I’ve been involved in thousands of contract negotiations throughout my career – first as a consultant and then as leader on a procurement team. I’ve seen many negotiations struggle under the weight of manual labor, inaccessibility to global benchmarks, and human error. I’ve seen consultants rack up hundreds of thousands of dollars in bills, sometimes without finding much in the way of savings.
The reality is that almost every contract shares things in common with previous ones, and companies do themselves a disservice when they think a consultant – even with years of experience – is the best arbiter of whether a deal is fair or not.
And the procurement department is often stretched beyond its means and doesn’t have all relevant information on hand to know which levers and leverage they possess to get a better deal.
This perfect storm of inefficiency and knowledge gaps has met the perfect technology – AI, which is the ultimate game changer.
Right now, there’s an arms race between companies that look to use AI in key areas and those that don’t. Nowhere is that gap larger than in contract negotiations, where one side depends on spreadsheets and calculations done by humans and the other side relies on AI that can do everything quicker while ensuring all information is considered.
Before discussing what AI and automation does well, I first want to tackle what I believe is not a good use. I don’t believe AI is anywhere near ready to do the actual contract negotiation without human intervention, especially for large dollar contracts.
Bots talking to bots may someday be a reality, though I doubt it. Certainly, trusting a bot to make a contractually binding decision can lead to some real problems – like when a customer tricked an auto dealer to sell him a car for $1 or when Anthropic tried to run an employee store using its Claude LLM. The latter hallucinated that it was a real person and was often tricked by employees to give away items for free or to provide unapproved discounts. It is clear that high profile deals are too important to risk a bad actor tricking a buyer or supplier with some malicious code injection.
With that out of the way, here’s what is really exciting about how AI can revolutionize contract negotiation and management.
Supplier Due Diligence: Before a contract ever reaches your desk, you should have conducted due diligence on several providers in the marketplace. In the past, companies often assigned the task of research to an associate or another costly consultant. But human error could lead to poor information capture or incorrect opinions of which information they needed to collect.
First of all, AI can easily create the list of companies that should be on your radar screen. Just prompting a public LLM which organizations are competitors to the vendor you are considering – to ensure you are casting a wide net. Then you can ask the AI for key information like finances, market disruptors, and market insights like economic risks and industry growth trends.
Automated Contract Analysis and Scoring: Once you’ve decided on which company or companies you want to engage, you’ll soon receive a contract. You can use AI tools to compare it to similar contracts – even if not in the same industry – to see how favorable or unfavorable it is.
AI can scan contractual documents, look for negotiation levers and assign a score, so the procurement team can immediately understand how much they can improve. Manual spreadsheet review disappears, and automated AI intelligence takes over.
Risk Assumptions: Contracts contain risks – such as late payment penalties, insurance gaps, data storage concerns, and many other potential liabilities. You can use AI tools to assess specific risks and assign potential costs related to them, create opportunities to renegotiate terms.
Specific Negotiation Strategies and Leverage Assessment: Understanding where a contract can improve is one half of the battle. Next, you need to know if you have any leverage to convince the service provider to accede to your requests. AI can also provide a detailed negotiation strategy to help you understand the amount of leverage you have and which cost savings are possible.
Helping With Negotiations: Organizations can use tools like Gen AI to gameplan negotiations, ask where there are gaps in their arguments and prepare sample responses from the vendor to whom they are speaking. That first conversation is too important to leave to chance. While the above tools can automate a lot of what humans previous did, the reality is that an employee will still have to get on a phone or meet in person to negotiate a better deal with a vendor
AI is a contract negotiation superpower
Many companies are confronting several financial challenges such as inflation and uncertainty about the health of the economy. They also are under attack by startups and AI use cases that can imperil their USPs. You cannot afford to leave any money on the table, especially not with third-party suppliers that are inclined to charge more money than what their services or solutions might be worth. Using AI to make smarter contractual decisions is one of the best ways companies can embrace this emerging technology while actually driving true and impactful cost savings.
Nithin Mummaneni, CEO and Founder, Infinity Loop
Nithin is the founder and CEO of Infinity Loop, an AI-powered contract intelligence platform that automatically identifies savings opportunities in any third-party contract and equips teams with expert negotiation strategies to unlock their full value. Companies using Infinity Loop typically achieve 10–15% cost savings by eliminating overspending and securing stronger vendor terms. Before founding Infinity Loop, Nithin held leadership roles in procurement and program management, where he led an AI initiative that identified inefficiencies across departments and automated them through software solutions. Earlier in his career, he worked extensively in management consulting, helping companies across industries optimize operations and reduce costs, and in M&A and corporate development, advising businesses throughout the U.S. and Canada.
