Thursday, January 28, 2010

CT TyMetrix Identifies Key Legal Industry Trends for 2010

Check out our press release on the top trends impacting the legal industry in 2010. Link below.

Benchmark data will help firms move to new value-based models

My recent post on “Web Tools for Law Firms” reminds me of another piece that I wrote earlier this year but never posted. Whereas the creation of web tools for law firms might be only marginally beneficial to corporate law departments, I feel confident that the new model articulated by O'Melveny and Myers will definitely be. Read on and comment.

I just read a fascinating post in Above the Law called
The New Biglaw Business Model, According to O’Melveny & Myers (, which was subsequently cited in the ABA Journal (

In it, bloggers David Lat and Elie Mystal discuss a “leaked” strategy memo from the management of OMM. Whether it was truly leaked or, as some commentators have observed, released as a PR move, is beside the point. The memo is interesting in that it perfectly illustrates the Catch-22 in which large law firms find themselves. OMM management acknowledges that the market for legal services delivered in the traditional model is shrinking. As the memo says, "In the very recent past, our business model, as a whole, has yielded disappointing financial and practice growth results." The plan notes that O'Melveny's litigation model, "which depended heavily on high charge hours levels by associates, counsel and partners to offset the impact of discounted rates and increased write-offs of expenses and time, has been under pressure for at least three years" -- i.e., well before the Great Recession began. In addition, OMM management acknowledge that alternative models are emergent. For example, the decomposition of the full-service firm is being driven outsourcing. "Document review and production have been outsourced altogether or client-directed to contract attorneys," the memo states, "thus eliminating much of the work formerly assigned to junior associates." These difficulties won't go away with the recession: "[O]ur litigation clients are looking for rate and fee reductions, and we expect that mindset will continue into the next good economy and beyond."

To their great credit, OMM management appears to be charting a genuinely new course for the firm, one that seems to honor the long time pleas of clients to pursue alternatives to the billable hour. They even take the courageous step of entertaining new organizational models required to profitably pursue these value based delivery models including a reversal of the traditional pyramid and proactive outsourcing of low value work.

The one question that I am left with in this memo, or any similarly aspirational statement of intent is this, “How can OMM effect this type of fundamental transformation of its model unless its knows, with a high degree of certainty, the costs associated with the matters it is handling?”. Obviously, they can’t rely on their billable information to date. It is that information that is at the root of their client’s dissatisfaction. Rather, they need benchmark information about what the same or similar cases cost when handled in the manner to which they aspire. I would submit that the only way the OMM, or any Biglaw firm, will be able execute on this type of model shift is to have, and be able to rely on, benchmark financial data about the costs and outcomes of similar cases. In addition, there is question of execution. As we all know, it is no small feat to change the fundamental structure of an institution like OMM. And for as hard as that is, changing the culture required to make this new vision work will be exponentially harder.

Tuesday, January 12, 2010

Wouldn't it be better if law firms were investing in "Web Tools that Help Clients?"

Last week, The Wall Street Journal ran an article entitled, "Using Web Tools to Control Legal Bills." The gist was that large law firms are finally embracing the project-budget and cost-tracking mechanisms that have long been used by their clients.

Frankly, my reaction to this piece is mixed.

On a positive note, the article cites several examples of how law firm innovation has led to new and improved means of serving corporate clients both quantitatively and qualitatively. For example, John Alber, partner at Bryan Cave LLP, created an electronic database for lawyers to efficiently and cost-effectively handle radio-spectrum licensing transactions and a Web-based service to help clients better understand international trade agreement laws. It is this type of expertise that most large law firms are equipped to provide. By creating self-service and virtual legal practice tools that can be easily consumed by both client and firm lawyers, they leverage their domain expertise in a way that scales efficiently across numerous clients.

Another takeaway from the article is that the large law firms are clearly trying to change. Creating meaningful case plans, designing and managing to time and staff budgets are all steps in the right direction -- even if they are a full decade or two behind most law departments' efforts in this regard. Unfortunately, for practical and structural reasons that I discuss below, I am afraid these undertakings, even the noble ones, are unlikely to succeed.

One practical reason that many of these initiatives will fail is that the vast majority are opaque to the client. Most of the tools described in the article are for the firm, not the client. Even when firms do invest in extranets, it is completely unrealistic to expect that law department lawyers who are handling scores or hundreds of matters will endeavor to access cases or financial information on a case-by-case basis. The single-firm extranet model ignores the fact that corporate counsel retain a diversity of firms for different matters, and that many large cases and transactions are handled by multiple firms.

So, if the law firms' intent is well-meaning but the model is flawed, what is the alternative?

Quite simply, law firms and their lawyers should ask to participate directly in their clients' matter-centric management platforms. These platforms, including TyMetrix 360, leverage the Saas (Software as a Service) model to provide unified matter, document and financial management to both in-house and outside counsel.

By using clients' chosen platforms, firms can streamline communications and create a single artifact of all the activities and financials on a given matter. At a minimum, the matter will then have a common plan, budget, progress and resolution. Advanced systems will also enable configurable workflows, embedded business intelligence, document libraries, and the ability to create and track alternatives to the billable hour.

Moreover, by collaborating in a corporation's chosen platform, firms give law departments a gift -- the ability to aggregate, index and analyze matter and financial information across the entire enterprise. It is only by capturing all corporate data in a single data repository that law department leadership can accurately assess the legal and financial risks to the corporation. Unfortunately, none of these benefits can be attained with individual firm extranets.

Accordingly, as much as I would like to, I can't celebrate firms for continuing to expend scarce resources on tools that are more psychological salve than client solution. Rather, I urge firms to consider engaging clients in ways that most benefit the client. It is in this way that firms can truly demonstrate their willingness and aptitude with respect to the financial and budgetary discipline expected of their clients -- and corporate law departments can derive the benefits of aggregated data to help drive results.