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Gartner: Half of procurement contract management will be AI-enabled by 2027

AI Enabled Contract Management

By 2027, 50 percent of procurement teams will support supplier contract negotiations through the use of Artificial Intelligence (AI)-enabled contract risk analysis and editing tools says Gartner, with organisations urged to take action now or risk being at a disadvantage over the next three to five years.

Exploring the impact of GenAI on procurement and how it is fundamentally changing the way that organisations work, analysts and supply chain leaders recently gathered at Gartner’s Supply Chain Symposium/Xpo in Orlando to discuss the importance of prioritising use cases.

Attendees heard that a Gartner survey of 101 procurement leaders, conducted in November 2023, revealed that sourcing and contract life cycle management is expected to be the area where GenAI can be most impactful over the course of the next 12 months.

Interest in AI for procurement has increased dramatically and is expected to see a rise in use, said Kaitlynn Sommers, senior director analyst, Gartner Supply Chain Practice as she addressed the audience.

“In our survey, 58 percent of procurement leaders said they already are implementing or plan to implement AI in the next 12 months,” she said.

“AI-enabled risk and editing solutions will help procurement expedite business decision making, decreasing time spent on the contracting process and increasing capacity for additional tasks.”

The technological research and consulting firm said GenAI has a number of benefits for procurement teams, helping them to take on more ownership in the supplier contract negotiation process, due to the use of automated editing tools that leverage legal department guidance and previously agreed-upon terms. 

It also suggests that GenAI can add efficiency to the contract negotiation process by highlighting potential risks and offering risk reduction options.

“GenAI promises to empower procurement professionals to make informed, data-driven decisions that yield tangible results faster,” continued Sommers.

“Our research reveals that procurement leadership anticipates a 21.7 percent increase in productivity from the use of GenAI in the next 12 to 18 months. Both procurement professionals and solutions providers should be taking action now or risk being at a disadvantage over the next three to five years.”

Gartner suggests a list of recommendations for procurement organisations who are looking to begin leveraging GenAI for contract management, including:

  • Move beyond a digital repository of contracts to a contract lifecycle management solution that supports authoring and negotiation of contracts
  • Start quantifying risk in contract clauses by using current contract templates to understand the main terms negotiated in various contract types
  • Partner with legal on defining risk across terms that are not business-led and outline the roles and responsibilities of both groups with a more digitally enabled future-state negotiation process
  • Evaluate current partners and explore new vendors to identify those that will support the organisation’s ambition. These use cases are distinct and may not be offered by a single vendor

Find out more here.

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