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

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 (http://abovethelaw.com/2009/09/omelveny_myers_strategic_plan.php), which was subsequently cited in the ABA Journal (http://www.abajournal.com/weekly/omelveny_aims_to_become_fixed-fee_leader_leaked_plan_says).

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.

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.

Alternative Fee Arrangements Work Best When Both Sides Benefit

Companies are investigating ways to control costs and to link law firm billing to value received. This movement away from the billable hour can be seen as a 'fight' (as characterized by a recent Wall Street Journal article that framed the discussion as the 'Billable Hour' Under Attack), which may be unnecessarily adversarial.

Bill Sowinski heads the CT TyMetrix decision support services group, and has worked extensively with alternative fee arrangements:

"Alternative fee arrangements work best when both sides benefit. Ideally, an arrangement should benefit clients by reducing cost and more quickly resolving matters without compromising quality.

Law firms benefit in one of several ways. One way is to yield to the client’s leverage and reduce income but retain business.

A preferred model is to secure reduced cost, but to allow the law firm to manage matters cost effectively by allowing the firm to assign the appropriate resources to required tasks (this is the Sidney method described in the article.) Gross receipts might decline, but the law firm’s net will increase.

A variation on the preferred model is to reward a firm that will reduce cost with more business which it is allowed to cost effectively manage. In that scenario, both the firm’s gross and net increase while the client reduces cost.

Of course, poorer performing firms will lose business to the selected firm but that is a good result.

The difficulty in establishing healthy alternative fee arrangements is largely due to a lack of understanding by the client and the firm as to the costs associated with individual matters and groups of matters. That weakness can be overcome with careful analysis of the costs and resources deployed in past matters. That analysis should be shared with the law firm so the firm can determine if it can manage its allocation of resources to make an alternative fee arrangement profitable.

Finally, the client must make its matter management philosophy and objectives absolutely clear to the law firm so that the firm fully understands what is required and can support the matters accordingly."

CT TyMetrix continues to be interested in realizing advances in value-based billing, including providing in-house law departments with a set of fixed-fee and alternative fee arrangement tools to manage a range of billing arrangements, as discussed previously on this blog:

• Supporting and Standardizing Fee Agreements
• The Future of the Billable Hour
• Value-Based Billing

Nine Best Practices for Managing Outside Counsel

Outside counsel share a common goal with their in-house counterparts: to effectively manage matters and achieve successful outcomes. At the same time, each faces unique pressures: outside counsel are out to run a profitable business, while in-house counsel is acutely concerned with cost reduction.

CT TyMetrix and InsideCounsel magazine are presenting a free webinar on Thursday, September 10 to highlight nine best practices to achieve strategic, cost-effective utilization of outside counsel, while increasing valuable internal competencies. Learn how you can get a handle on the corporate law department’s highest cost areas — maintaining litigation budgets, improving matter management, and controlling e-discovery costs.

There is no charge to register.

CT TyMetrix 360 releases vendor management and robust alternative fee arrangement (AFA) support

As regular readers of this blog are aware, CT TyMetrix has been hard at work developing and launching release 10.0 of CT TyMetrix 360, adding robust vendor management capabilities, including the industry's most comprehensive support of alternative fee arrangements (AFAs), to our integrated legal e-billing and matter management platform. From the press release:

"The economic downturn has underscored the value of strategic spend management. In order to better predict and manage their legal spend, corporate law departments are looking increasingly beyond the billable hour. These alternatives to the billable hour, commonly known as AFAs, can better align law firm compensation to the corporation's interests. The latest release of CT TyMetrix 360° is the first comprehensive solution for AFA management that provides end-to-end support for the creation, administration, tracking and measuring of AFAs.

The AFA module is the result of in-depth research among the CT TyMyetrix user base. Included in the module are the commonly used and requested AFA templates, such as blended hourly rates, deal-based billings, fee caps, hourly rate discounts, hourly rate volume discounts, matter-based rates, task-based billing caps, and others. In addition to AFA management, Release 10.0 introduces an advanced timekeeper rate management, another integral part of vendor management. Highly configurable, the advanced rate management functionality gives users more control over how timekeeper rates are created and maintained."

See the CT TyMetrix site for the full announcement, or see previous discussion of alternative fee arrangements on the CT TyMetrix Legal Spend Management blog, or listen to the archived webinar we recently conducted on AFAs.

