Trends in Enterprise Legal Management

Editor's Note: The adoption of Enterprise Legal Management is on the rise as legal departments seek to streamline legal processes, analyze risks and reduce legal spend. In this roundtable conversation, Marcus Hartmann, General Counsel, RB (formerly known as Reckitt Benckiser) and Jason Parkman, CEO, Mitratech, discuss trends in enterprise legal management, the tools it provides users, and the increased controls brought to legal departments using this technology.

Q. Enterprise Legal Management (ELM) is defined as integrated Matter Management and e-Billing systems. How critical is an ELM solution to the effective management of a legal department?

A. Hartmann: Effective management of a legal department essentially boils down to using available resources to accomplish the mission, which is providing legal support to the company. Matter management is the first building block to be able to determine what resources are being devoted to various legal tasks the department handles internally. E-billing systems provide management and better understanding of external vendors and advisers. Integrating Matter Management and e-Billing systems allows legal leaders to have a holistic understanding of the entire internal/external legal support effort and the corresponding resources.

Parkman: Corporate legal departments are being asked to manage a dramatic increase in risk and compliance challenges, along with increasing litigation costs, without the corresponding increase in budgets. They are also being asked to be more than just a cost center, but instead to be a strategic business partner to the entire organization. These requirements mean that the department has to do more with less, while increasing visibility, predictability, and responsiveness across the department.

ELM technology allows the general counsel to make decisions based on metrics instead of instincts, turning the legal department into a data-driven organization. In order to facilitate this data-driven decision making, robust ELM solutions have to offer users the ability to organize and analyze tremendous amounts of data to make educated decisions about everything from which matters to bring in-house, to which firms to use on specific types of matters, to how to better negotiate rates within a particular market or type of matter. Ultimately, this type of sound decision making enables the legal department to be an even more strategic business partner across the entire organization ' minimizing business exposure and reducing overall costs.

Q. How has the relationship between law firms and law departments changed over the past few years, and what role has ELM technology played in that dynamic ' both good and bad (specifically as it relates to e-Billing systems)?

A. Hartmann: Over the last few decades, we've seen a transition from legal departments that hire outside counsel and basically accept their terms, conditions and billing practices. Now, in-house counsel are much more strategic and have greater control over the legal project management. As noted above, that management means being able to understand what resources are deployed and how; ELM is a valuable tool in that pursuit.

Parkman: Over the past decade, and in particular since the recession, there has been a power shift to the GC from outside counsel, and the GC's role in the company has expanded tremendously. The legal department is being asked to act as a change agent; GCs are being asked to predict risk, to quickly adjust to new regulations, and to redefine the relationships with outside law firms. At the same time, we've seen the emergence of a buyer's market for legal services with, frankly, an oversupply of legal hours. In this environment, GCs have the ability to redefine the relationship with their outside counsel at the same time that they are being asked to provide the visibility and predictability typically associated with other business units within the corporation. All of this means that the GC's office, not the law firm, is leading the way with technology to drive efficiency, manage change, gain visibility, and manage risk. The result is that law firms must accept the preferred billing practices of the enterprise and adhere to their guidelines. Ultimately, by requiring law firms to use e-Billing applications, legal departments are realizing tremendous overall legal spend efficiencies.

Q. What challenges do you see facing the legal industry in the upcoming year? How are you preparing for those challenges from a technology perspective?

A. Hartmann: In-house counsel will be called upon to be more strategic in forward thinking organizations. That will mean a greater emphasis on how the legal function impacts the P&L, cash flow, the balance sheet and ultimately, shareholder value. Any technology that can assist and perhaps accelerate that trend will be something I would want to sponsor in my organization.

Parkman: There is an ever-increasing compliance risk, legal risk, and IP litigation to manage. On the compliance side alone, automated processes (through the use of technology) are absolutely necessary to keep track of the changing regulatory environment ushered in by SOX, HIPAA, the Affordable Care Act, and hundreds of other state, local and federal regulations that are changing the business environment on a daily basis. Improper management of compliance needs means huge business exposure. On the litigation side, IP litigation has increased tenfold in the last 10 years. All told, this means that how the legal department manages all of this risk and compliance can make a difference of millions, and even billions of dollars to the company. For many of our clients, the best way to manage that risk is to ensure that they have technology in place to provide the controls and visibility the department needs.

Q. How do you measure and quantify the value of ELM solutions? Can you provide specific examples of how you have seen the system save money, time, or lowered business risk?

A. Hartmann: We have used our matter management system as a knowledge management tool. As such, when the team is presented with a legal challenge or transactions, the first stop is to see if we have done something similar and have it in are matter management system. That step alone has saved countless dollars in outside counsel spend.

