What ERP Can Teach About ELM Adoption

With its origins in accounting, manufacturing, procurement, maintenance, and human resources, Enterprise Resource Planning (ERP) first emerged in the 1990s as an extension of Material Requirements Planning (MRP). The end game was about integrating company-wide business process and information to provide the insight necessary to manage and benchmark the global enterprise. Following in these same footsteps, Enterprise Legal Management (ELM) holds out the potential to link risk and legal data to enable the global enterprise to proactively mitigate legal risk, streamline the legal process, and make insightful decisions in response to market or regulatory changes. With ELM, the legal function transforms from the traditional role of litigation management to that of trusted business advisor. Drawing comparisons between ERP and the foundation of ELM sheds valuable light on how ELM systems can transform legal, risk, and compliance practices across the enterprise.

In the Footsteps of ERP

The increasingly wide adoption of ERP beyond manufacturing and production planning systems came about notably as businesses gradually expanded ERP's scope in the 1990s to embrace back-office functions such as human resources, finance and production planning. By giving managers an integrated view of business processes across the enterprise, ERP has evolved to the point where it provides the foundation for comprehensive business intelligence for organizations. More recently, ERP deployments have incorporated other business extensions, including supply chain management and customer relationship management, to become a highly integrated ecosystem.

That's not to suggest that the creators of ERP systems haven't faced material challenges every step of the way. Despite the clear benefits ERP can deliver, these remain complex systems, and inevitably some ERP implementations are more successful than others, whether due to cost or time budgeting or overly ambitious target outcomes. It is worth noting that the greatest hurdles confronting ERP implementations typically are posed by a complex array of organizational challenges ' i.e., resistance to change, organizational culture, incompatible business processes, or uneven commitment by senior management ' rather than by the technology itself.

Just as was seen with ERP, ELM will be a change management challenge. The catalysts that drove the adoption of ERP across multiple industries have been strikingly similar to those that are driving ELM's expanding adoption in the world of legal and governance, risk and compliance (GRC). One of the most pronounced drivers of ERP's appeal in its early days was the vexing nature of “siloing” that characterizes most every company at some point in its growth cycle. Unable to compose a unified view of the business, organizations were long accustomed to wrestling with persistent, enterprise-wide inefficiencies that generated significant drag on profitability.

In addition to the bane of siloing, there is another characteristic that is all too common to virtually all organizations: vendor sprawl. With rare exceptions, businesses in every industry find themselves contending at some point with a plethora of independent software vendors and business process service providers attached to most, if not all, of their respective operational functions. By imposing a unified view upon traditionally semi-autonomous ' and frequently unintegrated ' business operations, ERP has become an essential ingredient in industries ranging from aerospace and defense, automotive, banking, consumer products, construction and healthcare to telecommunications, transportation, utilities and wholesale distribution.

Powered by global providers such as SAP, Oracle and NetSuite, among others, ERP has literally transformed how organizations across these industries benchmark and deliver best practices-based integration spanning quality, productivity, cost and delivery. ERP applications continue to deliver high return on investment (ROI), with an average benefit of $7.23 returned for every dollar spent, according to a recent report from Nucleus Research analysis. In fact, the returns are up more than a third from average returns five years ago.

Enter ELM

So what can the widespread adoption and success of ERP across a host of industries tell us about the current and potential trajectory of ELM systems? Although their origins are in the corporate legal department, ELM systems' resounding appeal sharply mirrors the reasons ERP systems took hold in their own way. First and foremost, today's legal function is a business unit trying to manage between 35 to 40 different legal processes needed for support. Using this many individual systems, which don't provide a consolidated view of the operation, challenges the value of legal costs and is not sustainable over the long haul. By reaching well beyond the traditional legal department and all of its affiliated systems, ELM unites legal and risk-related data from systems across the enterprise. As such, ELM points to potentially far-reaching enhancements and efficiencies ' in terms of data management and process synergies ' for legal as well as risk-related systems across the company, including HR, compliance, and other systems. Much like the arc followed by ERP, ELM systems are contributing directly to a sustainable competitive advantage by reaching well beyond matter or spend management to bridge vendors and silos across legal, risk, and compliance operations. They accomplish this in several key ways, including:

Mitigating risk.