Webinar: Predictive Modeling in Litigation Management

For more than a decade, insurance companies have been leveraging technology to better manage their claims and the costs associated with litigation, including (by the early 90s) e-billing, which streamlined processes and automated enforcement of guidelines. This evolved (by the late 90s) into collaborative, web-based systems handling case management, and later into today's systems offering reporting tools to better understand law firm performance and other trends in litigation.

The missing piece has been advanced analytics to optimize this wealth of information into streamlined business processes and guided decision-making. Moving forward, predictive modeling will play a greater role in litigation management, promising significant improvements in process and total claim outcomes.

CT TyMetrix, in partnership with Deloitte and Claims/TechDecisions magazines, will present a webinar on this topic on June 16 at 2:00 p.m. ET. Our discussion of The Future of Predictive Modeling in Litigation Management will discuss the impact of system-aided guidance in matters including:

• Selecting the most appropriate defense law firm based on case details
• Providing guidance on resolution strategies given the carrier's and industry data
• Early automated identification of case severity

To learn more about this webinar or to register, visit www.claimsmag.com/cttymetrix.

CT TyMetrix to present ILTA product briefing webinar

CT TyMetrix is participating in the ongoing product briefing webinar series organized by the International Legal Technology Association (ILTA). We will present on Law Department Tools 2.0, or in other words, discuss how the next generation of law department tools can manage cases, reduce legal spend and accurately forecast the future, all of which are critical for attorneys operating in today's challenging business environment. This practical demonstration for ILTA members will show how your legal team can accomplish these goals with CT TyMetrix 360°, a comprehensive legal spend management solution incorporating legal e-billing, matter management and dynamic reporting functionality.

Webinar on Alternative Fee Arrangements

As pressures to manage legal costs mount, there's a renewed interest in alternative fee arrangements (AFAs) as a way to align the value delivered by an outside law firm with the amount billed for services (as Craig Raeburn discussed in his post on this blog about AFAs and how CT TyMetrix 360° supports alternative fee arrangements with the AFA module).

In our webinar, we discussed considerations to address when creating AFAs, and how a law department's e-billing system can support and enforce these arrangements. The webinar is available as an archived recording if you missed the live event or would like to review the topics we covered:
CT TyMetrix Alternative Fee Arrangement Webinar Archive

The presenters:

• Keith Brown (Consultant, Law Department Service Line, Baker Robbins and Company)
• Craig Raeburn (Vice President of Product Development, CT TyMetrix)
• Jennifer Pearce (Manager of Legal Operations and Records Management, International Paper)

Best Practices for Managing Outside Counsel

Our latest whitepaper focuses on best practices for inside counsel to achieve alignment and efficiencies with outside counsel:

"The relationship between outside counsel and their in-house counterparts has always been somewhat tenuous in nature. On one hand, both parties share a common goal—to effectively manage matters and achieve a successful outcome by applying their legal expertise. On the other hand, their goals and priorities can conflict, especially when it comes to cost reduction and utilization of resources.

One of in-house counsel’s top concerns is cost reduction. As the economy necessitates a reduction in corporate spending and corporate executives place increased pressure on departments to slash costs, in-house counsel must find ways to manage litigation effectively while staying within their budgets.

Meanwhile, outside counsel are out to run a business and turn a profit. Their hourly fees continue to rise, and in-house counsel often receive pushback when negotiating alternative fee arrangements and reduced hourly fees."

The paper details nine best practices for managing outside counsel, and is co-authored by CT TyMetrix expert Bill Sowinski and Keith Schrodt of CT Summation.

Download the free whitepaper (registration required)

Law Department Operations - Plato and Socrates Wrestle with Legal Technology

I just finished Anathem, the latest novel by Neal Stephenson. Even by Stephenson’s wildly creative standards, the book itself is pretty “out there”. Set in the future, Stephenson speculates about religion, war, technology, and believe it or not, multiple universe theory.

To me, one of the most interesting parts of the book was Stephenson’s attempts to disguise a discussion of classical philosophy in the clothes of a sci-fi novel. He does this by creating a battle between two monastic sects: one clearly adherent to Platonic idealism, the other to the dialectics of Socrates. Although he never mentions either philosopher by name, Stephenson runs through their dialogues in a way that highlights the differences –- and points of intersection -– between the two. Moreover, by couching classical philosophy in unfamiliar garb, Stephenson gives himself free reign to expand on the ideas -- and warp them -- as he sees fit.

