Speakers featured:

Melissa Drew: Founder and Fractional Executive, Simply-Transformed

Gaston Alvarado: Global Professional Services | LATAM Indirect Sourcing, Lincoln Electric

Toby Laforest: Director of Product Marketing, Ironclad

Melissa: Welcome. Welcome to our session, Unlocking the Power of AI in Procurement Contract Processes. We hear the term "artificial intelligence" or AI all the time, but what does that really mean? For contract management, this means greater efficiency and speed to making better informed decision. AI technologies have the greatest potential to completely transform contract management, which was not possible and had been significantly more difficult just five years earlier. For example, predicting the likelihood of various contract outcomes by analyzing both historical and current contract information, or continuously monitoring contracts to ensure they comply with changing regulatory and internal policies, then automatically flagging and sending notifications to folks to reflect deviations in those complex issues. Today we're going to explore AI's transformational potential in optimizing end-to-end contract processes. Topics we'll include, but certainly not limited to, highlighting leading practices and evaluating contract tools and application, discussing real-world scenarios and use cases, and recommending strategies for achieving the kind of value we had always hoped for. I'm joined today by two wonderful guys, Gaston Alvarado is a procurement professional with over 20 years of experience in indirect procurement and three years of data and analytics, AI and machine language. He currently serves as director of procurement for Lincoln Electric. Also, Toby Laforest. He's the director of product marketing at Ironclad. He's worked with AI enterprises, software service space for the last 10 years and leads Ironclad's procurement council today. Welcome to you guys both.

Gaston Alvarado: Thank you, Melissa. Glad to be here.

Toby Laforest: Likewise.

Melissa: Let's get started. We're going to start with you, Gaston. As a procurement leader, what do you look for in a contract solution, specifically when you hear that they're leveraging AI technology?

Gaston: To me, Melissa, contract management is one of those things that usually is not very well taken care of by the procurement function, and not because of the technology, but it's more about the process. I think that's where AI can help a lot. When I think of the process, anything that is manual that is happening right now in your process is something that AI can either help or replace in some cases. When you think of a contract from the very intake or the very initial process, when you're negotiating with the supplier, when you're creating templates, when you're exchanging notes with suppliers or internally with your legal counsel, with your attorneys, when you're doing all these processes, it can get really convoluted. At some point, if you don't have some sort of technology to help you out, you can lose track of these things. You can lose track of the different scenarios you can have with a contract or with your relationship with your supplier. That's exactly where I think AI can help, getting this organization, getting everything under one roof, so you as a procurement professional can take advantage of that, get more organized and get more advantages by using technology and getting your process more in control.

Melissa: That's interesting and I know, Gaston, you're coming at it from a procurement perspective in the organization. Toby, you're coming at it from a very different perspective. I would think that you might have a different way of assessing what should procurement organizations look for when they hear a contract tool is going to have some AI technology in it.

Toby: Yeah, I think there's a couple of different ways to approach it. You can look at it from a use-case perspective of where are they applying AI? Is that helpful to me? I think it starts with a non-technological question though, looking internally and saying "Where are our biggest pain points in the process? Where are we seeing the biggest slowdown? What's clogging our procurement process, our source-to-pay timeline?" First looking at, what are the biggest pain points that we're having? Where are our biggest challenges? Then looking at it from a technology standpoint and saying, "Can I apply AI to that problem? Are there solutions that apply to it?" It really starts in understanding your own process really well and understanding where your challenges are so that then you can go have that conversation.

Melissa: I think that's a really good segue back to you, Gaston, because, flipping that again to this organization, I'm sure you've had the same, sat down and had to think the same way. I'm out there looking for a tool that's going to, what you've just mentioned, automate my processes, take some of those tactical, make them automated, drive efficiencies. You're not just out there buying the application. You've probably got something in your back of your head that's supporting the business cases to go and fund that, right?

Gaston: Yeah. It's a very good point. I think Toby hit the nail when he said, "Understand your own processes." This is, in my own experience, the first time, the very first time that I got to deal with contract management tools and buy them and implementing them. I guess the biggest challenge is, you keep thinking contract management is something that procurement uses and everything goes around that. You think about your suppliers, you think about the clauses that you're going to include in your contracts, how you're going to workflow all that process so you can interact with your suppliers and attorneys and get it signed and get it approved, put it in a repository and that's it. Reality is, that it's not just that. Part of understanding the process that Toby said is you need to really visualize, who in the company is using contracts? When we were doing this in our company, the first question was that I asked, because I noticed that this was happening at the beginning. I said, "How about the contracts that our sales organization is creating? " How about the contracts that legal is creating for different purposes, for IP purposes, for other purposes? How about the NDAs? How about all those documents that flow across the company that are not just procurement contracts?" Part of understanding the process, coming back to Toby's point, is understanding the full scope of what a contract means for the company, where it is used and how can you leverage technology to manage, not just one part of the process, but the whole variety of contracts that you use in your company?

