Summary of the 2025 State of Contracting Report by Icertis

March 20, 2025

Introduction

Icertis’ report on ‘The 2025 State of Contracting’ highlights three important trends in contract management which reveals a clear evolution in how businesses approach contract management. The report further highlights a shift from viewing contracts primarily as risk management tools to recognizing them as strategic assets that can drive business performance.

We agree with Icertis in accepting that 2025 is shaping up to be a transformative year for businesses. Global markets are evolving, AI is revolutionizing how companies operate, and organizations are rethinking how they manage relationships with suppliers, customers, and partners.

In its “2025 State of Contracting” report, Icertis delivers 30+ data points on how organizations are responding to the trends by leveraging contracts to improve profitability, risk management, and operational efficiency in the year ahead.

"2025 stands to be a monumental year for businesses. A new administration in Washington is enacting sweeping changes to how the world trades goods and does business; market volatility is putting investors on edge; and in the middle of it all, AI continues to advance at breakneck speed, opening up almost every business and business process to enormous disruption and opportunity."

This Icertis 2025 report is based upon the findings from diverse sources. A majority of Icertis customers opted-in to allow their anonymized contract metadata to be analyzed by Icertis data scientists for research and benchmarking purposes for the outcome of this report. To further supplement this, Icertis have included a few highlights from their data set based on the +10M contracts they manage.

3 Trends of Contracting

The report highlights three important trends of contracting:

Trend 1: Businesses are approaching relationships from a place of risk, not opportunity

The report highlights a significant disconnect between contract negotiation practices and their perceived value. Despite executives recognizing the importance of contracts, current negotiation processes often fail to capture their full potential.

Key points:

• 90% of CEOs believe their companies are leaving money on the table during contract negotiations.
• 82% of CFOs agree that contract negotiations are not producing the value they should.
• The most negotiated contract term, "Limitation of Liability," is ranked only 9th in importance to the business.
• There's a growing focus on outcomes, but negotiation agendas have not kept pace with this shift.

Outcome? - This trend reveals a critical need for businesses to realign their contract negotiation strategies with their overall business objectives. The focus on risk mitigation, while important, is overshadowing the potential for contracts to drive business performance and value creation.

Trend 2: Business leaders are shifting focus to contract performance

There's a growing recognition of contracts as tools for business performance, not just risk management. This shift is evident in the evolving role of legal operations and increased involvement of other departments in contract processes.

Key points:

• 76% of legal operations professionals have influence on post-execution contract management technology.
• Nearly 40% of respondents evaluate contract management programs based on business-oriented metrics like revenue generation and cost savings.
• One-third of respondents report growing CFO involvement in contract language development.
• Legal teams are gaining more strategic importance by leveraging contract data for business insights.

Outcome? - This trend indicates a positive shift towards viewing contracts as strategic assets. It suggests that organizations are beginning to unlock the full potential of their contracts by focusing on performance metrics and involving a broader range of stakeholders in the contract management process.

Trend 3: The arrival of AI

AI, particularly generative AI, is rapidly transforming contract management processes. Its adoption is accelerating across various aspects of contract lifecycle management, from creation to analysis and performance tracking.

Key points:

• 42% of organizations are currently implementing AI in their contracting process, up from 30% a year ago.
• 37% of legal ops professionals sometimes or always use AI for pre-execution contract management, up from 19% the previous year.
• 92% of procurement professionals are confident or somewhat confident they'll be able to effectively use AI for process automation.
• 76% of contracting leaders say "Contract value realization" is their top aspiration for AI implementation.

Outcome? - The widespread adoption of AI in contract management is set to revolutionize how organizations handle their contractual relationships. AI's ability to automate tasks, provide insights, and monitor contract performance promises to unlock significant value and efficiency gains. However, concerns about security, accuracy, and ROI need to be addressed for full-scale implementation.

What's next for businesses?

The Icertis report reveals a clear evolution in how businesses approach contract management. There's a shift from viewing contracts primarily as risk management tools to recognizing them as strategic assets that can drive business performance. This change is being accelerated by the rapid adoption of AI technologies, which are enabling more efficient and effective contract management processes.

As businesses continue to adapt to these trends, we can expect to see:

1. More strategic approaches to contract negotiation and management, focusing on value creation rather than just risk mitigation.
2. Increased involvement of various departments, particularly finance, in contract processes.
3. Widespread adoption of AI-powered contract management solutions, leading to more efficient processes and better realization of contract value.
4. A growing emphasis on post-execution contract management and performance tracking.

These changes promise to transform contracts from administrative burdens into powerful tools for driving business growth and efficiency. However, organizations will need to carefully navigate challenges related to AI implementation, data security, and change management to fully realize these benefits.

Industry-Specific Insights

The report highlights the impact of the trends on the following six industries:

1) Banking & Insurance:

• Rapid evolution due to geopolitical shifts; increased focus on third-party risks and compliance.
• Only 33% adoption rate of AI in contracting—below cross-industry average (42%).
• Urgent need for banks and insurers to adopt AI-driven CLM solutions to manage risks effectively.

2) Government & Public Sector:

• Federal procurement modernization emphasizes efficiency, transparency, speed.
• Over 40% of legal departments already using AI for contract management.
• Government contractors must adopt AI-enabled CLM tools for compliance oversight and proactive risk management.

3) Healthcare & Life Sciences:

• Increased M&A activity requires robust due diligence through AI-driven contract analysis.
• Payers adopting value-based structures need advanced CLM solutions for accurate tracking and compliance monitoring.
• Healthcare organizations must embrace AI CLM solutions to manage complexity efficiently.

4) Industrial Manufacturing & Automotive:

• High adoption rate anticipated—90% procurement leaders plan to adopt AI agents this year.
• Contracts becoming strategic differentiators through automated negotiation and performance tracking.
• Manufacturers leveraging AI-enabled CLM will achieve significant competitive advantages through cost savings and optimized operations.

5) Retail & Wholesale:

• Revenue leakage (2%-4%) due to manual contract management highlights urgent need for automation.
• 75% of contract managers prioritize "contract value realization" through AI systems.
• Retailers must adopt AI-driven CLM solutions to enhance profitability by minimizing revenue leakage.

6) Technology, Media & Telecom (TMT):

• Highest adoption rates—over 80% implementing AI-powered contracting solutions.
• Contracts increasingly serve as strategic tools aligning operational execution with high-level business strategies.
• TMT companies not yet adopting AI are at risk of falling behind competitively.

Recommendations for Stakeholders

• CLM Services & Tool Providers: Invest heavily in developing advanced AI capabilities; emphasize analytics-driven insights and proactive risk mitigation.
• Corporate Legal Departments & Small Legal Teams: Shift focus from risk-only approaches toward balanced strategies emphasizing performance; implement AI-enabled CLM tools.
• CEOs & CFOs: Encourage alignment between contracting strategies and broader corporate goals; leverage AI analytics for strategic decision-making.
• Chief Legal Officers (CLOs): Champion adoption of integrated CLM platforms utilizing AI; position contracts as strategic assets driving measurable business outcomes.

In my next edition, I'll discuss about the "Traditional CLM vs AI-enabled CLM - The Right Fit For Your Business".

Questions? I'm always eager to discuss. Let's get in touch!

Happy Reading!

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