Parkman: We have worked with many of our clients to actually measure the value of our systems in their organization, and the results are material ' to the tune of millions of dollars per year. The value drivers fundamentally can be broken into three categories:

• Legal Spend Savings. Through tighter enforcement of e-Billing guidelines and more informed decision-making on outside counsel selection and matter outcomes, our clients have realized an average 6% reduction of outside legal spend per client. For many large organizations, this equates to millions of dollars per year.
• Productivity Gains. In many cases, ELM solutions can reduce what used to take legal staff a week to accomplish down to seconds. For example, many of our clients have reported needing a week to compile a report showing legal spend trends across matter types, geographies, and categories. With a system in place, that analysis can literally take a second.
• Risk Mitigation. Our clients realize significant revenue protection for the entire enterprise through ensuring that they have rigorous processes and clear visibility in place to be proactive about mitigating risks.

Q. Do you think corporate legal departments can actually use ELM solutions to drive revenue or a competitive advantage for the organization?

A. Hartmann: The simple answer is yes, but you need an entire legal department committed to using ELM solutions (there still seems to be a few luddites in our profession) and you need to be working for an organization that sees the legal function as a strategic partner that can drive revenue and/or competitive advantage. The trends are positive, but having both those ingredients together is still by no means a certainty.

Parkman: Absolutely, although not all legal departments have realized that they have that power yet. I can think of a few specific examples of ways that we've seen our clients drive a competitive advantage: 1) They proactively protect revenue-driving assets like corporate brand reputation and IP in such a way to better position the company to capture market share; 2) They minimize commercial friction (for instance, the speed and responsiveness of contract reviews) to the point that the company is viewed as the best choice for partnership; and 3) They facilitate optimized decision-making on legal matters (for instance, should we settle, should we sue, etc ' ) through the use of predictive legal analytics.

Q. A lot of ELM solutions on the market offer very similar functionality. How will solutions need to change in order to meet the increasing expectations of legal departments and law firms?

A. Hartmann: ELM solutions should not try to meet the expectations of both legal department and law firms. ELMs that try to straddle the fence always seem to come up short when it comes to in-house utility. Legal departments need ELM solutions to effect lean departments that are lawyer-friendly and do not require a tremendous amount of administrative support.

Parkman: We see a lot of opportunities to continue to enhance ELM technology, and we are continuing to invest in our products to meet these increasing expectations. For instance, ELM systems should not be so cumbersome or expensive to upgrade that legal departments decide to stay on antiquated versions of the software. They should offer flexibility and configurability in a way that makes that process, even for the most complex organizations, simple and efficient. ELM solutions will also have to provide the mechanisms to enhance the collaboration between legal departments and law firms. For example, they should provide secure, but simple, methods to collaborate together on matters, share knowledge across teams, enable real-time visibility into billing guidelines, and optimize sourcing processes.

'

Editor's Note: The adoption of Enterprise Legal Management is on the rise as legal departments seek to streamline legal processes, analyze risks and reduce legal spend. In this roundtable conversation, Marcus Hartmann, General Counsel, RB (formerly known as Reckitt Benckiser) and Jason Parkman, CEO, Mitratech, discuss trends in enterprise legal management, the tools it provides users, and the increased controls brought to legal departments using this technology.

Q. Enterprise Legal Management (ELM) is defined as integrated Matter Management and e-Billing systems. How critical is an ELM solution to the effective management of a legal department?

A. Hartmann: Effective management of a legal department essentially boils down to using available resources to accomplish the mission, which is providing legal support to the company. Matter management is the first building block to be able to determine what resources are being devoted to various legal tasks the department handles internally. E-billing systems provide management and better understanding of external vendors and advisers. Integrating Matter Management and e-Billing systems allows legal leaders to have a holistic understanding of the entire internal/external legal support effort and the corresponding resources.

Parkman: Corporate legal departments are being asked to manage a dramatic increase in risk and compliance challenges, along with increasing litigation costs, without the corresponding increase in budgets. They are also being asked to be more than just a cost center, but instead to be a strategic business partner to the entire organization. These requirements mean that the department has to do more with less, while increasing visibility, predictability, and responsiveness across the department.

ELM technology allows the general counsel to make decisions based on metrics instead of instincts, turning the legal department into a data-driven organization. In order to facilitate this data-driven decision making, robust ELM solutions have to offer users the ability to organize and analyze tremendous amounts of data to make educated decisions about everything from which matters to bring in-house, to which firms to use on specific types of matters, to how to better negotiate rates within a particular market or type of matter. Ultimately, this type of sound decision making enables the legal department to be an even more strategic business partner across the entire organization ' minimizing business exposure and reducing overall costs.

Q. How has the relationship between law firms and law departments changed over the past few years, and what role has ELM technology played in that dynamic ' both good and bad (specifically as it relates to e-Billing systems)?

A. Hartmann: Over the last few decades, we've seen a transition from legal departments that hire outside counsel and basically accept their terms, conditions and billing practices. Now, in-house counsel are much more strategic and have greater control over the legal project management. As noted above, that management means being able to understand what resources are deployed and how; ELM is a valuable tool in that pursuit.