Toby: We, as a company obviously serve thousands of customers. We are always kind of surprised by how many contracts businesses are handling. To your point, yes, it's the procurement contract that's the NDA, but nowadays, also, you have contracts or policies and different agreements on your website as well. Contracts are prolific throughout your whole business. I do think it's really interesting or anytime you're looking at contracting software, you have to be mindful of what your team needs, but then, Gaston, to your point, mindful of, what does the organization need? Try to use a Venn diagram to find overlap there. What is something that we can benefit our department's use case, but is still in the context of everything else and fits into that broader picture? Yeah, 100 percent.

Gaston: Just adding a little bit to what you said, Toby, is the fact that when you're talking about contract needs for these different organizations, procurement, sales, legal and all those different functions that marketing and everybody else, the needs are completely different. What procurement needs from a contract is completely different to what legal needs, to what sales needs. There has to be a deep understanding of those processes. At the end of the day, you can say, "This is how our process looks like for managing all these kinds of contracts." Then, the next question would be, how can AI help us to manage and navigate this complexity? Because processes can be really complex. A legal can say, "I don't care about suppliers. All I'm doing is sending this because I'm going to sue this company. I don't care who they are. I'm just going to sue them." All those different factors that are involved into this process need to be considered, so you can then go, like I said, with a big question, "How can AI help me to do this? Do I need help drafting a contract? " Do I need help looking for information about the laws that are going to rule this contract? Do I need information about a lawsuit that I'm getting in my company?" All these things that AI can do, you need to understand the process so you can really take advantage of that.

Melissa: I'm listening to both of you. I've been on both sides. I've been on the consulting side, I've been on the procurement organization side, and in my experience, whether it's good or bad, every time we get to a contract management solution, it's always legal out of scope. It's always marketing contracts are out of scope. We're going to always focus on procurement first. I think what I'm hearing from you is that that's not really the right approach if we want to be successful, if we want to leverage the tools that we're investing in. I'd be interested in understanding the perspectives from both of you on that. Because I think you guys have a good perspective. You guys have a really good insight on, "Hey, guys, this isn't the way it should be done. You really need to wrap your arms around the broader purpose of contracts not just procurement."

Toby: From my perspective right we're seeing thousands of customers on board and deploy solutions, so we see how it's structured everywhere. I don't think there's a one-size-fits-all approach here. I do think it's totally OK to start with procurement contracts first and then expand onto anything or connected, or it's totally OK to have two contracting solutions as long as they're integrated or they're dropped into a single repository. There's a lot of architecture you can do there to make it work for your organization. Personally, I think the important thing is how flexible or rigid are those solutions? Because if you are going to scale or if you're going to have to include legal now, you're going to have to change this, no contracting solution is the same and sits the same for months and months and years at a time. How quickly you can adapt or how easy it is to scale from just procurement contracts to all of your contracts, if you want to do that, that's what I think people need to really look at and that's what I mean by the context of it. It's OK to start small and start with one use case, but then, do you have a path forward to get to that ultimate goal of everything in one system or a connected experience? As long as you have an easy path, a flexible path to that, that can adapt to the changing business needs, I think it's totally OK to approach this in different ways.

Gaston: From my perspective on the procurement side and on the organization side, what you just said, Toby, is totally accurate. I would just add that companies just have to be very careful how they approach that just because a lot of times what happens is we say, "Well, let's just get started with procurement. That's great. It's an easy implementation." Most of the procurement processes for contracting are very simple. It's just a two-way communication, very few exceptions. It's not that complicated, but then what happens sometimes is we say, "Let's get started with procurement," but then six months later, legal goes and buys a different tool for managing their contracts. Another six months later, marketing goes and buys a different tool, and then everybody in the organization is having two, three, four different tools for managing contracts and storing contracts in different places. I guess from my perspective, the approach should be, have a multifunctional team that needs to be put together from the beginning and this team needs to put together a plan. Whether it starts with, whatever, procurement, legal, whatever, but this team needs to put that path that the company is going to follow to manage all the contracts across organization, so you don't get these situations where, "Well, I'm legal. I don't need procurement. I'm just going to go buy another stuff where there was ready for me."

