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How big is your negotiation data? and is your machine learning?

Jan 28, 2016 9:51:22 PM

What big data is there in contract management and how may it be leveraged?

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What exactly is big data?

“Big data” is an evolving term.  It generally refers to data that is so large or complex that it cannot be processed by any traditional means.  New technology allows for the analysis of this big data and this is changing the way business is being done.  This is because the information generated by the analysis is leading to greater operational efficiency, cost reduction and reduced risk.

So what big negotiation data do you have?

In the world of contract management big data could include all of the following:

Data in relation to pricing/cost of services

New technology analyzing pricing not allows for analysis of the cost of services procured in your own business but also prices paid by other companies in your industry.  In the future there may be less discrepancy between prices charged for services rendered and time spent negotiating on price as the prices charged by various vendors becomes more transparent.

Data in relation to time spent on negotiations

New technology effectively measures time spent on negotiations, including individual contract clauses.  This enables troublesome clauses to be identified with more ease and clarity and negotiators to more easily do away with them.  In the long term this may lead to greater standardization in contractual drafting.  

The different negotiation styles of those engaged in a negotiation also affects how much time is spent on a negotiation.   It will be important to keep in mind who the negotiators were when considering the time spent.  This will allow the efficiency of the negotiators to also be assessed.  Why do they take so long?  Are they taking so long for strategic reasons?  Can they justify taking so long by securing a higher price? Should the negotiator be engaged again according to the results?

The time a negotiation takes may also be partially due to the company with whom you are negotiating.  Some companies may deliberately take a long time in making any concessions as they believe acting in this manner will obtain them a better deal.  This must also be taken into account when analyzing negotiating time data.  

Data about the time other people have spent negotiating similar deals with similar people may also be accessed through new technology.  This information would allow you to assess where you are on the spectrum and to consider whether you should consider altering some of your negotiating and/or contract management strategies.

Data in relation to the quality of the services

Were all the tasks due to be completed under the contract completed on time?  Was the work performed to a satisfactory standard?  Did any litigation arise as a result of confusion under one of the terms of the contract?  These questions all pertain to the quality of the contract and work performed in accordance with it.  

Large samples of data could be analyzed for trends using new technology - by leveraging advancements in Natural Language Processing and Machine Learning.  This may lead to underlying problems in the contracting process to be identified and rectified.  Regarding contract negotiation analysis, the system could determine for the legal department that a particular clause in a contract is negotiated 90% of the time leading to a 50% increase in the contracting process -or- that a particular negotiator always argues for a language change and we as an organization say no each time, and he agrees. How about applying data science to vendor performance?  Well, the system could automatically inform the procurement department when a certain vendor, such as for construction, is consistently underperforming its contract commitments - revealing that a materials supplier is repeatedly late on delivery.  

Final Thoughts

All of the above factors could have previously been manually considered and assessed. However, this would have been a laborious and extremely time consuming process and more than likely error-prone.  For this reason, only small sample size of contracts may have been analyzed for trends in the past.  Technology now is allowing us to analyze much larger data samples, and of not just the transactional data, but also behaviors, with more ease and efficiency.  This is allowing for far more accuracy and transparency, and in turn, this increased efficiency, cost reduction and reduced risk will improve business outcomes.

What are your thoughts?  How is big data analysis changing the way business is being done? and is your machine learning how your deals are getting done?

ContractRoom, home of #HappyContracting – making the world more agreeable one happy contract at a time. Negotiate less, Agree More. 

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Katie Cook

Written by Katie Cook

Katie Cook is the Director of Marketing, Communications and Legal Standards at ContractRoom. Originally from the east coast of Australia, she has a background as an Attorney having practiced in both public and private practice in Brisbane and Melbourne. While working as an Attorney Katie completed studies in journalism and is now combining her legal and writing skill sets in her role at ContractRoom.

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