changes that we've seen were created by AI.

3:51These changes that I mentioned about contracts being less a focus for legal teams and more a focus for CFOs, COOs, more operations are something that we already noticed years ago. Uh, typically, actually, I would say probably around COVID is when people started to realize that they need to change the way they approach contract, the way they approach compliance. And so AI right now is just helping that movement accelerate, but didn't create it per se. And I think when it comes to contracts, when you think about it, what is really a contract? It's not a legal document. A contract is a business process. A contract is actually the most central business process you have in a company. Whether you buy something, you sell something, you hire someone, there is always a contract in the middle. But it's really about just a business process or how to start a relationship. It has nothing really to do with a legal aspect. The legal is part of it, but it's not really what it's about. And I think when it comes to compliance and AI, what AI is helping, helping people to do right now, it's just to actually get compliance done.

4:45The reality of things is that I think most companies were not really looking into compliance in the past, unless obviously you're an enterprise company and you have a lot of regulations behind you. But most companies, you know, that are SMB, mid-market, Concord, we work, you know, we, we serve about fifteen hundred companies that are more in the SMB mid-market world. So think about companies that are between fifty employees to, let's call it a thousand employees. Most of these companies were not really looking into compliance. And the problem with compliance in particular is as soon as you have human beings entering compliance, you potentially have issues, right? Uh, quite often, compliance is just about resetting a process in your own company. Uh, but sometimes, you know, people forget about steps. Uh, they don't upload the document that they should have uploaded, et cetera. And I think AI right now, what it's helping do is making sure there is less human, basically, uh, risks in a process because it's getting automated. But you were able already to do this with CLM at Concord in the past because you had a system that would kind of force different steps.

5:41So that's why, like, the compliance change that AI is just accelerating, it didn't create it per se. Um, and so I think that's the first thing that AI helps with compliance is just removing the human risk on it. The second thing that I think AI is really helping right now is just being able to review big volumes of contracts and really get data out of this. I think, you know, the biggest problem when it comes to compliance is that when you have thousands of contracts in a company, how do you really know- Which one is not in compliance with the rules that the playbook that you may have, have in your company. You're gonna have to go through every single contract manually. You're not gonna do this. You don't have the time to do this. And so it's really about how do you accelerate that review using AI? Um, and that's why I think you start having more and more, uh, understanding now of compliance issues, of risk issues in companies because just they have the access to the data, they have access to the information, and now they can act on it. Uh, so that's I think the two main point I think when it comes to AI and compliance, one, less risk when it comes to human beings missing something. Two, just getting the data so you can actually do something about it.

6:46And something else that, that you mentioned, Matt, is when we came out of the pandemic, you know, folks were starting to realize more and more, or, or, uh, probably while we were in it, people were realizing, right, that they needed these CLM tools because a number of folks were working remote and contracts were scattered all over the place. And there was a good amount of organizations before that were outsourcing their legal work. Um, but it seems like we're seeing an, uh, an even greater uptick in the past couple of years in organizations that are willing to do this. How are you envisioning AI is going to help these organizations that are using outside counsels to either work better with those folks, or maybe even internally get questions answered and not have to rely on outside counsel f- to, to, to get these answers? Yeah. I think this is probably the most important point here about what contract management is going to be about in the future. To your point, I think, you know, once again, in the past, contracts were the legal team problem. That is not the case anymore. Uh, and we've seen that change over the past five years also.

7:43Indeed, I think when you look at, at, uh, the company we work with today at Concord, I would say about probably sixty-five to, to seventy percent of our customers don't have a legal team anymore. They may have sometimes just, you know, one paralegal, that's it, but then everything else is just outsourced when they really need it. And what we have seen also, to, to give you another number, is that more than ninety percent of the contracts that are signed on Concord have basically zero negotiation. The contracts are just getting signed, and that's a movement that we've seen for years now. More contracts are being templatized, and people understand that they're not gonna be able to negotiate everything. If tomorrow you sign a contract with Salesforce, you're not gonna negotiate your contract with Salesforce. Amazon and you have enough power, but most companies just don't have the time, don't have the power to do this. And so I think the world has changed now when it comes to contracts. People understand that it's just kind of like what it is.

