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A ground-breaking report, which combines data on matter management systems (MMS) with benchmark metrics, is now available from General Counsel Metrics, LLC. MMS Insights reports on 130 users of more than 15 matter management systems in Canadian and U.S. legal departments.

Typically, a large share of the spend by a company on outside counsel is captured in its MMS (if it has one). A table in Insights shows for each package the median amount spent per lawyer on external counsel and other vendors. The median stands at $496,000. The U.S. and Canadian medians from this year’s General Counsel Metrics benchmark survey are reasonably close to the medians of this group of law departments.

Broadly speaking, the finding from MMS Insights suggests that $10,000 per week for each in-house lawyer is processed by MMS software. Litigation lawyers account for the largest share of that spending, in the range of 40-50 percent.

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On May 7, 2012, Law.com’s Corporate Counsel page offered some hardish data on the cost of a leading matter management system. “The cost of the [Serengeti Tracker] system ranges from about a quarter of a percent of a company’s outside legal spend, to about one percent of that budget.” Preceding that statement was some background information about the company and its product, focused more on law firms than on law departments: “Serengeti, which launched in 2001, now has 150,000 users in more than 180 countries, and adds more than 3,000 new users a month. Close to 500 in-house departments are on board—including Amazon.com, Heinz, Alcatel-Lucent, and Capital One.” My focus is the cost statement.

For a typical U.S. company with $1 billion in revenue, its total legal spend falls between $3 and $6 million. For our purposes, take the mid-point of $4.5 million and allocate 60% of that to outside counsel. That means the cost of Seregeti Tracker for such a hypothetical law department is somewhat more than a half-percent of $2.7 million, or somewhat above $13,000. As it is difficult to find public information about the cost of this common genre of law department software, this tidbit and estimated conversion to dollars has some value.

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For the first time, this year’s General Counsel Metrics benchmark survey collects and reports on compensation data. Only law departments in the United States or Canada are eligible to submit lawyer and administrator compensation data and receive a report, at no cost. To obtain your benchmark report, click on this link and submit your 2011 staffing and spending data.

Sixty-three general counsel have so far provided their salary, bonus, and equity award. On average they have been out of law school 23 years. The average number of lawyers in their departments was just under five, so bear in mind that these are smaller departments. As such their size is representative of the majority of legal departments in the United States. Smaller departments don’t pay as handsomely as large departments (See my post of April 16, 2012: five specialty areas and compensation.).

The median general counsel salary last year was $220,000, while the median cash bonus was $55,000. Overall, for salary plus cash bonus, the median general counsel of this group received $279,457.

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The Fortune 500 amassed revenue of close to $10 trillion in 2011. At five lawyers typically for every billion of revenue, they alone would employ something like 50,000 in-house lawyers. What else can we cobble together about the number of law departments in the United States.

With something like 25,000 law departments in the United States (See my post of Sept. 25, 2005: ACCA estimate of 71,000 non-governmental in-house lawyers; Dec. 3, 2006: possible Fortune 500 staff figures; Dec. 31, 2008: oblique data suggests about 21% in-house; March 9, 2009: ABA data and 8% in-house; April 2, 2009 #2: data from 1961 to 1991; June 15, 2009: almost one out of five lawyers in a large survey had gone in-house by their seventh year of practice; Oct. 7, 2010 #1: US has 30,000 companies with 100+ employees; Dec. 31, 2010: clues from subscriptions to trade journals and listings of largest law departments; July 20, 2011: estimates 30,000 departments; and Dec. 20, 2011: closer to 30,000 departments. ), employing at least one lawyer per department – call it 20,000 more. Governmental legal staffs contribute more – a pure guess at 15,000 federal and 20,000 state and local (See my post of May 13, 2012: law departments of government agencies.).

OK, so how can we correlate the estimate of 100,000 in-house lawyers to other facts? There are approximately one million lawyers practicing law in the United States, but 500,000 of them are solo practitioners who do very little corporate work. Take away 100,000 in-house lawyers from the remainder, then that leaves 400,000 in multi-lawyer private practices.

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Heretofore, no one has combined data on matter management systems (MMS) and staffing or spending benchmark metrics. Such a fertile mash-up, however, is now available from General Counsel Metrics, LLC. MMS Insights reports on 130 users of more than 15 matter management systems in Canadian and U.S. legal departments.

