I have long worried that general counsels were not using e-billing software properly, which is to figure out law firm cost-effectiveness. It turns out the worry is more basic – too many law departments are not using e-billing software at all. 

Five years ago I wrote “As e-billing grows, the data to evaluate law firm performance becomes more readily available. And the use of this data will be not so much to spot the errant fax charge or impermissible two lawyers at a deposition; rather, it will be, as in health care, to examine what in law practice works and what does not. This is less about following detailed rules and more about overall report cards.” (See Is BigHealth a Harbinger for BigLaw.)

Today, I was shocked to read Warning Bells, a blog post by Pam Woldow of Edge Consulting. She reports that in an audience of 35 large corporate law departments, only 3 report using e-billing. Confirming my 5 year-old fear, these 3

“were using it primarily to monitor and pay legal bills and flag bills that charged excessive rates or added too many timekeepers to the team. … there is little excuse for failing to take advantage of readily-available data-mining tools that are both sophisticated and relatively easy to implement.”

How can this be? We have just gone through an economic crisis; many general counsels were forced to cut spending. Without the business intelligence provided by e-billing, it’s not clear how GCs can intelligently choose and allocate work among outside counsel.

I would have thought that by now, large law departments would have pooled e-billing data (suitably anonymized) to assess law firm cost-effectiveness and provide “how much should it cost” reference points. Instead, we learn that many companies do not even use e-billing.

Until outside counsel management becomes data driven, general counsels will be missing huge opportunities to reduce cost. This is an invitation to have Corporate Procurement take over outside counsel selection and management. Next time you hear a GC whine about outside counsel cost, ask him or her (1) if the department uses e-billing and (2) if so, what types of analysis they have run on the data.