But what the heck does this have to do with law department management and legal spend management? In short, Anathem got me to thinking about how Socratic dialectic could help solve what I view as one of the biggest impediments to the future of legal technology. Essentially, the problem is this: we have two different, and seemingly incompatible, types of legal systems. One on hand, you have the structured, “backbone” systems like ERP systems that are essential to the efficient operations of an enterprise and have the clear benefit of demonstrable ROI. In legal tech, both basic matter management and spend management fall into this category. These solutions are platonic in that they assume perfect input will result in perfect output. In other words, if you create a perfect matter, you can attain a perfect understanding of that matter. If each of the matters in a portfolio were equally perfect, the combination would also be perfect, or to Plato, ideal.

Unfortunately, as Socrates tells us, you can't really know anything except through semantics and context. The same goes for systems. I do not need to tell anyone who has worked with data that neither the data that goes into a system, nor the data that comes out, is ever perfect. For this reason, we need context. In Socratic terms, we need semantics to create meaning from an insoluble problem. In my terms, we need metadata, both structured and unstructured, to add context to a matter. Currently, T360 enables users to use collaboration tools to supplement matter and financial data with a variety of critical meta-data. In addition, there are other excellent point solutions that can be used to supplement basic matter information. A couple of the best examples include data hosting providers like CT Summation’s CaseVault and sites that rely on Web 2.0 tools like Legal OnRamp.

Fortunately, it looks like we may have reached an historic moment where structured and unstructured data can be correlated in ways that optimize law department and claims operations. Much in the same way CT TyMetrix 360° was first to integrate the point solutions of matter management, e-billing, and document management into a single platform for the management of law department operations, we are on the cusp of integrating T360 with the industry leaders in document hosting and Web 2.0 for the legal profession. By complementing our enterprise legal management platform with on-demand solutions for handling unstructured data, we will synthesize the formerly incompatible systems to optimize law department productivity. The combination will result in a more perfect understanding of all aspects of law department operations.

There’s no way to know but I’m guessing that that's an outcome that even classical philosophers would consider “ideal”.

Supporting and Standardizing Fee Arrangements

While many arguments can be made for why Billable hours are outdated, or perhaps the value they provide (as discussed by John Weber in his prior posts on the future of the billable hour and value-based billing), it is clear the direction for many years has been toward Value Based Billing or Alternative Fee Arrangements. Unfortunately, there are no set standards for these arrangements. Fee Arrangements can vary by case, by firm and by client. In certain circumstances the parties are working off de facto standard frameworks, but the devil is in the details and with each one there are often slight variations from the others.

Supporting these “one-offs” through e-billing systems can sometimes be a challenge as you need to work within the industry-standard LEDES formats. To address some of these challenges CT TyMetrix has developed an Alternative Fee Arrangement (AFA) Module that will allow clients to set up the case-specific or law firm-specific AFA and have the system enforce the agreement.

The module will be launched with eight templates: Blended Hourly Rates, Fixed Fee, Hourly Rate Volume Discount, Task-Based Billing, Deal Based Billing, Hourly Rate Discount, Matter Rates and Years of Experience. This module was originally designed as an Add-On Module for e-Billing clients, but with the recent economic challenges and the strong shift towards AFAs , CT TyMetrix believes this module should be a standard part of all e-Billing solutions and will be offering it for no additional charge other than a nominal setup fee.

While all of this is good and exciting stuff, I still worry about the lack of standards around AFAs. The eight templates were created based on extensive client input and our 14 years of experience. But even with that we know we haven't addressed all possible AFAs (as we’ve seen, folks can get very creative with some of these agreements). The good news is the module is flexible enough to create additional templates, even client-specific ones, as necessary.

I can’t help but wonder, just as the industry saw fit to establish a non-profit group to oversee the LEDES formats, should Law Firms and Corporations considering creating an AFA Standards Committee? While the LEDES 2.1 format allows for the identification of a few AFAs, it does not (nor should it, I would say), address the specific details of how to bill and properly capture these arrangements. I’d welcome your thoughts.

Craig Raeburn
Vice President, Product Management
CT TyMetrix

CT TyMetrix at LegalTech NY

I had the pleasure of being interviewed by the New York Law Journal's Beth Bianculli yesterday at the Incisive Media Legaltech Video Booth (their site provides the full list of Q&As with conference participants and exhibitors). We spoke briefly about the advantages CT TyMetrix can provide to the in-house law department, particularly in a business environment where costs are under ever-increasing scrutiny. Unfortunately, it would seem that my microphone hadn't been turned all the way up, so you may need to listen closely. In any case, we're happy to have been a part of their video conversations (and to be among the company of notable legal bloggers: Rees Morrison also features his Legaltech video today on his Law Department Management blog).