Managing risk is about tracking regulatory changes, understanding their impact on your business, instituting controls and policies to manage risk, and tracking incidents against defined policies. It's also about auditing the end-to-end compliance process to make the continuous improvements needed to avoid future litigation that can seriously damage the enterprise, its image, and shareholder value. ELM is about providing the software, controls, and visibility needed for enterprise risk management. Risk management is not an end state; it's a journey.

Solving multi-platform IT issues.

Whether they were inherited in the course of corporate acquisitions or assembled independently in order to link partners and vendors, the accretion of many different, freestanding software systems leads to a complicated skein of vendors and “sub-platforms.” Left unaddressed, this undermines conformity and begins to impede process flow, both inside and outside the legal department. I always ask the question: “Do you think a legal counsel or compliance officer wants to meet with 40 vendors?” Of course not, they are seeking a dashboard that provides the early warnings and understanding needed to avoid legal action. Systems that are not integrated can never provide that insight. A unified software platform is needed.

Eliminating redundancy within and beyond the legal department.

Disconnects between various systems that address legal and risk-related information ' e.g., matter management, e-discovery, HR, and compliance management systems ' pave the way for increased errors due to duplicate data entry and time squandered repairing problems or finding needed information. ELM systems streamline these processes and eliminate redundancy.

Enhancing collaboration.

At the same time, ELM implementation opens the door to increased and improved collaboration inside the legal department and between the legal department and its external business partners, as well as across the enterprise, facilitating greater efficiency and risk mitigation overall. Collaboration tools should be the result of an ELM strategy, and the opportunity to streamline the legal process and reduce costs is significant. Legal departments constantly seek ways to collaborate on contracts and legal documents, share information, schedule and track critical legal events, and streamline the communication of the legal processes needed to support a global company. Collaboration is key.

The Bigger Picture

Considering its potential to present organizations with a unified, single hub for managing legal, risk, and compliance efforts, ELM's reach clearly extends well beyond matter and legal spend management. While these are foundational elements, the core value of ELM reaches considerably further to provide a comprehensive and integrated set of solutions that helps an organization more effectively manage its legal, risk, and compliance practices across the enterprise.

Importantly, under an ELM paradigm, legal and GRC tools become a tightly integrated system that can ensure the seamless flow of information across functions, removing information silos and improving the efficiency of data sharing to mitigate risk.

From a technology perspective, a sound ELM system meets the test of extensibility. By providing a platform with discrete modules that can be implemented according to client practices and needs, the system can grow as needs expand. Likewise, a high-performance ELM system is responsive to specific client requirements with custom development tools that enable the customer or ELM supplier to rapidly implement changes as needed to address evolving business and market needs. Finally, because most legal and risk management departments already have a base of installed systems, ELM must provide the capability to integrate adjacent solutions to unify both legal and risk-related data drawn from systems across the enterprise, all under the highest level of data privacy and security standards.

The explosion of regulatory complexity as well as data volume have set the stage for a substantially new approach to managing the combined ecosystem of legal, risk, and compliance. The 2013 Code of Federal Regulations contains 175,496 pages comprising more than 200 volumes, according to the Office of the Federal Register. Regulatory issues are seen as the number-one litigation threat, cited by 46% of respondents to a recent Grant Thornton law-department survey. At the same time, the data deluge continues to mount for businesses in every industry, with the volume of business data worldwide, across all companies, doubling every 1.2 years, according to some estimates.

Against this backdrop, the value of a robust ELM system can hardly be overestimated. Seen in this context, the emergence, growth and success of ERP systems over the last 25 years point to the power of a unified vision of the enterprise. ELM is paving the way to a holistic, unified vision across the legal function and beyond in ways that promise to transform legal, risk, and compliance practices and usher in a new era for how companies handle these challenges.

Jim Tallman is Executive Vice President and General Manager of ELM Solutions.