8:34They also understand that they need to go fast, um, they don't want to lose a month in a negotiation cycle, and so they're just willing probably to sign things that they would have maybe tried to negotiate in the past. And so that's what you see right now, a bit of a change, uh, for smaller companies, particular in the SMB midmarket, uh, where more and more people are, um, just using that CFO/CO resources to manage the contracts and not legal teams anymore. Now, to answer your question about AI, I think AI once again didn't create that movement, but it's gonna accelerate it seriously. The first thing is that AI gives access to people to a lot of legal knowledge that they didn't have in the past. Today, if you put your contract in ChatGPT or in Concord AI, you're able to, uh, really to give us first a review of your contract to understand if there is really something that is a problem. Maybe a clause that is not there, maybe a clause that is not written properly or some inconsistencies. We can either do that with AI, and that's, you know, something that a lawyer would have to do in the past.

9:31And so you don't need that first review anymore. You're still gonna need lawyers obviously or, or to be able to do complex negotiations. But how often did that really happen in a company? Your customer contracts, they're probably templatized. Your vendor agreements, probably templatized by your vendor. Your HR documents, they're absolutely templatized. And so you don't really need someone with a legal knowledge in your team anymore. And I think this is gonna get even more the case in the future as AI gonna get any better and better and better, you'll be able to really just assess all your contracts without any review whatsoever from legal. And I think, you know, you're gonna see a lot of changes also just the way the contracts are written because of all of this. So yeah, so AI is gonna make it the less and less of a legal problem and more and more of a operation problem for everyone. And so I think you'll see a lot of legal teams being reduced or sometimes just being entirely outsourced in most companies, and I think we're gonna see this even in enterprise companies.

10:27Uh, they're gonna start just focusing their legal teams more on actual legal issues and instead of just contracting per se. Right. You touch in several times, Matt, how CFOs are taking over, you know, for using contracts data to make better de-decision making. But can you give us couple of examples, especially on some of the data points that you have seen that are, like, the most, uh, useful as a CFO, and then how CFOs can start using those AI tools to get that data? Yeah. What's interesting for me for the CFO is that we're seeing right now a massive change of what a CFO is in a company. The same way we... You know, if you guys are old enough like me to remember what a head of IT used to be. Twenty years ago, a head of IT was just someone that would help you plug your computer and doing some support on technical stuff, right?

11:18And today, a head of IT is probably one of the most central role in your company because this is really about plugging all the systems together. And, uh, CFOs are basically the same thing right now. CFOs, think about it, you know, ten, fifteen years ago, in smaller companies at least, they were just the accountant guy, kind of, and this is changing right now. I think CFOs are, because of the tool they have access to, are starting to have a more central role in general in a company, and they start to take more and more power. And I think what's interesting about contracts is that it's just one of these tools that they start to have at, at their disposition to be more efficient. To give you an example here, something that we're doing now with Concord is we help our customers understand really their commitment when it comes to financial with their contract. And so think about it. When you do forecasting in your company, I've run company for years, so I've done this multiple time. How do you do forecasting for next year? Well, typically, until now, you basically look at your expenses from last year and you're gonna think, "Oh, we're gonna grow by X percent, so we're gonna just put the percentage of growth in these different expenses, and this is my forecast for next year."

12:18I'm obviously making this very generic here. That's kind of like the idea of it, however. What's interesting about contracts is that you have a lot of information when it comes to financials in your contract. If you look at your contract, you know basically what money is coming in and out from your contract. You know exactly when, you know, you know how much, you know for how long. And so what we're helping cus- CFOs do now is to actually start building forecasting, not just based on past expenses, but on their actual commitment. And so you'll be able to actually know that, yeah, this is all the money coming out per month from my, from my company for the next 10 years based on the contract that I have. So this is the type of things that, you know, technically you could do it in the past, the contracts were already there, but you're not gonna have someone review the contracts all day and putting data somewhere. AI can do it for you today. So this is the type of things that you're gonna start seeing. Another example here for CFOs also is, once again, CFOs managing operation, managing efficiency in the company.

