Legal Billing Software is Partially Effective in Reducing Outside Counsel Spending
As we have already seen, most legal departments simply have no legal spending management system at all
— presumably, most of these departments are reviewing outside counsel bills the old-fashioned way, by hand (or worse, not reviewing them at all).
Among the relatively few legal departments which do use legal billing management software, 9 out of 10 in-house counsel find it “not effective” or only “somewhat effective” in reducing their monthly spending on outside counsel.
“The experience of in-house lawyers with legal billing management tools is a decidedly mixed bag”
Looking a bit deeper into the results, it becomes clear that the experience of in-house lawyers with legal billing software is a decidedly mixed bag. Within the minority of legal departments which do use legal billing software, only 10% find such tools “very” effective, while 68% find them only “somewhat” effective. Those falling into the latter category apparently experience significant “soft costs” in using their spending management systems — especially the drain on employees’ time spent analyzing the output of the software and individually negotiating bill reductions with each outside law firm.
Moreover, a significant minority (21%) complain that their legal billing management software is simply “not effective” at all — in significant part due to the fact that the software generates too many “false positives” (apparent billing errors which turn out to be typos or only minor discrepancies) while failing to catch significant overbilling issues by outside counsel (“false negatives”).
"To end on a high note, it bears repeating that the “lucky 10%” who find their spending management system “very effective” reported that they “consistently obtain reductions” in outside counsel spending. This is intriguing, as it suggests that many other legal departments could also reduce spending if only they had an effective tool to identify such savings opportunities."
The lesson here is that, while legal billing software clearly has some potential value to in-house legal departments, as of today this potential value rarely translates into actual, measurable reductions in outside legal spending. In-house departments should carefully evaluate the available products and services — since our survey results show very clearly that all of these systems are definitely not created equal and some tools, unfortunately, appear to raise more issues than they resolve.