With its origins in accounting, manufacturing, procurement, maintenance, and human resources, Enterprise Resource Planning (ERP) first emerged in the 1990s as an extension of Material Requirements Planning (MRP). The end game was about integrating company-wide business process and information to provide the insight necessary to manage and benchmark the global enterprise. Following in these same footsteps, Enterprise Legal Management (ELM) holds out the potential to link risk and legal data to enable the global enterprise to proactively mitigate legal risk, streamline the legal process, and make insightful decisions in response to market or regulatory changes. With ELM, the legal function transforms from the traditional role of litigation management to that of trusted business advisor. Drawing comparisons between ERP and the foundation of ELM sheds valuable light on how ELM systems can transform legal, risk, and compliance practices across the enterprise.

In the Footsteps of ERP

The increasingly wide adoption of ERP beyond manufacturing and production planning systems came about notably as businesses gradually expanded ERP's scope in the 1990s to embrace back-office functions such as human resources, finance and production planning. By giving managers an integrated view of business processes across the enterprise, ERP has evolved to the point where it provides the foundation for comprehensive business intelligence for organizations. More recently, ERP deployments have incorporated other business extensions, including supply chain management and customer relationship management, to become a highly integrated ecosystem.

That's not to suggest that the creators of ERP systems haven't faced material challenges every step of the way. Despite the clear benefits ERP can deliver, these remain complex systems, and inevitably some ERP implementations are more successful than others, whether due to cost or time budgeting or overly ambitious target outcomes. It is worth noting that the greatest hurdles confronting ERP implementations typically are posed by a complex array of organizational challenges ' i.e., resistance to change, organizational culture, incompatible business processes, or uneven commitment by senior management ' rather than by the technology itself.

Just as was seen with ERP, ELM will be a change management challenge. The catalysts that drove the adoption of ERP across multiple industries have been strikingly similar to those that are driving ELM's expanding adoption in the world of legal and governance, risk and compliance (GRC). One of the most pronounced drivers of ERP's appeal in its early days was the vexing nature of “siloing” that characterizes most every company at some point in its growth cycle. Unable to compose a unified view of the business, organizations were long accustomed to wrestling with persistent, enterprise-wide inefficiencies that generated significant drag on profitability.

In addition to the bane of siloing, there is another characteristic that is all too common to virtually all organizations: vendor sprawl. With rare exceptions, businesses in every industry find themselves contending at some point with a plethora of independent software vendors and business process service providers attached to most, if not all, of their respective operational functions. By imposing a unified view upon traditionally semi-autonomous ' and frequently unintegrated ' business operations, ERP has become an essential ingredient in industries ranging from aerospace and defense, automotive, banking, consumer products, construction and healthcare to telecommunications, transportation, utilities and wholesale distribution.

Powered by global providers such as SAP, Oracle and NetSuite, among others, ERP has literally transformed how organizations across these industries benchmark and deliver best practices-based integration spanning quality, productivity, cost and delivery. ERP applications continue to deliver high return on investment (ROI), with an average benefit of $7.23 returned for every dollar spent, according to a recent report from Nucleus Research analysis. In fact, the returns are up more than a third from average returns five years ago.

Enter ELM

So what can the widespread adoption and success of ERP across a host of industries tell us about the current and potential trajectory of ELM systems? Although their origins are in the corporate legal department, ELM systems' resounding appeal sharply mirrors the reasons ERP systems took hold in their own way. First and foremost, today's legal function is a business unit trying to manage between 35 to 40 different legal processes needed for support. Using this many individual systems, which don't provide a consolidated view of the operation, challenges the value of legal costs and is not sustainable over the long haul. By reaching well beyond the traditional legal department and all of its affiliated systems, ELM unites legal and risk-related data from systems across the enterprise. As such, ELM points to potentially far-reaching enhancements and efficiencies ' in terms of data management and process synergies ' for legal as well as risk-related systems across the company, including HR, compliance, and other systems. Much like the arc followed by ERP, ELM systems are contributing directly to a sustainable competitive advantage by reaching well beyond matter or spend management to bridge vendors and silos across legal, risk, and compliance operations. They accomplish this in several key ways, including:

Mitigating risk.