Melissa: Kind of like a contracts council, where you've got representatives that, "Hey, I'm in this group and I use this contracts." I like that because it becomes more collaborative instead of, "Oh, can you give me your requirements?" Requirements is very prescriptive and assumes that you know what you want before you even know what you want, right?

Gaston: Yeah.

Melissa: I like that idea. I think that's a good...Anybody listening, Mark that as a good idea. [laughter]

Toby: I think you said, "The path forward is the piece." I think you said that perfectly of like, there needs to be alignment on the path forward, but if everybody's not on that same journey, if everybody's not going to the same place, that's where you'll get everybody headed in different directions, so yeah, perfect.

Gaston: Maybe just the gravy on top of that is or would be, make sure that you get to the very end of those implementations. Then you have, "Let's get started with legal and then you do the whole thing for legal." Six months later, nobody cares about the rest of the implementations and then you get, you're basically back to square one. Then you got this, what I call the syndrome of the big, white elephant. You get a big, nice software like Ironclad and can do anything you want, but then nobody's using it. Three of the four groups that were supposed to be using this are not using it and then you lose the ROI for your investment. Maybe later you're going to have to buy something else because other organizations are going to do the same.

Melissa: We're going to pivot now into the technology piece of it. Toby, you mentioned a moment ago about a use case. Do you have a use case in mind that would help illustrate everything that we've talked about, the strategy and the business and the challenges and what we're trying to solve and how applying AI in a contract management solution is really solving for that?

Toby: Yeah, for sure. I think we talked about process a bunch here already and so I'll break it down in that way in terms of a process. A contracting process has a request phase. Someone is raising their hand saying, "I need a contract" or they're going to create a contract. Then you have draft. That contract gets negotiated, then you sign the contract and then there's an analysis. If we think of those stages, I think that's how everybody should think about, "Where can I apply AI?" There are tons of tools out there either standalone or CLMs, contract management tools with AI in them where you can then apply the AI to these different stages of the process. When I think AI use cases, I think, "Early on in my request process, when I get a contract from a vendor and when I upload it into my system, AI can do a great job of extracting information from contracts. Either I need someone to review it or I'm storing it in my system." AI does a great job of reading the contract, interpreting the contract, and harvesting the information to just make filling out a form or submitting something into a system a lot easier. Then, on the negotiation standpoint, when you're going back and forth, there's tons of tools out there as well, including Ironclad, that give you AI in the form of negotiation. They'll redline a contract for you. It'll understand what you previously had or understand what your preferences are and make those changes automatically, so I don't have to manually sit there and redline a 20-page document. Then, because I think one use case that most contract management systems get wrong is a contracting software has the contracts and it has the data, and so you can use AI to tie those two things together and make sure that when I make a change in my contract, the data that I'm pulling from it is accurate. What happens a lot of times is, people have documents and their data that don't line up. The agreement date here and what's actually in the document isn't the same. Those are just a couple examples, but I think that framework is helpful to say, "Let me create stages in my process or different chunks, and then how can I apply it to those different stages in my process?"

Melissa: Gaston, I'd be interested in hearing from you on the same topic. Did you find one or two specific use cases that guided the direction for you?

Gaston: Yeah, in my case, I'm going to focus on two things. One is the automation of the process and second, the consolidation of all the information. Most companies have the issue of having contracts everywhere, everywhere in the company. People's laptops, shared drives, network drives...

Melissa: Filing company.

Gaston: flash drives, anything that ends on drives, so that's where the contracts are sitting now. Then you add that to hundreds of square feet or cubic feet fill out with paper on storage locations, records from 1960 that are still sitting somewhere. All this information in some cases for some companies is very relevant. If you work for the, I don't know, for the defense industry, for the government, you might need that contract that was signed in 1955 because there are repercussions through the years. The consolidation of your contracts and information it's at the top of the priorities for that. In our case, when I did this sometime before, that was a top priority, to make sure that we could gather everything, basically sweep every possible location and gather everything into one repository. That was very, very important. We swept drives, computers, different places and the only part that we couldn't do that was the physical records because that was a separate project. That's something that's also important that needs to be done. Then the second part of that is the automation of the process. These contract processes within procurement and legal as well and sales as well, everything happens by email. Everything happens with a Word file that is flying from one computer to the other, from one email to the other. The employee leaves the company and then you lose the whole history and then you don't know who approved what. You don't know if the contract is ready to approve. This workflow gets you the organization and the clarity on the process and the automation on the process, because a lot of times if you're going to sign an NDA, you don't need everybody to be reading the document. If you're using your own template, you don't need to go through different stages. You can just use the tool to pull the template and then go through the approval process all the way to the end. In some cases, you don't even need anybody to touch the document. It goes just straight to the supplier. This automation that can begin, and as Toby said, maybe you need to draft a new contract for a supplier. GenAI is embedded in almost every tool, and you can just pull the topic, and there are a bunch of templates I already created. You just pick one of those, and then you create that, and you route it automatically into the workflow and then you get at the end a product that is very, very reliable. I think the consolidation, like I said, of the information and the automation of the workflow and the way you handle contracts is probably the top priority of the procurement needs. If you can get that, you are probably 80, 90 percent ahead of the game with contract management.