If you're at Legaltech today or tomorrow, please feel free to stop by our booth (#217). And don't forget to mark your schedule to join CT TyMetrix's own Matt Den Ouden for this afternoon's panel discussion on matter management systems, moderated by Scott Rosenberg of Huron Consulting (click here for a preview).

Law Department 2.0

I just heard an excellent presentation by John Barker, Wolters Kluwer’s guru of all things Web 2.0. In it, John refers frequently to Marc Prensky, a futurist who posits a fundamental difference between “digital natives” and “digital immigrants”. According to Mr. Prensky, a “digital native” is anyone born in or after 1981. In essence, digital natives have evolved past email to Web 2.0. They have grown up instant messaging, texting, and tweeting. They rely on social networks, blogs, and wikis to communicate. They require video game excellence in user interfaces and Google-like performance. Importantly, they rely heavily on the “meta” in the digital world, in which the ratings from their community on a particular product or piece of content are as important, or more important, than anything else. According to Mr. Prensky, the digital native not just demands all things Web 2.0, their neurons require it. Studies have shown that digital immigrant’s nervous system is hard-wired differently than digital immigrants.

The rest of us are “digital immigrants” (he says having been born a couple of decades before the cut off). We might be adept at the use of technology, even excited about it, but the vast majority of us will never have the wiring to fully understand the digital native.

What does this mean for the legal community?

By my calculations, the first digital natives are about half way to becoming partners in law firms and senior members of law departments. In other words, those individuals who expect video game excellence in graphics and all the bells and whistles of Web 2.0 are only a couple of years from making “buy” decisions on the technology that the profession will use to communicate among itself. Suffice it to say that application platforms that rely on the design metaphors satisfactory only to the digital immigrant (like Microsoft’s current UI metaphor) will likely face a tough audience in the natives.

More than just a usability issue, I believe that the ascendancy of Web 2.0 -- and its adoption by digital natives -- will help the legal community finally claim that Holy Grail called knowledge management. Why? Web 2.0, and its use by digital natives, solves the two main impediments to successful KM.

From my perspective, the first impediment to successful KM was difficulty of adding and extracting – in a timely meaningful way – the data that puts the “K” in KM. Correct input required slavish adherence to a onerous workflow, as well as strict discipline regarding the addition of structured metadata. These two tasks added so much overhead to the input process that it very quickly fell into the category of “more trouble than its worth.” Once in, the data was then lost in an imperfectly structured blob, forever lost to potential consumers of the info. Web 2.0, in its various flavors, creates so many channels to share the data that the “overhead” issue is resolved. Moreover, the combination of concept search and tools designed to lever the abundance of metadata available in today’s data stores enables users to easily retrieve contextually relevant content. This process if refined even further when used inside of “profile driven” networking sites like Legal OnRamp and LinkedIn.

The second primary obstacle to success in KM? Digital immigrants. There are mindsets and behaviors among most digital immigrants that do not easily adapt to the openness required for KM to attain its highest state. Personally, I don’t feel comfortable “publishing” my work until I have had a couple of chances to review it. Even then, I have some apprehension before I push the publish button. I do not see that type of self censorship with digital natives. A peek onto any Millenials’ Facebook page is an object lesson in my point. Therefore, as digital natives become the majority, the primary behavioral impediment to successful KM will disappear.

Finally, you may be asking yourself, why in the heck is a guy who sells the industry leading matter management and e-billing platform waxing on about Web 2.0, digital natives, and KM? Well, I certainly find it interesting. Also, I’m sufficiently paranoid that I work hard to anticipate what’s next. At the end of the day, however, the reason that I’m really interested in the topic is because I see it as the next stage in the evolution of law department technology. Currently, and at the risk of immodesty, our T360 platform is the best in the market and the core operating system for law departments that use it. Candidly, for as good as it is, I think that most digital natives would find it somewhat restrictive. In order to serve both our current clients – most of whom are digital immigrants -- and the next generation, we are going to have to incorporate the wisdom of digital natives into our thought process.

Legal Spend Management Is News Fit to Print

Alternatives to the billable hour, long a "holy grail" topic among legal thought leadership, has gone mainstream. Take a look at the New York Times article entitled Billable Hours Giving Ground at Law Firms. In the piece, our newest champion of alternative fee arrangements, Evan Chesler of the esteemed law firm Cravath Swain & Moore, as well as other luminaries of the profession, lay out the basic argument against the billable hour. I would be very interested to know how much of Cravath's revenue is based on the billable hour and what, if any, specific plans the firm has to offer value billing alternatives. That, to me, would truly be news fit to print.