Parkman: Over the past decade, and in particular since the recession, there has been a power shift to the GC from outside counsel, and the GC's role in the company has expanded tremendously. The legal department is being asked to act as a change agent; GCs are being asked to predict risk, to quickly adjust to new regulations, and to redefine the relationships with outside law firms. At the same time, we've seen the emergence of a buyer's market for legal services with, frankly, an oversupply of legal hours. In this environment, GCs have the ability to redefine the relationship with their outside counsel at the same time that they are being asked to provide the visibility and predictability typically associated with other business units within the corporation. All of this means that the GC's office, not the law firm, is leading the way with technology to drive efficiency, manage change, gain visibility, and manage risk. The result is that law firms must accept the preferred billing practices of the enterprise and adhere to their guidelines. Ultimately, by requiring law firms to use e-Billing applications, legal departments are realizing tremendous overall legal spend efficiencies.

Q. What challenges do you see facing the legal industry in the upcoming year? How are you preparing for those challenges from a technology perspective?

A. Hartmann: In-house counsel will be called upon to be more strategic in forward thinking organizations. That will mean a greater emphasis on how the legal function impacts the P&L, cash flow, the balance sheet and ultimately, shareholder value. Any technology that can assist and perhaps accelerate that trend will be something I would want to sponsor in my organization.

Parkman: There is an ever-increasing compliance risk, legal risk, and IP litigation to manage. On the compliance side alone, automated processes (through the use of technology) are absolutely necessary to keep track of the changing regulatory environment ushered in by SOX, HIPAA, the Affordable Care Act, and hundreds of other state, local and federal regulations that are changing the business environment on a daily basis. Improper management of compliance needs means huge business exposure. On the litigation side, IP litigation has increased tenfold in the last 10 years. All told, this means that how the legal department manages all of this risk and compliance can make a difference of millions, and even billions of dollars to the company. For many of our clients, the best way to manage that risk is to ensure that they have technology in place to provide the controls and visibility the department needs.

Q. How do you measure and quantify the value of ELM solutions? Can you provide specific examples of how you have seen the system save money, time, or lowered business risk?

A. Hartmann: We have used our matter management system as a knowledge management tool. As such, when the team is presented with a legal challenge or transactions, the first stop is to see if we have done something similar and have it in are matter management system. That step alone has saved countless dollars in outside counsel spend.

Parkman: We have worked with many of our clients to actually measure the value of our systems in their organization, and the results are material ' to the tune of millions of dollars per year. The value drivers fundamentally can be broken into three categories:

• Legal Spend Savings. Through tighter enforcement of e-Billing guidelines and more informed decision-making on outside counsel selection and matter outcomes, our clients have realized an average 6% reduction of outside legal spend per client. For many large organizations, this equates to millions of dollars per year.
• Productivity Gains. In many cases, ELM solutions can reduce what used to take legal staff a week to accomplish down to seconds. For example, many of our clients have reported needing a week to compile a report showing legal spend trends across matter types, geographies, and categories. With a system in place, that analysis can literally take a second.
• Risk Mitigation. Our clients realize significant revenue protection for the entire enterprise through ensuring that they have rigorous processes and clear visibility in place to be proactive about mitigating risks.

Q. Do you think corporate legal departments can actually use ELM solutions to drive revenue or a competitive advantage for the organization?

A. Hartmann: The simple answer is yes, but you need an entire legal department committed to using ELM solutions (there still seems to be a few luddites in our profession) and you need to be working for an organization that sees the legal function as a strategic partner that can drive revenue and/or competitive advantage. The trends are positive, but having both those ingredients together is still by no means a certainty.

Parkman: Absolutely, although not all legal departments have realized that they have that power yet. I can think of a few specific examples of ways that we've seen our clients drive a competitive advantage: 1) They proactively protect revenue-driving assets like corporate brand reputation and IP in such a way to better position the company to capture market share; 2) They minimize commercial friction (for instance, the speed and responsiveness of contract reviews) to the point that the company is viewed as the best choice for partnership; and 3) They facilitate optimized decision-making on legal matters (for instance, should we settle, should we sue, etc ' ) through the use of predictive legal analytics.

Q. A lot of ELM solutions on the market offer very similar functionality. How will solutions need to change in order to meet the increasing expectations of legal departments and law firms?

A. Hartmann: ELM solutions should not try to meet the expectations of both legal department and law firms. ELMs that try to straddle the fence always seem to come up short when it comes to in-house utility. Legal departments need ELM solutions to effect lean departments that are lawyer-friendly and do not require a tremendous amount of administrative support.

Parkman: We see a lot of opportunities to continue to enhance ELM technology, and we are continuing to invest in our products to meet these increasing expectations. For instance, ELM systems should not be so cumbersome or expensive to upgrade that legal departments decide to stay on antiquated versions of the software. They should offer flexibility and configurability in a way that makes that process, even for the most complex organizations, simple and efficient. ELM solutions will also have to provide the mechanisms to enhance the collaboration between legal departments and law firms. For example, they should provide secure, but simple, methods to collaborate together on matters, share knowledge across teams, enable real-time visibility into billing guidelines, and optimize sourcing processes.

'