Toby: I think what you're talking about there is super, super important because we're talking about AI, but a huge part of this has nothing to do with AI. What I mean by that is your contracting solution needs to have some basic, basic things. The automation you just talked about is a great example of that. We work with customers all the time that have been able to 90 percent of the contracts they generate in certain areas of their business, now are automatically generated without anyone having to do any drafting or modifications to it. That's because automation can understand the specific type of contracting need you have, and then build a contract for that scenario, so no one has to manually adjust the clauses. That's kind of a basic piece of contracting. The automation engine is needed. Once you have that, then you can introduce GenAI, then you can introduce other AI tools and build on top of it. You said gravy on top before, it's the same thing. AI is the gravy on top, but you need there to be substance there before you build on top of it.

Gaston: Right. Even going back to the very basics of AI, a lot of people when they hear the word, they imagine this big piece of software that is going to solve every aspect of the procurement problems that we have. It's really not the case. Like I said before, AI is embedded in almost every tool. I've been in procurement for a long time and I've talked to suppliers that I met 15 years ago and they were technically using AI on their platforms and whatever they were doing. This is not something new, but when people hear AI, they think of all of those things that they see on social media, on YouTube, and all those great things that AI does, but also, a lot of those things don't really apply for what we do in procurement. Getting back to the ground is very important as well as a procurement professional because GenAI is great, but it's something that you can use for specific things. It's not going to be the main usage for your contract management tool. You need other things. Like Toby was saying, you need a contract that needs to be read and understood and maybe put a summary of the contract or just bring the clauses that are more relevant and tell you what the risks are for this contract. That's the kind of thing that AI can do that is useful for procurement. Understanding what things that the tool is doing, and of course, behind the scenes that uses AI can help us in procurement, I think it's very important. I'm going to even venture to say, Melissa that honestly, we don't even need to know if it's AI or not behind the scenes. At the end of the day, what you need to know is what the tool is going to do for you. Toby, you can probably correct me here, but I'm going to guess that 80 percent of what the software right now is doing, or most softwares are doing, have something to do with AI.

Melissa: That's right. [laughs]

Gaston: You don't really need to understand all the bones behind that, but you need to understand that the software can take a contract, read it, understand it, put a summary and do things like that. Then, if you're able to do that, then you're in a good shape and you're using AI for what it's supposed to be.

Melissa: I want to stay on this topic, but slightly pivoted. Last year, I was fortunate enough to facilitate a workshop of 30 chief procurement officers. When I posed the question, where do you think you should be using AI technology first, 70 percent of them said contract management solution. When I followed that up with some follow-up questions, suddenly it was gear or headlights, completely blank. They know they wanted to use contracts, but they didn't know how to get started. In connecting that with what you guys were talking about, I'd love for you to both address, if I'm in the organization and I'm head of procurement and I'm directing my staff that they need to go out and start looking at these technologies that leverage AI and GenAI, what questions should they be asking to make sure that they're getting the right solution? I can preface that with one particular example was, for example, if Ironclad is out there developing their solution, they're using AI to specifically solve business challenges, so where in Ironclad solution are they really using that technology to solve the business challenges that we have in the organization? That would be an example of a question. I'd love to know what you guys are thinking.