13:14What AI can help you do today is just make sure that you don't have any bottlenecks in your contract process, making sure that your contracts in sales are not staying stuck for a week because a clause is constantly being negotiated, and you might just wanna change it in a template to make it simpler. Type of things where you can just make sure that you're not losing five days on something when it could be done immediately, and that's something that AI also helps with, uh, just to, by pointing out, putting you out in the right direction. Yeah, I, I mean, I think it's so interesting how we're seeing these, these trends, right? And, you know, legal obviously still involved in the contracting process, especially at larger organizations, but focusing on higher value work, right? And I, I think we're gonna s- continue to see contract management tools help with this trend. We're also gonna- going to see AI help with this trend. And Matt, I'm, I'm curious, you know, I know that y- the team works with commercial and mid-market enterprises, right?

14:06That's kind of the, the focus of your customers, and I'm assuming that most of these folks are moving from more manual methods into Concord. What kind of maybe tips do you have for folks that are out there that are searching for their first contract management tool? Yeah. That's a very good question. We see today, you know, it's interesting, contract management is obviously a bit, it's our world, so we're, we, we live in it. But the truth is, most companies have nothing in place. If you loo- if I look at to- all the companies signing with Concord every day, about 90% have absolutely nothing in place. So you're right, they are coming from a manual process. They usually have DocuSign or something like this for e-signature, but that's basically it. There is nothing when it comes to the pre-signature process or, you know, creating the templates, the internal negotiation, approval, the negotiation, uh, and nothing after the signature. And so most companies come from really the Stone Age on, of contract management, and what's exciting for them, and they're able to move from the Stone Age directly to the modern era with AI, right?

15:00But this is not something that happens so easily, honestly, uh, depending on the way you approach this problem. I think the right thing to do when you are a company, small company, midsize companies, you have nothing in place, go for something simple to start with. I think people tend sometimes to over-engineer what they want from contract management when they start. They want to automate everything and plug everything with th- their different tools. But the thing is, you don't want to automate something that you're not sure is really solving your problem. At the beginning, you might wanna just keep it small, make sure you actually are improving your processes, and once, once you know that, you can start automating. So that's the biggest advice that we give to our customer typically is first try to go step by step, go by typically one category of contracts and then expand to different teams. The big revolution where, you know, from overnight you have all your contracts that are automated everywhere typically doesn't work very well, uh, because it's a learning process for organization to start really getting a CLM that is, that is matching their needs. So that's the biggest thing. Go small at the beginning.

15:59The other thing that we typically recommend to our customers is, you know, when you start using a CLM, start focusing on the contracts that you're building every day, the contracts of tomorrow. Don't focus as much on the contracts of the past. You'll be able to get them in the system, but quite often the biggest pain when it comes to contract management is really in the contract processing itself, making sure they're getting signed in time, making sure that you're compliant in your process. Past contracts are here, and, you know, you can import them on Concord. We are an AI to do all of this, so we can help you with this. But I think the important part is just focus on the future to have something that really works, and then you can start looking into bringing everything from the past. So there's just basic things here, but that helps a lot getting an im- implementation successful. Yeah, that's for sure. We really like that phased approach for a CLM implementation and especially because of the change management part, right? Because you- Yep...

16:52can have the perfect implementation, all the process was taken, it was, everything was done perfectly, but when you start using the system, adoption can make this a big success or a big failure. So Matt, in your experience, like, can you give the audience some tips on how midsize companies can start, you know, helping their internal operations to start working on their change management so they can start adopting not just the CLA, but also AI tools? Yeah. Change management is all about managing people's expectations at the end of the day and, and how you're trying to help them. I, I think the way we, we typically approach a big implementation with our customers is just to ask them, "Okay, let's just divide it by different blocks." And when you, typically the interest of a platform like Concord is to have all your contracts obviously on the system. Why would you have different system for different type of contracts? Makes no sense.

17:48But you don't want to start rolling that out for all your contracts, you know, vendor, customer, HR. Just take it one by one. And so when it comes to change management, where you're gonna have a successful implementation and adoption in the company is by making sure your users actually like the system. And so what we tell our customers, like, first find the type of contracts that are the, the most painful today for your teams. If it's sales because it takes too long to get a contract approved by legal, and therefore you're just losing the sales cycle. Is it vendor agreement because your team can't get the tool that they need to help you grow? Uh, so find first of all, like, the biggest problem for your teams. What takes them the most time? What creates the most frustration? And then start working from there. Just build something for these teams. And then if you're really solving that problem for these teams, then they're gonna be very happy, and they will tell the rest of the company about it. And that's how then the other teams are actually gonna look forward to that new tool instead of, like, just thinking like, "Oh my God, another tool again," and, "It's not gonna work." And, you know, we...

