Reduce Legal Expense or Value Based Billing which camp do you sit in?

Earlier this week I had the opportunity to attend the Corporate Counsel’s Controlling Legal Cost Seminar. There were a number of fantastic presentations, John Weber (TyMetrix, General Manager) and Steven Williams (Managing Director of General Counsel roundtable) presented the findings of the Real Rate Report. For me this is always interesting, but I’ve seen it before and done the presentation myself. What knocked my socks off was Amy Schulman’s (Pfizer’s GC) and Lisa Damon’s (Managing Partner, Seyfarth Shaw) presentations.

Both set the tone for what Value Based Billing should really be all about. As Amy put it (I’m paraphrasing), in the first instance it cannot be about saving money. You need to focus on how to truly drive value (For her this was about deepening the relationship and creating predictability in their budgets). If you successfully do that you’ll get the greatest bang for your buck and ultimately will save money and get better outcomes.

Lisa did a great job of getting the audience involved and identifies ways that the industry itself can start to move more in the direction of Value Based Fees. Many folks agreed TRUST was the big hurdle and a requirement to making Value Based Billing a success. There was also agreement that clients need to get comfortable with the fact that when done right Value Based Billing is a win-win for law firms and clients. There will be situations where the law firm makes more on a deal because they efficiently and effectively managed it (which is what we are all driving for after all).

Another comment that I found very insightful was from Cindy Westervelt of Staples (who joined Lisa during her presentation). Cindy noted that as Staples began their transformation into more value based arrangements a change in mindset was required for both internal and external attorneys. One example she cited was that everyone wanted to do A+ work all the time, yet not all matters require A+ work (and the associated costs that go with an A+ effort). “Sometime it is okay to do just enough” Cindy commented. By getting everyone on the same page and working together on identifying the A+ and the NOT A+ matters they created a positive environment for all that was a win-win for both Staples and the firms.

In reflecting on this seminar and a number of other conferences and meetings I’ve participated in during 2010, I see two camps forming. One camp is highly focused on saving money through auditing of bills, modifying rate agreements and other tactics (including the establishment of AFA arrangements), while another seems focused on driving to Value Based Billing with a strategy not so much about reducing legal expense but about getting the best value for each dollar spent. In my experience both strategies can work, but you need to decide what camp you sit in. Those trying to straddle the fence may find they’re sending conflicting messages and ultimately may not achieve the results they expect.

Technology good...Knowing what to do with your data...Priceless

It may seem odd to give a shout out to a competitor, but my hat is off to Jim Tallman, CEO of Datacert. Tallman joined the company a couple years back and has done some things that his predecessors failed to do. Way back in early 2003 there was a clear shift in our market, clients were demanding a single, integrated solution for matter management and e-billing. Their budgets no longer could cover buying and supporting both systems separately nor did people want to deal with the challenges of integrating the two. At that time TyMetrix and some of our competitors made the move to build new platforms to support this market shift or added new capabilities into their existing products. For whatever reason at that time DataCert failed to see or ignored the shift. A few years into the change and in an attempt to catch up to the market they acquired Corprasoft and made a run at creating a “unified” product, Corporate Legal Desktop (CLD) 10. Based on my knowledge, despite heavy marketing their new “unified” product never took off or was accepted by the market.

While I can’t say for certain, it seems that when Tallman joined DC he was able to analyze the landscape and recognized their solutions were not at parity with competitors and to his credit he focused attention on building a new product line that based on what he describes should bring Datacert into some level of parity with the market. Seven years of TyMetrix experience in building, implementing, innovating and improving our platform proves it will still take some time for Datacert’s products to get up to speed, work out the typical kinks in new products and ultimately catch up to where the capabilities and stability of existing platforms are today. But, so far their heading in the right direction by finally getting into the game. My only bone of contention with Mr. Tallman and Datacert is their marketing assertions that they are the first or only e-billing and matter management platform designed to support the needs of the law department from the ground up. Back in 2003 TyMetrix saw the trend and developed the CT TyMetrix360° platform from the ground up for just that purpose. With more than 6 years in the market TyMetrix360° has nearly 400,000 members operating in the collaborative platform and nearly 2 million matters, associated with over $35B in legal spend. I welcome Datacert to the market, the key now will be in successfully transitioning from a landscape of ideation and marketing into one of execution and delivery.

Having delivered a patented, integrated platform over 6 years ago, TyMetrix has found that at this point in time that General Counsel and law department leadership teams are less interested in the bells and whistles of technology for technology’s sake. High performing legal departments are making unprecedented and growing demands for the actionable information and insights technology can bring…if structured and implemented strategically. And, they want this information and insight at their fingertips when they need it most. The demand for reliable benchmarks, meaningful KPIs, and detailed invoice and matter data, combined with data sources beyond what e-Billing and matter management systems can provide (i.e., H.R. data, accounts payable data, document management data, etc.) is growing rapidly. A recent example was the successful launch of the Real Rate Report by CT TyMetrix and General Counsel Roundtable. Providing industry wide insights into the drivers of law firm hourly rates.

It will be interesting to see how the market addresses this new trend. Who will lead and who will follow?

E-Billing and Matter Management: Key Enablers of Alternative Fee Arrangements

In response to the March feature in InsideCounsel, “A Matter of Time: Law Firms Move Away From the Billable Hour,” Keith Brown, principal business consultant for CT TyMetrix notes:

The increased utilization of AFAs by corporate law departments has been driven by two main factors. First, the recession that began in 2008 created an environment where corporate law departments were forced to implement cost control efforts. This resulted in an economic balance shift of sorts from the large law firm back to the corporate law department. The other driver has been that in the past five years many corporate law departments implemented technologies like integrated e-billing, matter management and business intelligence. Evaluating the success of existing AFAs and determining where new AFA opportunities exist requires both e-billing and matter management, ideally in a fully integrated system. Implementation of such integrated systems has allowed in-house counsel to level the data playing field with their firms, who have necessarily had the data in their hands for years as part of their core business.