Gaston: I would probably go the other way around, Melissa. I would probably say that the question is not exactly positioned that way. I guess to position the question, you got to say, going back to my initial comment, what part of your processes you're doing manually right now that AI can either replace or help you to manage? The reason why I'm saying that is because, and Toby, you know this better than I do, and you can probably expand on that, almost any tool in the market for contract management is going to do a lot of things with AI. It's going to do pretty much whatever you want. I find hard to believe that anything that you need within contract management, that you're not going to find it in the market. It's very likely that everything is already out there. The question is not, what is the best tool that you want to pick? The best question is, which ones are your manual process that you are having now and that you don't want to keep doing it that way and then that you need some kind of technology, in this case AI, to help you either, automate, replace or make it more efficient? If you approach it that way, then you're going to find out that you can talk to our cloud or another 20 suppliers in the contract management industry and all of them are going to do the same thing. The difference is going to be of course the way they present the software, the support they give you, the implementation, the integration, the interface with SAP and other things, and of course, the pricing and different things. I guess the foundational question for you as a procurement professional, when you're talking to your stakeholders internally, because the CPO or the CIO or whoever is going to come and ask you, "What do we need to ask?" Well, the question is, what are we doing now that we need to replace with technology? If you start that way, I think you'll get better chances to succeed.

Melissa: Toby, before you answer, I'm going to refine the question for you. I'm in procurement and I've got five different suppliers out there. They all are contract management solutions and they all claim that they're using AI, but we've learned over the past couple of years with a lot of things on LinkedIn and the news that not what everybody claims is AI is really AI. Using that as the more refined question, how do I know that what you're is, in what Gaston said, the best tool for me? How can I, as an individual who doesn't really know a lot about AI, how do I know that I'm picking the right one?

Toby: There's a couple of different things here. I think one principle is test drive. What we mean by that is even in enterprise software here, I think a true mark of a provider that's confident in their solution and also for you to really understand what's happening here is you got to test drive it. You got to get in there. You got to experience the AI yourself. I think that's one portion of it, advice I would give out to the market. I think another portion of it is kind of what Gaston was saying there of you wouldn't go in Home Depot or Lowe's pick up a shovel and say, "What should I use this shovel for?" You wouldn't say, "Here's AI, what I should I do with it?" It should be grounded in hear what are the issues that we're having? I do think there's an element of, it shouldn't matter too much if your pain point is this and whether it's solved by AI or not, it's kind of a secondary or a tertiary thing. It should be, does it solve my problem? Is it doing what I need it to do? Whether it's done by AI or not, yeah, I agree, it doesn't really matter. It just needs to get the job done. All that said, I would add on of, let's say there is something that you're looking at, and the solution is done by AI, and there's a couple of providers that have AI, how do I look at the difference between the two? Honestly, I default to, it becomes a privacy and security conversation a lot of times as well. Are they using my...? Especially with contracts, contracts have tons of proprietary information in there, really information that could give insights into what you're doing as a business. How the AI is trained and what data is retained with the AI is a question that everybody should be asking their provider. What information are you storing? Not only you, but with AI. Usually providers use downstream providers or there's third-party tools that are aiding the main tool. What are you and your AI providers doing with my information, I think is the top question you have to ask.

Gaston: If you can translate that into a very specific question, it will be something like, what data is the company using to train their AI models? That is a very specific question that would answer what exactly Toby is saying. Just to add to that Melissa, in my experience and I've done hundreds of different software contracts and negotiations, not just for contract management for different things, but one common issue that I have found with suppliers is that we were selecting another solution not for contract management, but we've had this very nice tool. It was the greatest in the world. They had AI embedded everywhere. I asked a lot of questions about AI. They did everything. It was like a magical tool, but guess what? They didn't have the security infrastructure for it, so all of our data was going to be on risk. Even though it was the best solution on the market, it did everything, it had the latest and greatest from AI, it couldn't be a good solution because there was no good security infrastructure. To your point, Toby, that's another important question, Melissa. Maybe the second question would be, what kind of security measures you use for other people and companies not to hack into the data that you're going to be storing? That would be another big question. Another big question, if you will is, if you want to get a little more technical, you can even ask, on your training data, what specific training data you're using for that? There are many different options that the software companies are using. You can even ask how often are you updating their training data? Are you using my data to retrain your model or is it getting outside? Is there a way that you can isolate my data so my processes are updated and learn from my own data and not other people's data? Those are the kind of questions. You want to get a little more technical with that, you can ask just to satisfy the security side. At the end, like Toby said, at the end, it doesn't really matter if it's done with AI or not. At the end, if you put the test drive, the contract, and you say, "Read this contract and tell me what it is," and the answer you see doesn't satisfy you, then you know that is not what you need.

