What many legal teams don’t realize is that looking for a “redlining tool” inherently limits the value they can get from the vast quantity of information hidden within each and every contract they work on. More than just streamlining contract negotiations, the right contract management solution can transform how you negotiate in a way that leads to better business outcomes like hard cost savings and better customer and vendor relationships.
The limitations of traditional redlining tools
While traditional redlining tools do provide efficiency gains for your legal team by automating the comparison of text changes between contract versions, they barely scratch the surface of what’s possible. These tools focus on facilitating faster revisions and approvals, but they often neglect the broader implications and strategic advantages that your team can leverage from comprehensive contract analysis.
For instance, redlining tools don’t usually account for the context or the business intelligence embedded in historical data even though these elements are critical for making informed decisions during negotiations.
Furthermore, standard redlining solutions are generally standalone, lacking integration with other business processes and systems. This means they don’t contribute to or benefit from the centralized data insights you could be using to inform broader business strategies. This siloed approach means each contract negotiation starts from a relatively blank slate, absent of the learnings and precedents that could have been gleaned from past agreements.
The result is that many legal teams who go out in search of a redlining tool hit one of two major roadblocks:
- It’s hard to make a business case for purchasing your redlining software because “legal efficiency” isn’t a good enough argument to secure budget, especially in today’s lean times.
- After getting a redlining tool, the legal team finds it’s still spending way too much time combing through past versions of contracts, searching for context and clues to inform today’s negotiations. There’s no connection between the contract you’re working on and information you could extract from similar contracts in your company’s history.
The advantages of a comprehensive approach that includes redlining
A comprehensive Contract Lifecycle Management (CLM) system, like Pramata, transcends the limitations of traditional redlining tools by integrating redlining capabilities with a robust array of other functionalities that enhance the entire contract management process. This integrated approach not only refines the negotiation process but also leverages the full potential of every contract to support broader business objectives. Here’s how:
A clean, organized, digital contract repository
This is at the heart of a comprehensive CLM, but most solutions require you and your team to do the hard work of migrating, deduplicating, QAing and much more. Pramata’s different! It does all the heavy lifting for you – and if that sounds too good to be true, check out my last blog where I explain how we do it.
Now, as for why starting with a clean, organized, digital and searchable contract repository is important when all you really want to do is redline:
- This repository becomes a single source of truth for all contractual information, which drastically reduces how much time you spend searching back for contracts and related documents you want to reference in today’s negotiations.
- It ensures that all negotiations are informed by the complete historical context, enabling legal teams to quickly reference past terms, agreements and negotiations and avoid reinventing the wheel, particularly when it comes to nonstandard contract terms.
- This continuity is vital for maintaining consistency and learning from previous engagements. You can even use it to identify contracts across your entire organization that need your attention based on insights from the contract you’re working on.
Enhanced analytical capabilities with contract AI
Unlike standalone redlining tools, a CLM that starts with – and takes advantage of – clean, organized contracts within your repository brings even more capabilities to your redlining practices. This includes powerful contract AI that can extract and analyze data across the entire contract portfolio. For example, you can instantly compare any contract to your company’s contract playbook to alert you immediately to non-standard terms you may need to dig into more deeply.
Having these capabilities means legal teams can identify trends, pinpoint common negotiation sticking points and understand the broader implications of certain contract terms. Contract AI can also predict potential contract risks and opportunities, offering strategic insights that go beyond just making edits to a contract.
Improved collaboration and workflow automation
A redlining tool might help you track changes to a contract but it won’t facilitate better collaboration between your company and your customer and vendor partners or internal business units. When you combine your redlining needs with a larger CLM however, you can automate workflows and approvals to ensure contracts move smoothly from one stage to the next without unnecessary delays. Automated reminders and notifications keep all relevant parties informed and accountable, reducing common bottlenecks in the contract approval process.
Integration with other business systems
Working within a standalone redlining tool keeps your contract data siloed away where insights and analysis take manual effort to uncover. A CLM like Pramata integrates seamlessly with other business systems which allows other departments to gain insights from contracts that could influence business strategies, financial planning, and operational decisions.
Risk management and compliance
With a comprehensive CLM, organizations can better manage legal and regulatory risks. The system can automatically check contracts against compliance standards and flag potential issues before they become problematic. This proactive approach to compliance not only saves time but also protects the organization against legal penalties and reputational damage.
A strategic asset beyond redlining
Ultimately, a comprehensive CLM is a strategic asset that you won’t get with a traditional redlining tool. It empowers legal teams to contribute significantly to the business’s larger goals and priorities by solving large business problems that span far beyond the legal team’s purview. When you’ve got the ability to show real value across the business, you’re more likely to get broader buy-in (and budget!) for a system that comes with the functions you need to make you and your legal team’s jobs easier.
3 real-life redlining use cases Pramata makes possible
If all this sounds good but you’re still really in need of something to make redlining a less cumbersome part of your job, here are three ways Pramata helps with that thanks to its foundation of your clean, organized, digital contract repository.
Can other redlining software do this?
1. Risk scoring with historical context
When you’re redlining a contract within Pramata, you’ll see a risk score using a red, yellow, or green colored indicator.
- Green means the current contract aligns with your company’s standards (according to your playbook, which Pramata can create based on an analysis of every contract in your system) and little-to-no compliance risk.
- Yellow means there are some nonstandard clauses that someone may need to pay attention to, or which could open up the company to risk. These could include termination clauses or publicity clauses that don’t meet your company’s standards.
- Red indicates a higher level of risk based on the contract’s comparison to what your company considers standard and best-practices.
Most importantly, though, these risk levels aren’t displayed in a vacuum. Pramata connects the nonstandard terms it identifies with historical context. For example, if there was a reason your company agreed to a particular term in the past. Having this information immediately accessible while redlining can save hours of research and keep negotiations moving forward instead of stalling.
2. Referencing previously agreed upon terms
When Pramata flags a contract term as yellow or red, it can also show you where and why this deviation from a standard term was agreed to with the same counterparty. This feature saves time and reduces friction in negotiations by reminding the legal team of fallback positions or special concessions that were acceptable in past dealings. This context is crucial, especially in maintaining consistency and harmony in ongoing business relationships.
3. Locating other non-standard or risky contracts to target for renegotiation
The benefit of using a comprehensive system like Pramata for your redlining needs goes beyond what’s right in front of you during the redlining process for a single contract. Users can take advantage of Pramata’s sophisticated reporting functionality to run reports identifying where certain non-standard terms have been agreed upon across all contracts in the repository.
Identifying all contracts with a non-standard price escalator term, or non-standard termination clause, for example, can alert the business to terms that put revenue at risk before they become emergent. This capability allows people across the business (not just in legal) to make strategic decisions about whether to accept, negotiate, or standardize certain terms based on their prevalence and potential consequences.
Think outside of the redline box and get better results
As you can see by now, a software that helps you with redlining only lacks the ability to do so much more service to your business. When you think outside the “redline” box and move from a limited focus on redlining to a more holistic contract lifecycle management approach, legal teams can unlock a deeper level of strategic value from their contract portfolios.
A comprehensive CLM does more than just streamline negotiations: It provides a structured repository for all contract-related data, offers analytical insights into how the business functions via its contracts and ensures compliance with both internal standards and external regulations. This means your CLM can deliver true business impacts and real value far beyond just “making the legal team more efficient.”
A CLM that does that (like Pramata!) is truly a win-win for the legal team and the business, which is also a key factor in making the case for any software.
To learn more about how Pramata helps companies extract real insights and value from their contract data without all the legwork normally associated with implementing a CLM, contact us for a demo today.
