In recent years, corporate lawyers long accustomed to charging an hourly rate have found themselves facing client demands for discounts, shared risk deals (where fees are based on results), and flat rates. “Clients now treat law firms as they do other suppliers: They make us respond to RFPs, apply rate pressure, and make us compete,” says John Alber, technology partner (the legal industry’s term for a CTO) at the global law firm Bryan Cave.
The move to new and variable financial models made it more difficult to determine which deals were profitable or used the right talent in a cost-effective manner. At the same time, law firms also needed better ways to identify conflicts of interests before assigning attorneys to cases. What was missing was a centralized, global overview of client deals and resources, a shift from the traditional approach of individual lawyers managing their own clients independently.
At Bryan Cave, Alber saw that demand several years ago and began integrating the firm’s multiple information repositories and defining metrics to gauge profitability on an ongoing basis for each client engagement. “We needed to use that information collectively,” he explains.
The ultimate goal was a set of dashboards for managing partners to see how profitable the firm was across its clients – with drill-down to the client and attorney level to make sure deals and billings met goals. Individual attorneys require the same view of their own clients and billings to better manage their engagements, such as getting the right economic mix of paralegal and contract support based on the profitability goals for each engagement and to assess proposed fee structures before committing to them. “Simply looking at fees billed and collected to calculate what percentage of the standard rate you were realizing — the standard approach — was grossly inadequate because it didn’t show you what you needed to do to compete,” Alber says.
So in 2002, he began a multiyear effort. First, he linked the various repositories — such as accounting, attorney skills and rates, timekeeping, and conflict of interest — so that the firm could analyze the cost and return of both clients and attorneys, as well as where appropriate matches could be made for specific cases. Alber also began to develop, with the firm’s partners, the economic model to assess profitability at the case, attorney, client, and overall levels. The effort started with Excel spreadsheets, so various participants could experiment and test the models using a tool they already knew.
By 2004, the repositories were linked and the initial economic model was defined. Alber could then build the application base for case-planning and create dashboards to monitor the economics of each case. “We created planning tools to see if engagements would make money in various scenarios,” he says. “We also created analytic tools to see how we were doing against plan.” The effort was completed in 2006.
The result was what Alber had originally championed: “The degree of profitability increased significantly,” he says. Since then, he’s begun an effort to include a dashboard on the diversity of personnel assigned to clients, such as race, gender, and sexual orientation, so clients can ensure that their legal contracting meets their internal diversity goals. “And we’re working on a finely detailed view of what we’re doing, what we’ve done, and what we will do for project management visibility,” Alber says. The goal is transparency with clients, he notes — a competitive advantage compared to more traditional, opaque firms.
But Bryan Cave hasn’t kept these systems entirely proprietary. The firm partnered with Redwood Analytics to commercialize the analytic and reporting system for other law firms. One reason was the royalty revenue, which helps fund the firm’s technology investments. But more important was shifting the continued development and maintenance of the software to another party. “The more products you do yourself, the more burden you have with ongoing maintenance,” he notes.
Once Alber transfers the firm to the commercial version of his software, he plans to focus on creating new modules that provide additional functionality. That way, the company can profit from its basic technology without losing competitive advantage. “By the time our competitors change their culture to use the [commercialized] technology, we’ll be further down the stream,” Alber says.