Toby: One thing I can add there is we talked about training a couple of times here. Another way to differentiate what's out there is, am I able with your solution to tailor the AI and customize it for my needs? What I mean by that, I'll give an example with contracts, a COLA clause, a cost of living clause. We have a customer that's in Canada. She has a really specific type of clause that they use in contracts in their locale, and so no solution is going to have AI that is trained to identify that specific clause and then do something with it. What our solution allows you to do is give it a few examples of the clauses you want to detect, and then it creates a model to go and find that in other contracts. That's another way to differentiate is, am I just dealing with an out-of-the-box or a suit off the rack, a dress off the rack, or can I tailor this to my specific needs? Especially with contracts, there is something unique about every business, and so AI needs to be able to adapt to what you, again, need. We keep going back to that.

Melissa: This is great. I'm hoping folks out there are taking notes. This is exactly what we needed to hear. I'm watching the time and I want to make sure we have enough time for some questions. We're going to have this last question for you guys. We've been following this chronological story and in this story, we now have our contract solution in place. The next big challenge that people have is, how do we fully leverage what we've just purchased to really gain the value that we were hoping this was going to get? Who wants to start first? [laughs]

Gaston: I can start because I had that experience before. [laughter]

Gaston: It wasn't a good one. [laughs] I think, again, and this applies for any software solution, but specifically for contract management, the only way you can really leverage whatever you buy is when you have a full utilization of the tool. What I mean by that is software solutions usually have different functionalities. When you purchase something, you purchase functionalities in most cases. You purchase one, two, three, four, five, whatever number of functionalities within the software, or maybe you can buy the whole suite of services that the software offers, which is great. At the end of the day, you need to understand that every module functionality that you buy from the company needs to be implemented, needs to be utilized, needs to be trained, needs to be...There's a whole process for each functionality. That takes time, that takes people, and that takes money. If you buy a piece of software, you need to make sure that you're buying the right modules that you're going to use, and then make sure that you're going to utilize all those modules. Then a layer above that is, make sure that everybody in the organization that is a potential user of that tool can get the adoption using the tool. I think the leverage comes by using all the modules you are purchasing or you're buying for the company, and then make sure that everybody in your organization is using those solutions.

Toby: I think to do that, you have to assess software in a different way. I think over the years, what I've seen is what we used to prioritize in software is, "Can I customize every little detail of this software to be what I need it to be?" I think now we're striking a balance between customization and flexibility. What I mean by that is, if I create a perfect fit, perfectly customized for every part of my business and then next month we have a new product or a new set of suppliers that we're doing business, we do business in a new locale or the smallest change, I now have to go back and change everything and my business is outpacing what I can do. You need to find a solution or part of making sure there's true adoption. I think there's a couple of different factors. One, is it walk up usable? Something we do when we're building our software is, we literally take people off the street. We take UPS drivers, people who work in a cafe, walking their dog, like people that have nothing to do with contracting, don't know what NDA, SOW, all these acronyms are and we put them through the paces in our platform and say, "If that person can find a contract and find the expiration date, then anybody can." You really also want to work with a vendor that wants to be the...B2B software, it's not the same as our Google app on our phone or texting, but it should operate. It should be that easy to use. It should be walk-up ready. There's one, like how easy is it for a first-time person with no context, no training, no onboarding, can they navigate this? Then two is, can this adapt with us? Because I think a huge thing of what we see in implementation is, as soon as you start, now, the wheels start spinning and it's, "Oh, I actually want to use this in a different way," and so is it flexible to adapt to that or is it too rigid? Those would be the two things I think about.

Melissa: No, that's good. Go ahead.

Gaston: I was just going to add, because I think that's very important what Toby just said. You as an organization, as a procurement professional as well need to understand that that flexibility, and I call it process flexibility, it's a key part of the process. It's hard for organizations to understand that sometimes when you buy software you need to change your processes. You need to adapt to the software because that's easier than try to make the software do what you want. It's not 100 percent the cases, but a lot of times it's easier for everybody, for the software company and for your organization to change a little bit your process to adapt to what's already built in the software, because most likely was built thinking on those kind of processes than go the other way around. The process flexibility, it's probably the most important ingredient on that part.

Melissa: We do have a couple of questions that have come in. You guys ready?

Toby: Mm-hmm.

Gaston: Yeah.

Melissa: Ready? OK. One of the questions that has popped up is, what are your thoughts on how AI is being used now to mitigate risk versus what we couldn't do five years ago? You want to try that one, Toby? You want to take that one first?

Toby: Yeah, sorry. Go ahead... [crosstalk]

Melissa: Talk a little bit more about how AI is being used for risk management.

