Nicholas d’Adhemar, Founder and CEO at Apperio, explains why visibility of spend is just the start of a data-driven transformation in legal services.
Technology is dramatically changing the practice of law. Big data, machine learning, smart contracts and Artificial Intelligence are all making the assimilation and interpretation of large amounts of unstructured data much easier. Some doom-mongers see this as the end of the traditional practice of law. We believe, rather, that the trend will be for legal professionals – in law firms or in-house - to spend their time on higher-value, more challenging activities.
But what about the business of law, rather than the practice of law? Particularly, the opaque nature and archaic processes of legal fees. It seems extraordinary that invoices for legal services operate on as much as an 18-month cycle, and that million-dollar legal value activities should be subject to less transparency and oversight than an everyday stationery order.
According to Thomson Reuters Legal Ops Index 2018, only 13% of corporate legal departments describe their spend management approach as ‘optimised’ and 25% are not using any legal technology at all.
The immediate cost is obvious. It’s not uncommon for legal departments to receive unexpected invoices, containing surprise fees, without any clarity as to the additional costs. Those fees may be justified; they may not. There’s no easy way for General Counsel to evaluate the work that has been done in its context, and ultimately one side of the transaction – client or law firm – is likely to feel aggrieved to some degree. No client wants unexpected expense, and it’s a recipe for conflict.
Furthermore, now that legal departments are being expected to budget and forecast effectively and run their teams with the same rigour and discipline as other back-office functions, this opacity will eventually either attract the attention of a CFO (challenging) or has the potential to get caught up in any cost cutting exercise (very challenging indeed!).
But that’s just the short term. General Counsel and the law firms they work with are now at a fork in the road. Using spreadsheets and emails to manage legal spend is not only time consuming, out-of-date and often inaccurate, it is missing the broader strategic opportunity:
Data: When you have granular visibility of your legal spend – for example, the proportion of spend on Partners all the way down to Paralegals; or the typical time and effort spent on different types of matter, you can deploy that data and insight for business decision-making. This data becomes the management metrics of a smooth-functioning legal department - indeed, the sort of metrics most business functions have enjoyed for decades. GCs become empowered with benchmarks across their business, their sector or indeed their industry as a whole.
Collaboration: We live in a connected and collaborative world. When General Counsel and their panels work together effectively, without suspicion or uncertainty overspend, there is a greater chance of an effective and long-term partnership. The cost of opacity overspend is therefore not just administrative: it creates division and unwarranted focus on price that can affect service, professionalism and ultimately legal outcomes. Tools like Apperio enable new models of collaboration by triggering new patterns of emergent, collaborative behaviour that enhance trust and benefit both sides of the relationship in ways that are often hard to foresee in advance.
Proactive control: When information is available in real-time, forecasting, expense management and quarterly financial reporting become more accurate and, at the same time, cease to be a burden. Instead of multiple matters creating insurmountable complexity, GCs and Legal Operations Managers can have total control and intervene rapidly should issues with invoices arise. Similarly, we are augmenting the Apperio dashboard with alerts, so that GCs will be able to receive custom warnings based on our increasing dataset, to proactively warn of overspend or challenging trends: again, it’s a case of better insight and speed of response, combined with a lower overhead in effort and management time.
The next wave of digital: Finally, we are not alone in applying technology to management challenges in legal departments. As the opportunities to deploy technology grow, the commercial benefit is exponential: above we mentioned AI; but we also see dramatic advances on the horizon in engagement/terms management, e-billing, case management systems and more. As legaltech grows, we are committed to a collaborative relationship with partners old and new, recognising that our clients have an increasingly diverse set of choices in how they buy and deploy technology in their operations. But if you don’t make going digital with the raw information in your department a priority, all of these upcoming benefits remain out of reach.
So the tactical value of managing legal spend is just the start. Both in house legal teams and their law firms need to transition into a new paradigm for legal engagement, one which uses transparency and the availability of data to drive professionalism and commercial transparency throughout the legal relationship. Technology now exists to achieve this and works to improve the commercial relationship on both sides.