Beyond paper

There are days when in-house counsel must legitimately wonder whether they have become accountants and clerks, sifting through mountains of paperwork necessary to keep track of their dealings with outside counsel.

In recent years, electronic legal spend management systems have gained prominence as a way to deal with the document blizzard. The promises are compelling: a “paperless” way to collect and share data on spending, hours, and budgets as well as tracking of performance, better efficiency, and ultimately savings on legal spending.

It all sounds very nice, but how does it work in the real world? “You know exactly what is going on at all times and you get much better control for your costs,” says Serge Reynaud, corporate vice president of human resources of Kruger Products in Toronto. “You get much better control of your legal spending and legal issues.”

Kruger Products, which uses a half-dozen outside legal firms in Canada and the U.S., took the leap into electronic billing and file management three years ago when it purchased a system from Seattle-based Serengeti Law after comparing it with a couple of other competing platforms. Because he is the sole member of Kruger Products’ legal team and often travelling on the road, Reynaud has found the Internet-based system allows him instant access to any files regardless of his location. “Because we are a privately owned company, I get a lot of questions as to how much money we have spent thus far on certain files, I can have it right at my fingertips,” he says. In the absence of a web-based billing and file-management system, he would have to resort to calling a clerk or assistant hoping that they find all of the necessary information.
Of its relationships with outside counsel, the most important for Kruger Products is the one it manages with Gowling Lafleur Henderson LLP’s Toronto office, the company’s main firm for intellectual property matters. “In a typical month, we may have anywhere from between 50 and 100 invoices going to a significant client,” says Gowlings partner Chris Pibus. Processing that monthly volume “was a challenge” in the case of Kruger, he adds.
Gowlings and Kruger Products approached Serengeti jointly to create the e-billing and document-management system it now operates. “We did it really as a three-party joint effort so that we all knew from the beginning how it would work and we were able to construct a system I think that is very well-suited to having many different matters going on at the same time,” says Pibus.
A typical IP file can last a couple of years, he adds, meaning potentially thousands of invoices for a portfolio of files with a client. Having the system in place has “reduced the stress” of keeping on top of what was before a steady stream of paper invoices. “To be able to manage that through a system that allows a client to see at a glance the history of a file, to see what is current on it, to see what has happened over the past months, and to be able to process it electronically rather than dealing with stacks of invoices, there is a real advantage to it.”
While legal e-billing and document-management providers typically promise cost savings for in-house counsel of as much as 15 per cent annually, Reynaud estimates the savings to his firm in outside legal costs would be between eight to 10 per cent. Because systems such as Serengeti’s provide better quality information by breaking it into key categories, it does provide in-house counsel with data to give it leverage with outside legal firms on costs when required. “I guess one could say you can play hardball although I am a little bit reluctant in utilizing that term,” he says. “But you certainly have much better control and much better vision of what is going on and how to control your costs.”
In Canada, Serengeti counts as in-house clients the likes of Kruger, American Express Canada, and J.D. Irving Ltd. and has a total of 284 outside law firm offices across the country using its system for e-billing and document management. While the Seattle company says it can tailor the software to work with any size of client, it may deliver the best return for smaller legal offices such as Kruger’s. “Smaller law departments often find that it is a necessity for them because they have fewer in-house resources to manage all the legal work that they have,” says Rob Thomas, Serengeti’s vice president of strategic development. Outside law firms “can drown you in paper and e-mail,” he says. “If you are an in-house counsel and you are working with 30 or 40 law firms on 100 different projects, it is just a logistical nightmare. You are getting all this stuff in different logistical formats and you have to keep track of it all.”

Thomas says a typical relationship with an in-house counsel client starts with a phone call and a test run of the system. Once a client signs on, the software firm configures the system to the company’s specifications to track required fields of information and train client staff and outside firms, if necessary, about how to use the platform. “It is basic project management, I tell people, but it is project management for lawyers,” says Thomas. “It involves those kinds of things that you would expect: status and deadlines and documents and basic information, budgets, bills, results, evaluation forms of outside counsel.”
Serengeti cites return on investment studies that detail savings “north of 10 to 15 per cent” for corporate clients on annual legal spending. Those savings come in areas such as working with budgets more regularly and creating a project plan and tracking progress against it. It can even go to little things like the cost of photocopies, for example. “Many companies say, ‘We will not permit a firm to make a profit off of photocopies, you are not in the photocopying business, you are giving us legal services,’” says Thomas. The system will catch “over-billing” in such flagged and monitored areas. “Longer term, you really get savings by tracking the efficiency; who does the best job for you in given types of projects,” says Thomas. “How long does it take certain firms to do real estate or patent work? So over time the idea is that you are sending more work to the firms [that] are most efficient, who get the best results for you and less work to those that aren’t. That is where the big savings are.”