Managing risk is about tracking regulatory changes, understanding their impact on your business, instituting controls and policies to manage risk, and tracking incidents against defined policies. It's also about auditing the end-to-end compliance process to make the continuous improvements needed to avoid future litigation that can seriously damage the enterprise, its image, and shareholder value. ELM is about providing the software, controls, and visibility needed for enterprise risk management. Risk management is not an end state; it's a journey.

Solving multi-platform IT issues.

Whether they were inherited in the course of corporate acquisitions or assembled independently in order to link partners and vendors, the accretion of many different, freestanding software systems leads to a complicated skein of vendors and “sub-platforms.” Left unaddressed, this undermines conformity and begins to impede process flow, both inside and outside the legal department. I always ask the question: “Do you think a legal counsel or compliance officer wants to meet with 40 vendors?” Of course not, they are seeking a dashboard that provides the early warnings and understanding needed to avoid legal action. Systems that are not integrated can never provide that insight. A unified software platform is needed.

Eliminating redundancy within and beyond the legal department.

Disconnects between various systems that address legal and risk-related information ' e.g., matter management, e-discovery, HR, and compliance management systems ' pave the way for increased errors due to duplicate data entry and time squandered repairing problems or finding needed information. ELM systems streamline these processes and eliminate redundancy.

Enhancing collaboration.

At the same time, ELM implementation opens the door to increased and improved collaboration inside the legal department and between the legal department and its external business partners, as well as across the enterprise, facilitating greater efficiency and risk mitigation overall. Collaboration tools should be the result of an ELM strategy, and the opportunity to streamline the legal process and reduce costs is significant. Legal departments constantly seek ways to collaborate on contracts and legal documents, share information, schedule and track critical legal events, and streamline the communication of the legal processes needed to support a global company. Collaboration is key.

The Bigger Picture

Considering its potential to present organizations with a unified, single hub for managing legal, risk, and compliance efforts, ELM's reach clearly extends well beyond matter and legal spend management. While these are foundational elements, the core value of ELM reaches considerably further to provide a comprehensive and integrated set of solutions that helps an organization more effectively manage its legal, risk, and compliance practices across the enterprise.

Importantly, under an ELM paradigm, legal and GRC tools become a tightly integrated system that can ensure the seamless flow of information across functions, removing information silos and improving the efficiency of data sharing to mitigate risk.

From a technology perspective, a sound ELM system meets the test of extensibility. By providing a platform with discrete modules that can be implemented according to client practices and needs, the system can grow as needs expand. Likewise, a high-performance ELM system is responsive to specific client requirements with custom development tools that enable the customer or ELM supplier to rapidly implement changes as needed to address evolving business and market needs. Finally, because most legal and risk management departments already have a base of installed systems, ELM must provide the capability to integrate adjacent solutions to unify both legal and risk-related data drawn from systems across the enterprise, all under the highest level of data privacy and security standards.

The explosion of regulatory complexity as well as data volume have set the stage for a substantially new approach to managing the combined ecosystem of legal, risk, and compliance. The 2013 Code of Federal Regulations contains 175,496 pages comprising more than 200 volumes, according to the Office of the Federal Register. Regulatory issues are seen as the number-one litigation threat, cited by 46% of respondents to a recent Grant Thornton law-department survey. At the same time, the data deluge continues to mount for businesses in every industry, with the volume of business data worldwide, across all companies, doubling every 1.2 years, according to some estimates.

Against this backdrop, the value of a robust ELM system can hardly be overestimated. Seen in this context, the emergence, growth and success of ERP systems over the last 25 years point to the power of a unified vision of the enterprise. ELM is paving the way to a holistic, unified vision across the legal function and beyond in ways that promise to transform legal, risk, and compliance practices and usher in a new era for how companies handle these challenges.

Jim Tallman is Executive Vice President and General Manager of ELM Solutions.