18:47Post-COVID, I think all the companies started just adopting so many tools, and most of them actually are not used today, and so it create a lot of frustrations. CFOs are pissed because they're spending a lot of money for things that are not used. Users are pissed because they've lost time on a tool that in the end didn't solve anything, and they still have to do things manually. So find the, find the biggest problem for your teams, make the users very empowered by the, by that solution, and then it will just go by itself. And so Matt, I would really like to know your opinion on this. You know, like, AI has been, you know, evolving so fast, and I cannot say, like, how do you envision AI in, in 10 years, because that's, like, way too much time. But in the midterm, how do you see it's going to evolve, and how do you foresee companies using AI in, you know, one or two, or in the next three years? I won't speak of AI in general. I will speak more about AI in the contract management space, which is really what I know. Right.

19:46And obviously, and that's also understanding that I don't have a crystal ball like everyone else, so, uh, this is just what I suppose here. But I think what AI is changing right now is that knowledge and experience is not something that really matters anymore when it comes to your teams. AI is, you have all the knowledge that you want and all the experience that you want at your fingertips, and so you don't really need that from people anymore. And I think AI is also, on top of this, gonna just automate a lot of the things that you do, obviously, manually, but that's already the case today. So when it comes to contract management, what does that mean? I think that first of all, who had the knowledge about legal, talked about it several times already today about legal teams, we won't really probably need them as much or f- sometimes not at all when it comes to your contracts. So that's the first thing I think AI is going to change. The other thing is I think we are going to see a change in contracts themselves because if tomorrow you have a world where there is absolutely no contracts, we forget about everything that humans have done for the past centuries, and we have AI, and we ask AI, "Hey, I need to, to start a relationship with that customer, my vendor, and I need to formalize, uh, that agreement, that, that relationship that I have with them," and you ask AI to write a contract, do you think that AI would write contracts the way we have been written them for the past centuries? I don't think so. When you look at contracts, they're extremely inefficient. Every contract is different. Sometimes, you know, like, the important part is in the middle of 15 clauses, you don't really see it.

21:09It's just not a very smart way to build that relationship. And so I think what we're gonna see more and more with AI writing contracts is probably over time AI getting free from what we have done in the past as human and start automating and having something that is more efficient. And so what could it look like? Well, like everyone else, like Concord, we raise a lot of money. We've worked with a lot of lawyers. What do you typically do on complex agreement? You have a term sheet, a term sheet with a very simple table that tells you exactly what are the terms of your contracts, and that's, I think, what contracts are gonna look like more and more in the future. I think you're gonna have very, a templatized way of showing that, uh, and the cool thing about this is whether you're looking at a customer contract or vendor agreement in the future, you'll know exactly what to look for in a second. And so I think this is gonna be very interesting, and I think AI will help that. And so I think contracts are going to change. The way we work with contracts is going to change.

22:03And I think long term, and that's more like, you know, 10 years from now, I think they won't be really contracts anymore. I think they'll be there, but I think no human will actually review them. I think you'll see more and more AI and computers being able to negotiate between them and automate everything. And, you know, that's a bit of a different topic, but that's all the concept be- behind smart contracts that you can find in, in crypto, in- for instance. You're gonna see more of that automation, I think, between companies. Not tomorrow, but in 10 years from now. Yeah, I mean, I think that's, uh, an interesting take, and I know that none of us have a crystal ball, but I, I think we're going to be seeing sooner than later if some of these fruitions that other folk have brought up with us, and Matt, the ones that you're talking about here, right, are those things going to happen and, you know, is it just a matter of time until they do? But you know, I guess we'll find out. We'll see. But Matt, this has been a, a fantastic conversation. We really appreciate you coming on the show and, and talking with us. If folks wanna connect with you or learn more about Concord, wh- where's the best place to do that? Concord.app, and then if they wanna connect with me, I'm on LinkedIn, Matt Sumau. L-H-U, M-A-U. All right.

23:00Well, thank you so much, Matt, for joining us, and thanks everybody for listening to another episode of Contract Heroes. Thank you, guys. This episode of the Contract Heroes was brought to you by Concord. Their contract management platform is trusted by over 1,500 companies to help streamline agreement workflows, accelerate deal closures, and drive business growth. Learn more at Concord's website.