Leading integrated e-billing and matter management vendors like CT TyMetrix have built AFA solutions intended to allow the corporate law department to implement, track and manage AFAs. Many of these vendors have also invested heavily in reporting, partnering with leading third party business intelligence providers like SAP’s Business Objects to offer reporting intended to allow the corporate law department to measure the success of AFAs. Ongoing data collection and analysis through these systems enables corporate counsel to respond better to a law firm’s offer of an AFA and to also proactively identify AFA opportunities within the law department’s business - in a portfolio of similar or specialty matters or perhaps for an extraordinary matter.

Now that law departments have the data, the next phase of maturation for many of those departments will be the creation of “AFA Programs” internally. Such a program would include the designation of a program manager, the setting of goals and strategies for the department’s use of AFAs, the identification of what AFA types are to be utilized for what type of matter(s) and those reports necessary to measure the success or failure of the AFAs.

The Power of UTBMS (Uniform Task Based Billing Codes)

In Response to the Rees Morrison's blog entry ("Drawbacks of Uniform Task Based Billing Codes for fees as used by legal departments") Bill Sowinski, the head of Decision Support Services for CT TyMetrix notes:

"While [Mr. Morrison] makes some good points about the challenges regarding UTBMS codes, I wouldn't throw the baby out with the bath water. The codes are a powerful tool for analyzing patterns and comparing performance. Over the years I’ve had the benefit of working with a number of clients who have captured their firm’s activity at the UTBMS code level. Through this detail, together with clients, we’ve been able to conduct analysis and generate reports that routinely result in a collective “WOW!”

UTBMS information is, of course, useful to compare how law firms deploy their resources for work on similar phases of like matters (e.g. percent of partner, associate, paralegal time and fees) but also reveals the average and median rates, both blended and by individual as well as by level of resource for that legal work. Examining activity at this level across firms invariably results in the revelation of diverse practices with the best and worst practices being immediately apparent. When addressing such issues with firms, the client has the data and the data is based upon that firm’s actual invoice entries. (We counsel our clients to identify precise billing entries for precise timekeepers and share it with law firms.)

The information is also useful for examining billing on diverse matters as the UTBMS information can be used to compare the performance of multiple firms working on the same matter as well as compare individuals within the same firm working on the same matter.

We provide three UTBMS standard reports to all of our clients. Those reports can analyze information across a year’s worth of data for one or one hundred firms in seconds. Those reports can analyze rates, resource level use and individual lawyer tendencies at the click of a mouse. Today’s Business Intelligence applications are making this information widely available and we strongly suggest the information be strategically used not just by legal departments, but by law firms as well.

It is true that the more careful firms are in coding their time the better the analyses, but our clients routinely stress the importance of coding properly and address any coding issues with the law firms. We’ve not experienced significant coding problems and we have tens of thousands of firms that submit invoices through CT TyMetrix. If you are interested, I would be more than happy to show you the reports and analysis available through the use of UTBMS."

Knowledge and people will meet at the corner of workflow and data

Check out this terrific interview of David Curle by Paul Lippe in the Huffington Post ("Will Knowledge & People Converge?")    http://www.huffingtonpost.com/paul-lippe/will-knowledge-people-con_b_452324.html .  David is one of the top analysts at Outsell, a firm that covers the legal and professional information services industry.  Paul is the founder of Legal OnRamp.

This interview is a great example of why David is one of the most respected analysts in this space. Whether or not he is prescient, he certainly has his finger on the pulse of the current state.
In particular, I agree with David's first prediction. He says, "One macro trend worth watching is that in the business world, legal decision-making is moving upstream. By that I mean that corporate counsel are thinking twice about turning so much work over to the firms; they are using technology and collaboration to manage more legal work in-house. Companies are also using technology to embed more legal knowledge into the business workflow, so that legal decision points are resolved on the spot."


I couldn't agree with this more. In fact, the first trend that I noted in my recent piece, "Key Legal Industry Trends for 2010" is "The Rise of the Corporate Law Department." In it, I note that the "The down economy has shifted the balance of power from large law firms to corporate legal departments. In 2010, corporate law departments will assert more control over [their operations]. There will be a heightened demand for "tools of empowerment" that provide them with the knowledge, transparency and real-time technology to take control." http://www.prnewswire.com/news-releases/ct-tymetrix-identifies-key-legal-industry-trends-for-2010-82602952.html
Interestingly, I believe that the embedding of "legal knowledge" (read: content) into lawyer's workflows is just part of the story. In addition to traditional "lawyer as knowledge worker" paradigm, I believe that that we, as an industry, are on the cusp of a brand new legal service delivery model: the data-driven lawyer. Having processed tens of billions of legal invoices over the last decade (each of which contains specific task and activity codes), I believe that the corporate lawyer's workflows will be informed by the empirical data derived from the these invoices and other objective data sources. These data will enable smarter decisions around case management, budgets, vendor sourcing, staffing profiles, time lines, and matter strategies. This approach, which is old hat to many other areas of the corporation, will improve stakeholder ROI and build better, more authentic partnerships between corporations and their law firms. Moreover, since the SaaS model has now been fully accepted by the legal profession, it is easy to imagine a platform that embeds this intelligence across the entire legal service delivery chain.

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.

http://www.prnewswire.com/news-releases/ct-tymetrix-identifies-key-legal-industry-trends-for-2010-82602952.html