A Look at Client-Side AI-Powered Legal Spend Analytics Tools
This is a live blog post of a Legal Value Network virtual webinar, A Look at Client-Side AI-Powered Legal Spend Analytics Tools. As with all of my live blog post, I publish as a session finishes, so please forgive typos and misunderstandings of meaning.
- Brad Blickstein, Principal at Blickstein Group and Partner and Co-Head, NewLaw Practice Group at Baretz+Brunelle [Moderator]
- Arun Mistry, Vice President, Legal Operations at Providence St. Joseph Health
- Brad Rogers, Chief Operations Officer and Chief of Staff – Law, Government Relations, Reg Affairs, and Corp. Secretary, TIAA
Brad’s Introductory Remarks. Legal e-billing has been around for decades and only recently have products started using legal AI to drive insights from the data.
What drives disruption? Brad cites four drivers of disruption:
Brad: Technology will not take away lawyers’s jobs; it will bring more transparency to pricing, costs, and how lawyers work. “The MBAs are coming” is something Brad saw in health and medicine and that’s now happening in law. “Replacement Cost Revolution” refers to new ways of getting law done such as offshore resources and ALSPs. And the fourth driver is operating model innovation: rethink how matters are done and the work supporting them. “Flex model” at TIAA disaggregates matters. The lawyers running matters allocate the discrete tasks to different resources.
These disruptors started in 2009 with GFC and now, with COVID, the change is happening even faster. Arun sees the same drivers at work. While law firms have not changed that much – they still bill by the hour – but law departments and legal operations professional face corporate pressure for predictable spend. That drives using predictive tools.
[RF comment: both cite changes in healthcare. In my opinion, that is not a compelling analogy. Yes, healthcare has seen many changes. From both what I read in mainstream media and experiences I regularly hear from friends, neither doctors nor patients have benefited from that disruption.]
Tech, Tools, and Where AI Fits. Brad references an early ROI tool based on e-billing systems. He sees 3 values of e-billing tools:
- Streamline the process, get rid of the paper, and automate review of line items with rules
- Enforce outside guidelines
- Use the data to make better decisions. This has not happened that fast.
Arun discussed “weaponizing data.” Uses Legal Decoder to assess and analyze bills. We had a lot of billing data but no way to analyze it. [RF: I wrote in 2005 that we needed to use ebilling data for analysis.) Providence St. Joe needed a tool to identify savings. Used PoC on $15M of legal spend to flag potential savings. This is where phrase “weaponize data” came from – use it to increase saving + transparency and for benchmarking. Use the analysis in discussions and negotiations with law firms.
Brad points out that modern systems can overcome the limitations of task codes; instead they extract that information by analyzing narratives. Furthermore, they help benchmark and set standards to help align spend to meet or exceed the benchmarks. In sum, modern systems allow not just collecting but also analyzing data. Legal AI contributes by using natural language processing to convert narrative to structural data, machine learning to analyze large volumes of data, and mixing and matching benchmarking data.
Brad discusses AI: outcomes are probabilistic, not rule driven. That distinction and understanding is sufficient to drive significant value. At TIAA, it took 18 months to understand what lawyers did and how much the company spent on outside counsel. Prior to his arrival, there was not a single system to track legal spend. Used (I think about 4 years ago) an AI tool to put in a range of law firm bills (different formats and structures and media) to gather info on spend. This found that 25% of law firm spend was outside of guidelines, which was low hanging fruit for savings.
Brad focused on freeing up lawyers to spend more time on strategy and innovation for the company. This required putting 12 different technologies to track the work and understand if it could be reallocated. That led to reallocating work to offshore lawyers, ALSPs, and discovery. Onit for e-billing, iManage for DMS, will use AI tools to find prior knowledge. Separately, conducted an activity analysis to understand how lawyers spend their time and find opportunities for in-house lawyers to delegate work to paralegals.
TIAA converged to 30 main outside counsel and works with them in partnership. To save money, incentives were not in place for in-house lawyers to reduce spend. Now, Brad and his team have spend control and are incented to manage it.
At TIAA, 90% of spend is still billed hourly. Is spinning up a tool that will estimate cost if a different firm had done the work. Brad thinks AFA and auctions are the way to future savings. Mentions Pursuit for RFPs.
Arun was first in legal ops role at his organization, joining about 18 months ago. He faced all the same challenges as Bard – track spend, understand how lawyers spend time, find ways to analyze data.
Arun asked lawyers how they evaluated bills. The answer was “if it’s reasonable, we just pay it.” He wanted more objectivity around that using benchmarks. And to make sure the right people do the right work. Using Legal Decoder to identify potential savings opportunities. And work on ways to update and enforce outside counsel guidelines. None of this is to grind down law firms – it’s about working in partnership for creating more value by rethinking the work. This leads to, among other discussion, incentives for law firms, including how they compensate partners.
Both talk about the potential for Alternative Fee Arrangements to be a win-win solution but acknowledges it is easier to talk about than to do. TIAA looking at a 4% early discount (15 days) as another win-win.
Audience Q&A omitted.
More and more clients are now relying on very sophisticated, often AI-powered analytics tools—from both startups and legacy providers—to better understand and benchmark their legal spend. Most of these tools provide real-time monitoring and better information for setting budgets, alternative fees and negotiating with outside counsel. Some go a step further and leverage anonymized data to provide detailed benchmarks. Clients who use these tools are often ahead of their firms in understanding what legal work can—and should—cost. We’ll cover what tools are being used, what kind of data is being analyzed, and the benefits and risk factors associated with leveraging these sophisticated tools and frameworks effectively. The discussion will help firms best position themselves to meaningfully engage in conversations where clients are referencing this data, and give some visibility into the way legal operations executives are approaching the challenging task of rationalizing legal spend.
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