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Vendors tout the benefits of their software, including its return on investment, but none of them can offer objective, comparative and empirical support. A recent white paper on contract management software directs us to this point. The conclusion states that “contract automation and management can save time, cut costs and improve performance and efficiency better than almost any other initiative.” The claim of “better than” implies a quantifiable basis for the comparison.

Managers of law departments crave proof of such a claim, but their craving will go unsatisfied. Not only do we lack evidence for productivity gains from contract management across a range of companies in comparison to a control group, but also we can’t take the next step and match contract management to intranets, or matter management, or instant messaging, or scanning, or electronic billing, or predictive coding in e-discovery, or other software capabilities. Then to even contemplate how contract management stacks up against non-software “initiatives” – fixed-fee arrangements, offshoring, para-professionals, CLE, Centers of Excellence, and more – is at this time a remote dream.

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When someone refers to “licensed” software it excludes software that it bought outright. That probably doesn’t happen much with law departments, but the term “commercial software” has broader, and more accurate coverage.

In pursuit of clearer terminology, it may be more precise to refer to “home-grown software” rather than “customized.” Home-grown sounds pejorative, but it gets to the root of the idea: a company plants and cultivates the software itself.

Many law departments make changes to packages that they license (commercially-available software) Changes range from minor modifications of field names to wholesale engrafting of new code. A term that suggests the first, tweaks and revisions of implementation, is “configuration.” A department configures its e-billing system according to the rules of invoice review the department chooses.

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A respectable view holds that in-house lawyers should draft and interpret contracts, possibly negotiate them, but not administer them. The term “contract management” means different things to different people, but is roughly coterminous with “contract administration.” Exari tried in a recent survey to gather some data about practices in this area. Their white paper, Corporate Counsel Contracts Survey Report, Dec. 2011 at 13, includes two pie charts. One, covering the sell side of contracting, shows that the legal department “owns contract management” in 66% of the approximately 100 respondents, with sales “owning” it in 17% and “other” in 17%. As might be expected, when companies buy goods and services, the percentage of legal department ownership slips, to 59%, the share owned by procurement reaches 28%, and “other” has 13%.

The distinction between sell side, which generates revenue for the company and may require legal review of the buyer’s contract form, and the buy side, where a company has more leverage and a procurement department to deploy it, makes sense. With both sides, the Exari survey suggests the law department has oversight responsibility more than half the time.

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Surprisingly, of the law departments that completed the ALM benchmarking inquiry about recording lawyer time, 9 of them said they track it and 41 said they did not. However, if we assume that the 32 non-replies were also denials of time tracking, then overall about one out of nine law departments track time (9 out of 82). This ratio is in line with, or a bit higher than, estimates typically seen. It is not my impression that time tracking is resurgent.

To learn more about the Law Department Metrics Benchmark Survey of ALM Legal Intelligence, click here for ALM’s website.

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Respondents to last year’s ALM metrics survey ranked seven possible internal obstacles for law firms to fully implementing alternative pricing strategies. The leading reason was “Law firms are more comfortable with the billable hour” (2.2 average ranking where 1 is most important). Next was “Absent better metrics and data, it is difficult to determine alternative values” (2.9), followed by “Firms have insufficient experience defining or managing work on an alternative basis” (3). After that, “There is not sufficient billing history or pricing methodology to know how to bill AFAs” (3.6), followed by “Other” (4) and “Alternative fee arrangements are too risky for the firm’s overall revenue” (4.3) and “Partners object or refuse to cooperate” (6).

The gaps in the average ratings highlight how dominant the respondents thought the first reason was. The gap to the next reason is 33% of the lowest score. “Absent metrics” and “insufficient experience” are in a virtual dead heat (2.9 and 3) so they are perceived to be equivalent blocks. Then a 20% gap between the third ranked reason and the fourth (“insufficient billing history”), which is close to the fifth (“Other” at 4). Partners’ objections were off the chart low. Rankings tell us something; gaps between ranks adds to our understanding.

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One of your law firms might volunteer to analyze the bills you have paid and bring to bear more talent than you have available. KMWorld, Feb. 2012, at 11, brought the possibility to mind as it describes how Byran Cave has a Practice Economics Group. The firm created the Group “to develop tools and techniques to improve the firm’s ability to price projects accurately and competitively and to manage those projects to completion on budget and on schedule.” The capabilities of the Group, and similar staff in other large firms, could extend to poring over your matter management system’s data and presenting the results. Even better, if a firm could combine your data, anonymized and secured of course, with data from other clients and from their own matters handled, the empirical insights would improve even more.

An innovative law firm with reach in a defined area of representation could amass data, hone analytic and presentation skills, and develop an offering for the market with formidable competitive advantages. Meanwhile, law departments who make their information available will approach alternative fee arrangements and budgets more confidently.

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At some point of departmental size or maturity, general counsel often have a stake in several kinds of legal software. They and their managers confront whether to license “point solutions” that provide specific capabilities or to license fewer solutions that combine capabilities. Some departments favor a single vendor whose offerings cover the waterfront, an all-in-one path; others want to mix and match from however many vendors are needed, a best-in-breed path.

In the e-discovery space, the strategic fork often crops up. Do you license different software to manage the collection, processing and review of documents or do you use one package that handles them all? Similarly, with matter management do you use a database from one vendor, an e-billing function from another, a dashboard from a third, and license a third-party report writer?

KMWorld, Feb. 2012, at S4-5, covers the basic pros and cons of these software strategies. All-in-one has deployment and training benefits as well as simpler vendor management. Best-in-breed provides more speed and agility to innovate, it can allow a law department to align capabilities better with needs, and it can give cost flexibility.

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Law departments like law firms that innovate to meet the department’s needs. As an example, KMWorld, Feb. 2012, at 10-11, describes one client that uses Littler Mendelson to mediate, settle and defend EEOC (Equal Employment Opportunity Commission) complaints. The client’s law department wanted a nationwide fixed price for that work. The law firm, which focuses on labor and employment law, scrutinized, altered and streamlined every step of how EEOC charges are handled and rolled out early in 2010 customized software to enable the new procedures. The software includes a dashboard to show counsel and clients an aggregated view of where the company stands on charges.

As described in the article, this exemplifies both innovation and teaming, including, I assume, some differences in how the company responds to charges. Even if Littler were to market the software capabilities for the benefit of other companies, the originating company will benefit from a flow of improvements. Many law departments could challenge their primary firms to redesign software, workflows, work management and resources to the benefit of the department.

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The more ideas and possible mixes and matches a law department manager has available to choose from, the more …

We know intuitively that as the number of choices increase, the number of possible combinations of those choices increases even faster. The mathematics that makes explicit how those combinations increase falls into the field of permutations and combinatorial functions. My latest column for InsideCounsel, published February 13, 2012, gives examples of combinatorics for legal departments.

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Wormhole as Best in Show at LegalTechNY?

Here is a technology flash from Charles Christian’s American Legal Technology Insider (#43) February 2012, at 5. I quote his note in full.

“The most interesting product we encountered at LTNY 2012 was a system not on public show but merely in the final stages of development. All we can say is its codename is Wormhole and it has the potential to transform the way many inhouse legal teams manage their relationships with outside counsel. Watch this space for further news.”

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