Setting up a system such as Serengeti’s is faster than it was in the past because many outside law firms already use one or more e-billing and document-management platform. The speed of the startup process is determined by how motivated the law department is, says Thomas. It can range from a few weeks to three or four months for larger law departments. “But it is not a year-long IT project.”
Thomas says costs for e-billing platforms, which are carried by corporate law clients, range depending on the size of the legal department with more discounts offered to companies with bigger legal budgets. Most companies end up spending half to one per cent of annual legal spending, Thomas estimates. “If they are saving 10 to 15 per cent, that is a pretty damn good return on the money.”
While e-billing and document-management platforms all seem to offer the same thing — a client-controlled set of ground rules — their value can ultimately be determined by asking a simple question. Would you give it up and go back to the old, paper-based way of doing things? “No,” says Kruger’s Reynaud. “Once you are accustomed to it and you realize all the advantages it represents, why on earth would you go back to a system that was time-consuming and not as precise as the one that I have got right now. To me this is just not an option.”

A competing e-billing and document-management platform offered by U.S.-based CT TyMetrix has proven to be a popular option for some of the biggest legal departments in Canada, in particular the country’s big banks. In March, Royal Bank of Canada announced it had engaged CT TyMetrix, following earlier implementation of the system by the Bank of Nova Scotia and TD Bank.

The first to adopt CT TyMetrix’s system was TD, which began the implementation process in 2002-03, says Bob Aziz, TD’s former senior vice president and assistant general counsel. “I looked at different [systems]” after first thinking TD would have to create such a platform from scratch, recalls Aziz, who is currently executive vice president and chief legal counsel with Oxford Properties Group. At the time he started the process, TD was working with about 850 outside law firms, which the bank was determined to pare down. As part of the process of implementing the new electronic system, it sent out a request for proposals to a much smaller group, just 200 firms, to compare their rates and specialties, and informed internal business units that they would in the end have far fewer outside firms to deal with. The RFP process helped TD reduce its roster of law firms to less than 120.
It also trimmed its legal bill by more than 30 per cent each year for the first three years, a combination of working with fewer, typically larger firms; requiring outside law firms to adhere to a new, U.S.-style billing system; and having better information about the bank’s legal spending on a real-time basis. “The TyMetrix is just part of an overall solution to managing legal work,” says Aziz. “It allowed us to sort of get a hold of the data that we didn’t have. We knew that we were buying legal services, but we didn’t know whether we were buying work for loans or litigation or work for leases. There was no breakdown.”
Ultimately, embracing e-billing resulted in better file management at the bank, says Aziz. The system gave TD the information necessary to determine if files were staffed properly and by the appropriate level of outside legal staff. “It’s a task-based billing system which is common in the U.S., less common in Canada, although it’s becoming more common.”

Connecticut-based TyMetrix says the most obvious benefit of platforms such as its T360 system to potential corporate clients is getting rid of the paper. Keith Brown, a principal business consultant with the software firm who practised at a Boston law firm prior to joining the company, recalls working in front of a wall of red legal file folders. “You take those folders and turn them into something called ‘matter management,’ where everything around the case that goes on is moved into an electronic file box. Documents can be uploaded against it and e-mails from outside counsel can be associated to the matter.”

Browser-based, e-billing systems are designed to be easy to install with little, if any, requirement for support from a corporate IT department, says Lee Matthews, another principal consultant with CT TyMetrix. “If you can use e-mail and search the Internet, you can use one of these systems,” he says. E-billing platforms can also typically be set up with little or no involvement of the IT group. “The appeal to the smaller end of the market right now is honestly the legal department in-house is usually on the last of the list of IT’s priorities.”

While going paperless is the most obvious pitch to in-house counsel, Brown says in the end the ability to manipulate the data and examine spending is where the value of the system really comes into play. “The legal department begins to have the ability to look at its vendors and where it is spending in lots of different ways,” he says. That’s done “in ways that are sometimes eye-opening” and in ways that sometimes just confirm the lawyer’s gut feeling “from having worked as an in-house lawyer for 10 years.”
Aziz put TD Bank on the map not just in Canada but also in the U.S. with its early implementation of e-billing. But it’s getting easier as suppliers fine-tune their systems and, perhaps more importantly, outside legal firms grow accustomed to using electronic platforms. “It is surprising that it has taken so long to catch on because you do save money, but people are reluctant to change from what is comfortable,” he says. “TD had a more difficult time of it because we were asking the law firms to make big changes to the way they did things. By the time Bank of Nova Scotia came along, they used a lot of the same firms but they had some pushback, but not as much, and Royal is going to have it even easier.”

Despite his early adopter status, Aziz does not have an e-billing and document-management platform at Oxford. “We don’t, partly because we just don’t spend that much. I haven’t been convinced we need it here yet.”

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