“Big Data” is a term that is capturing a lot of attention. Almost every industry is involved with some type of transaction that leads to mass amounts of data. These large data sets are often referred to as Big Data because they are difficult to optimize: How do you capture, store or analyze the information in a meaningful way?
Many industries see the value of analyzing this data as a way to spot trends. For example, the financial industry was an early adopter of Big Data, collecting and analyzing credit card data to better understand customer spending habits. With this information, businesses can build marketing campaigns and offer pricing plans to retain existing customers and attract like-minded customers. The result goes straight to the bottom line.
This same approach can be applied to the legal industry. Legal departments are expected to operate with an eye toward cost-efficiency, as CEOs are putting more pressure on in-house counsel to demonstrate business-centric results. In turn, law firms are being asked to provide greater clarity around pricing and staffing decisions.
Together, both law firms and legal departments need information to help identify a balanced solution. Understanding the value from the mass amounts of data generated as a by-product of legal transactions can lead to greater transparency in managing the business of law.
What is the legal industry’s Big Data?
Most discussions about the legal industry’s Big Data naturally are focused on e-discovery. But technology occupies many facets of legal activity. From trademark search and filing to service of process, the legal business is full of transactional activity. Harnessed in a responsible way and analyzed intelligently, service of process records can help legal professionals identify litigation trends; trademark filings can support intellectual property practitioners’ efforts to gain competitive advantage; and commercial lending activity can help M&A counsel better predict risk.
Electronic legal billing and matter management programs also have become pervasive in corporate law departments. The first online legal electronic billing program was launched in 1997. By 2015, at least half of corporate law departments plan to use electronic billing, according to Hyperion Research.
The electronic invoice format leaves mass amounts of data to capture and store. With analysis, this data can provide insights into legal spend management and legal performance management. The resulting information leaves corporate law departments in a better position to evaluate cost and make improved decisions on resource allocation through:
- Cost-effectiveness: Data analysis allows you to create benchmarks from which to negotiate rates with law firms and predict costs for future matters
- Efficiency: Data insights also help identify for which matters to outsource or create alternative fee arrangements
- Engagement: Performance management insights allow an organization to identify the best people or location of a law firm to assign to a matter
For law firms, analytical insights provide a clear understanding of their competitive advantage and offer valuable insights into what law departments are willing to pay, before negotiating rates.
Improve performance and drive intelligence
There are a series of questions to consider before embarking on a legal spend and performance analytics program:
- Does your department currently use a singular electronic invoicing system with all its external counsel? If not, consider how moving your firms into a single platform can increase efficiencies and improve your understanding of law firm management.
- Have you defined what type of insights and benchmarks you want to understand from legal invoices?
- Is there a significant need to decrease your legal spend? Do you know how the budgets for each law firm or matters differ?
- Do you know what the national or regional averages are for different matters?
Such non-proprietary information can help law departments better understand where legal spend should be.
Setting up electronic invoice platforms and establishing key metrics to analyze performance can result in significant savings. The savings do not necessarily mean eliminating the deep resources of certain outside counsel or increasing inside counsel workload. Sometimes savings can be realized by retaining a current law firm but moving less expert-domain matters to a secondary office.
In our next part of the series, we will illustrate real examples of how some corporate law departments have used big data to realize cost saving and demonstrate efficiency. We will then translate those examples into opportunities any type of law department can adopt.
Embracing the opportunities that lie within the legal industry’s Big Data is a journey worth taking. In the end, bringing transparency to legal spend and performance behaviors leads to efficiency which all stakeholders, inside or outside counsel, will benefit from.