Toby: Yeah, for sure. When I think risk management for procurement, there's a couple of different ways. Again, going back to this concept of like, not everything has to be solved by AI. Just the fact that your organization is using a contract management system makes your process less risky. There's guardrails in place. Again, the automation is a huge piece of it where it just builds the right contract for the right situation. I think AI, what we're working on or what we're thinking about, and this is very much future kind of where we go, is think of policy changes, think of GDPR or other regulations and policy changes, AI will have the ability that as soon as a policy is out there, is talked about, is new, it can go and immediately scan your thousands of contracts and say, "Which of these now need to be renegotiated? " Which of these I now need to go and take a look at and at negotiation, draft the terms differently," or I immediately need to go rewrite this, or maybe it has nothing to do with the contract, but it's, "Wow, OK, based on these five supplier agreements, I need to now go have a conversation with each supplier about this regulation change and make changes to it." That's one example, but I think that highlights how AI can just understand what's happening on a global scale or out there with regulations and help us understand the contents of a contract and then what to do about that changing world.

Gaston: From my perspective, I think it's exactly that. It's just the fact that you have control and you have your information available and you can visualize what you have and the ability to search through all those mountains of contracts that you have, that mitigates the risk of your company. The fact that you can have access to contract expirations, contract liabilities, contract cancellations and things. How many times companies have contracts that are just evergreen and just extend and extend or clauses that are just renewed every year and nobody knows and you keep paying hundreds of thousands of dollars for those? Just the fact that you can have visualization of that, have all the information together, I think it mitigates the risk of what your company is exposed to right now. I guess at the same time, like Toby was saying, it's also very important to understand that these AI tools are not magic. They work with data and if you don't input your data into the tool, it's not going to do anything for you. If your data is still sitting on the storage facility and not scanned and not converted into electronic, it's not going to happen. The risk mitigation comes from the fact that you're going to have control, you're going to have all your data together, and then AI can do that for you.

Toby: I think just to add on there, there are also a couple of practical things. I talked about AI for negotiation. That will help you de-risk a contract and remove things from the contract using AI. Gaston just talked about obligations, using AI to extract the obligation and make sure that you have that so you're reminded about a renewal or an upcoming invoice or a delivery schedule or anything. I think there are tons of different ways, but to summarize what we're talking about, it's just having a CLM or contracting tool in place that de-risks you. Then there's AI solutions that you can apply AI directly to help. Then in the future, I think AI is going to get better and better at helping you understand the risk throughout your living contracts as the world around it changes.

Melissa: We have a lot of great questions, but the one that's next in queue is, so Gaston, you use the word "magic" when talking about AI and Toby, you just mentioned the word "future." Both of those ties in great with this next question is, where do you expect AI to evolve for the procurement organization over the next 5, 10 years from now? What's your wish list? Where do you want to see this go? I'll take a stab. I'll do first while you guys think about it, so give it a think. I foresee that with the use of the advancement of the technology, the production of the chips, being able to parse data much more quickly, synthesize it, I think we're going to be more kind of what "Star Trek" is, verbally communicating with our computers. Being able to communicate verbally with our contract solution, ask questions, get information back, ask verbally a lot of what-if scenarios and be able to get that predictive component come back and with a much higher level of accuracy. That's where I want to go. [laughs]

Gaston: I completely agree. I like reading articles about AI every single day. That is absolutely what's going to happen. There are a lot of companies that are already testing humanoids, if you will, that have those capabilities. Now they're embedding GenAI on those, robots, if you will. Imagine what GenAI is doing right now just online when you go to ChatGPT, Gemini, whatever you use, and you're using it with the computer. The next step would be to take that out of the computer and put it into something that is going to probably look like a human or something that is going to be interacting with you. Like you said, maybe you're going to have it next sitting next to you and you're going to say, "Hey, you know what, C3PO, we're going to renegotiate the contract with R2D2 and just go find the clauses and write the contract, print it out and put it on my desk." That's probably what's going to happen.

Melissa: I like that.

Gaston: I see tools, there are already tools right now that are actually preparing the negotiations, suggesting what you got to do, and putting everything just for you so you can just sit and do it. I guess all that manual process that you're doing now, which is going looking for the clauses, typing the contract, all that stuff, I think is going to be done pretty soon by this kind of artificial intelligence that is going to... Like I said, to me, in the next 10 years, we're going to, or maybe less, we're going to see this taking out of the online world, or out of the cloud and putting physically next to us so we can start interacting with those things. That's what I think.

