Building the Business Case for Return on Legal Technology

31
Jul
2017

Steven O’Donnell

Early in my career, I worked for a major insurer who faced legislative challenges in regards to the use of credit scoring in determining auto insurance rates. I was tasked to find software that would allow insurance brokers to contact their respective state legislators with messages that would influence the legislation. The project was intense; I had to search for software vendors, issue an RFP, evaluate responses, and arrange for demonstrations. Once a vendor was selected I knew we needed to negotiate a price, but what I did not expect was the internal request to build a business case to measure the return of investment of the technology. I scrambled to try to measure the benefits of the software, had to revise the business case multiple times, and although the technology purchase was eventually approved, that process of proving value extended the purchasing process by months.

Nowadays, I am on the other side of the coin. As a legal software vendor I frequently find myself in the position of providing the inputs for business cases to corporate evaluators. Ever more so with the expanding role of the Office of the General Counsel, which has resulted in the exponential growth of the legal operations department. It is these legal ops professionals that find themselves at the epicenter of that expansion and in need of technology that can bring efficiency and timesaving as well as save the company money. But how can they effectively measure and communicate the benefits through a business case? 

Well, if they use the following tips and practices then they should avoid some of the pitfalls I encountered early in my career and successfully implement technology needed for their department to reach its goals. 

The Benefits?

The business case for legal technology compares the costs of software and implementation to the benefits delivered. For e-Billing and matter management technology, those benefits can be grouped into three primary areas: decreases in legal spend with outside counsel, increase in staff efficiency, and the reduction or mitigation of risk. 

Legal Spend Savings – Organizations can significantly reduce their legal spend with e-Billing and matter management technology. While one could manually calculate this benefit, e-Billing has been so widely adopted that this data can be obtained from both peers and references. It is broadly accepted that e-Billing can deliver the following benefits at a minimum by just turning it on:

Increased Staff Efficiency – Time spent on tasks such as opening and assigning a new matter, generating a report for the department or creating a legal document all take administrative time that could be spent on higher value work. You can easily calculate this benefit as savings on a percentage of salary. 

Let’s say it could take two hours for the legal team to generate a report. With matter management software the same report is delivered in 10 minutes. That’s 110 minutes saved. If 500 such reports are run each year, then 55,000 minutes per year are saved. If the fully weighted salary of the employee(s) is $80,000 than the annual value of that time savings would be approximately $63,500. 

Reduction/Mitigation of Risk – Reducing risk is potentially the most valuable benefit but may be the hardest to measure. If technology was in place would the staff be able to react quickly and avoid an expense? Would legal outcomes improve? If this is a pain point for your company than it is certainly worth investigating. Examples of this could be a reduction in fraudulent claims payouts, avoidance of non-compliance fines from regulators with the ability to respond to inquiries quickly, and a reduction in the cost of employee policy breeches with technology in place to quickly respond to incidents. 

Consider the business case early and often

The recommendation here for legal operations professionals is to realize that they will have to build or provide inputs to a business case regardless of the situation. Rather than scrambling to prove value at the end of a technology evaluation, the recommendation is to consider the return on technology from the first moment and throughout. A technology roadmap can help prioritize projects to pursue according to the return they are expected to deliver. As planning takes place, collecting inputs and statements from those doing the work can be invaluable in presenting your case later. I suggest that you record how much the department spends currently, how long it takes the department to process a contract, respond to a request from a business user, and how much time and effort IT spends to support that process. 

It can be difficult to identify all the benefits

Often technology purchases happen because the department or company has faced a change that has created a specific pain point. For example, legal spend may have risen suddenly due to influx of litigation and the management of outside counsel, subsequently the resulting invoices overwhelm the team, or say an acquisition has taken place and the departments workload doubles overnight. In those situations it is very easy to concentrate on solving the immediate problem, but it is also possible that the software being considered positively impacts other areas as well. I recommend asking the software vendors to provide their value propositions based on similar client results. This will provide insight on the full set of benefits that technology provides.

Presentation of an internal business case involves personal risk

It can be both risky and daunting to put forward a business case to company leaders showing how much can be saved. If the technology is not adopted fully and the benefits are not realized, the recommendation as a whole will be brought into question. You will need to show the value of benefits that stakeholders generally agree can be achieved, and keep in mind that it will take time to get to that result. If the company estimates it can save $1M per year by implementing e-Billing, it’s important to communicate that this benefit will be seen over time as you have to implement the technology, on-board your team and create and enforce new processes. Remember; on average it takes a company three years to fully realize that benefit.