Typical sizes of the law departments that use a MMS differentiate the packages. For example, for the eight packages with the most departments using them, the average department size is 51 lawyers. Custom-application departments, of which there were 19, averaged 14 lawyers. In the smallest range, law departments that indicated they had no MMS or did not identify one averaged 8.4 lawyers. Clearly, the larger the department, the more likely it is to have licensed a matter management package.

If your IT group or your law department would like to learn more about MMS Insights, please write its analyst and author, Rees Morrison.

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Comprehensive legal spending by companies should include settlement, judgments, fines and awards. Data rarely appear on those outlays, but one source found that those “legal resolution costs” amount to about one quarter of internal and external legal costs. That ratio puts those costs at 20% of the total (See my post of Jan. 20, 2009: “for every $1 million spent internally and externally, the law department that conforms to this benchmark ratio spends $250,000 on legal resolution costs.”).

The broadest measure of legal spend should also include the whole array of costs paid for by a company that have a reasonable relationship to legal services (See my post of Sept. 6, 2011: 15 unusual expenses sometimes in legal department budgets; and Sept. 7, 2011: 14 more of those costs.). The total expenditures could rise even more if we included the all-in cost of clients who pitch in with legal-related work such as meeting with lawyers and preparation for depositions and assistance with document production.

Furthermore, a legal department may get support from the company, notably a bit of HR or Finance that might not be charged back to it. Then throw in expenses of workers compensation and claims management. All these costs that spread more broadly than the line items of the legal group we might term “peripheral legal costs.” What might all this amount to?

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A ground-breaking report, MMS Insights, combines data on matter management systems (MMS) with benchmark metrics. Prepared by General Counsel Metrics, LLC, the study reports on 130 users of more than 15 matter management systems in Canadian and U.S. legal departments. This first edition will be followed by a second, in the Fall, which will wrap in all the additional data being collected in this year’s survey.

Focused on North American departments, the first edition doesn’t analyze the many packages available elsewhere, such as substantial players like Benner, Espaider, Gerpro, Iken, Kleos, Legal-Suites, Qualidata, and Tedesco. As they gain benchmark participants, these country-based packages, which are often in a native language, will be covered.

Insights does not yet distinguish between hosted and cloud platforms nor whether e-billing capabilities are included. It does include data on the longevity of packages as well as custom programs, SharePoint implementations, and uses of Microsoft Office products.

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A ground-breaking report, which combines data on matter management systems (MMS) along with popular benchmark ratios, is the creation of General Counsel Metrics, LLC. MMS Insights reports on 130 Canadian and U.S. legal departments that use one of more than 15 matter management systems. Its dozen charts and explanatory text show how the MMS packages with at least three departments compare to each other on such benchmarks as average number of lawyers in the department and total legal spend as a percentage of revenue. Also, the 110-page report collects more than 150 posts from this blog regarding MMS, all organized under five commonly asked questions, edited, indexed, and cross-referenced.

A series of posts here will share some of the findings from the study. If your IT group or your law department would like to obtain MMS Insights, please write its analyst and author, Rees Morrison, at Rees@reesmorrison.com.

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As of two days ago, of the 275 companies that had participated in the General Counsel Metrics benchmark survey, 87 of them named the matter management software they use (including four who listed “custom”). Of those 275 companies, 56 named their contract management package (including nine “custom”). Note that approximately three out of four participants in the GC Metrics survey are U.S. or Canadian legal departments. To my surprise, ten respondents gave the same package for both applications.

The benchmark survey may triple by year’s end, so the two ratios that follow may shift. Preliminarily, however, almost two matter management packages have been installed or every one contract management. Of the 87 law departments with a named MMS, 33 also named a contract management system – so again roughly speaking half the time a department with one solution has the other.

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An article about how an actuary at Towers Watson obtained a patent for a statistical algorithm, in the NY Times, May 13, 2012 at BU7, raises several points about law department management.

Initially, the employee cleared with his boss that it would be worthwhile to obtain a patent, and then “worked with an outside patent firm to translate technical information into layman’s terms for the application.” The Towers Watson law department probably lacked patent experience and had to find and retain a specialty firm.

Later, the lawyer who started the patent application left the firm and someone at Towers Watson had to decide whether to stick with the firm or move the project with that lawyer (See my post of Aug. 14, 2005: transitioning matters; July 21, 2006: moving matters; and June 13, 2006: the decision to hire the firm or the partner.).

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