Melissa: You ready, Toby, or you want me to give you more time?

Toby: [laughs] No, I'm good. I'll answer the question not as a wish list, but what we're actually working on or thinking about for AI and next steps, which is call them internally AI agents. What we mean by that is, when you kick off a workflow, a contract, the AI is smart enough to understand what you've done on the last 5, 10 versions of them or your last contracts. It knows, "I should probably reach out to security ops to review this contract." It knows that I need to take these clauses out. Today we think of software as, "I have to set up the automation. I have to configure the tool. I have to point it in a direction and I have to tell it what to do." We think there's a world in which AI can kind of anticipate when a contract is needed. On the sales side for instance just knowing in salesforce, "We're reaching the end of conversations here, we should start to get the contract ready," and so AI will jump in. Or again with suppliers knowing that "This is coming up for renewal. Instead of me waiting for a request, the AI is just going to go ahead and start preparing what that potential contract could be." There's a lot of it just learning what we're doing and then taking those actions for us. It's not to remove our teams. It's to just kind of learn and make the, again, de-risk it or make the legal and contracting choices we're making a lot smarter in the future.

Melissa: I'm going to add...Oh, go ahead.

Gaston: I've seen tools that are already built on the commercial side, on the sales side that are already interacting with you with voice capabilities. It's like a person, basically. They're even negotiating with the customer what kind of product you want to buy, what price you're going to pay and they offer you a discount. They say "Take this tool." They take the order for you. They create it, generate it and then they send it to shipping and they send the items to you. Those things are already happening. They exist in the market. You can go buy these things right now. Those agents that Toby was talking about. That's why I was saying, once this translates into the manufacturing world and the procurement world, things are going to change completely because you're going to have access to that. Do the same thing and maybe these tools are going to help you to prepare for a negotiation. You're going to have the conversation with AI and say, "What do I need to do?" It's going to ask you, "Have you considered this? Have you considered that?" Then you're going to have your one-on-one and then develop your negotiation strategy for that particular category. Those are things that are probably going to happen even faster than the others because most of that is already developed.

Melissa: Without data, there is no AI. I think that's one thing that we've all agreed on. Where I think this is going to go in the next two, maybe three years, is we're not going to need for the integration. We'll still be able to connect with the data, but we're going to eventually eliminate the need for a technical guide to build these manual conduits of interfaces between point A and point B because right now what's limiting the value is we don't have access to all the data. We may have access to the contracts, we may have access to what you've mentioned the salesforce and maybe one other system, but there's a whole lot of other systems out there, the materials database and automotive. You've got multiple different systems with all this data that could get pulled together to generate those automated contracts. Where I think we're going is the underlying foundation to support all of what we've talked about, that's going to get a lot easier and our data and systems are going to be able to talk to each other without having a physical person spend weeks and months trying to integrate. Gaston and Toby, as a follow-up to that one, it was originally prefaced at 5, 10 years, but it sounds like you guys are predicting this in what? What's your prediction? Because we're recording it, we record this and we're going to have the prediction and we might come back in two years and say, "Hey, you guys got it right."

[laughs] Gaston: I would say three to five years.

Toby: I'm a little more optimistic. I think with the rate of where AI is going in one to two years we'll see some insane advancements. I've been working with software and AI over 10 years and the last year and a half, two years have been insanely faster paced than the last eight. I think we're in a kind of a new world and yeah, one to two is my prediction.

Melissa: Unfortunately, we are out of time. I know we had a lot of other questions. We can promise you that this team here will reach out to you separately so that we can address your questions. As we wrap up, Gaston, Toby, any other last thought before we depart?

Gaston: I guess in my end, just my recommendation is don't be afraid to ask questions. When you meet with suppliers on this category, don't be afraid to ask questions and don't get too hung up on the AI conversation. Get more into what you need and how this tool can resolve your issues. I think that's the most important conversation.

Toby: Plus one to all of that. The only thing I'll add is test drive. Get out there, test things, try things, explore AI. It shouldn't cost money to always to try things. Push vendors to let you explore those before signing them.

Melissa: That's important because we heard it here today guys. You guys are the ones that are in the trenches and that's why you're here. If you're saying that it's not going to cost you money to test drive and you shouldn't be getting forced to do X or Y, absolutely. We need to take that to heart. Gaston, Toby, you guys were great. Thank you so much for your time. Truly appreciate it.

Gaston: Thank you.

Toby: Thank you.

Melissa: Bye.

Gaston: Bye.