Category: Legal Operations

Legal tech is at a tipping point. Demand for solutions that automate menial tasks and enable organizations to operate more efficiently is accelerating adoption, fueling significant growth across the sector. And with greater adoption comes increased investment. Investors who historically shied away from legal, are beginning to add legaltech companies to their portfolios at a rapid pace.

Jean-Marc Levy, Operating Partner at private equity firm Edison Partners and former CEO of risk and compliance management platform ComplySci, has noted strong similarities between the growth trajectory of fintech, regtech, and now legaltech.

Bodhala CEO, Raj Goyle, recently sat down with Jean-Marc to get his thoughts on these parallels – everything from the convergence of technologies and the waves of innovation that technology businesses undergo, to what makes these solutions attractive to investors and how to build a successful platform solution.

RG: Jean-Marc, thanks for taking the time to chat with me. You have a robust background in fintech and regtech – how did you get into that space?

JML: I’m an engineer and computer scientist by training — I use technology to solve problems. After working for several years at the New York Stock Exchange, I looked at the regulation, compliance, and governance space and it became absolutely striking that these markets had the exact same characteristics as the early fintech ecosystem. They had fragmented and inefficient processes, data sets that didn’t talk to one another, no standardization, and no benchmarks. It was clearly a space where technology could make a huge difference – so I dove in.

RG: You mentioned something recently that really resonated with me – you think that legaltech is currently where fintech and regtech were roughly 15 years ago.

Obviously, you’re an expert in regulatory issues, compliance, and a successful operator and investor so I’m curious to know — what makes you think that? What are you seeing in legaltech that makes you think we’re in the very early innings of something huge?

JML: Taking a step back, if you think about the history of fintech and regtech, we’re probably on the third or fourth wave of fintech and regtech innovation.

The first wave of fintech innovation was primarily around taking any process related to a financial transaction, often a tiny element or the entire workflow, and taking inefficient manual processes and simply automating them — nothing else. No other value-add, quite frankly. But it was enough to create some very successful businesses in that first fintech wave.

Regtech is very similar. The initial first wave was just automation. As a compliance officer, for example, you need to manually review a whole stack of financial statements for your employees. Just allowing you to do that electronically was a huge opportunity. But you could argue there was very little value-add other than simply automating a manual process.

Once people get accustomed to automating very manual tasks, you flow into the second wave of innovation — how do these tasks constitute an overall workflow and can that workflow be enhanced and made more valuable through automation?

In the second wave of regtech innovation, you start looking at how the automated parts of the workflow can actually create more opportunities for value. By definition, as you continue to evolve those processes, you start introducing concepts like standardization, so that certain workflows are always consistent, with reliable data sets.   

The third wave of innovation involves taking all those workflows and allowing them to become interoperable and communicate with one another. It’s all about data standardization, APIs, microservices, and making your platform open enough so it can incorporate other data sets to create more value.

Legaltech is likely around the second wave.

RG: Are you seeing a big convergence between fintech, regtech, and legaltech?

JML: What I’m seeing more and more is actually the lines and the boundaries becoming increasingly blurry and porous. For example, Bodhala could technically be characterized as a procurement tech solution and a legaltech solution, right? But what does the convergence of all of those technology-enabled markets really mean for firms that are specialized in just one of the areas?

This convergence that we’re seeing now in this fifth wave of innovation is both a challenge, as well as an enormous opportunity. It’s a challenge because if you don’t pay attention and keep your focus solely on your core market, a lot of people around you that may not be “pure” legaltech companies, but are adjacent, are going to start encroaching on some of the things that you do.

On the other hand, the opportunity is that you’re not limited to marketing yourselves to one audience anymore so you can expand and specialize within certain areas.

I think the fifth wave of innovation is actually much broader than just a single segment like fintech, legaltech, or procurement tech — I see a huge convergence.

RG: In your experience as a successful tech operator, why do you think people, markets, and sectors do not always act rationally? Why do tech companies have to go through all of these waves of innovation and “cross the chasm” even when the ROI is clearly there?

JML: It’s a combination of things, but I think the most important transformation that I’ve seen in the course of my career is that, even in smaller companies and very much so in larger companies, there is no such thing as a purchase decision that’s made by a single individual. This is a transformation that has taken place over the last 10 or 15 years.

It started with larger companies, but we’re seeing it everywhere now as businesses become more collaborative and less siloed. Almost every purchase decision has multiple stakeholders, so even though the ROI and savings is clear to the General Counsel, for example, others will ask “Are we still going to be using the best vendors? How will this affect our relationships? How can we ensure compliance?”.

There are so many stakeholders involved in these decisions now that you have to be able to sell to all of these personas that have different value propositions.

RG: What are the characteristics of a market that’s right for a technology solution?

JML: Typically very fragmented industries or industries with a lot of niche vendors — like mom and pop shops that solve a very niche problem — and where there is very little standardization of data processes and workflows. And simultaneously, there’s a great deal of pressure to generate customer-facing value and not spend as much time on back-office systems that are not perceived as value-creating.

These are the characteristics of a market that’s right for a technology solution based on what we saw in fintech 30 years ago and what we saw in regtech about 10 years ago.

We’re starting to see this in legaltech now too. There are a lot of really good companies that solve very specific problems, like e-discovery solutions or Bodhala in outside counsel optimization, for example. But what we haven’t seen yet in legaltech is the emergence of more sophisticated workflows within the legal organizations that incorporate several of those niche products.

RG: Legal has a reputation in the investor world as being too hard to sell to because it’s a clubby and relationship-driven market. But you’ve mentioned previously that this is what people used to say about financial services 30 years ago — tell us more about that.

JML: If you were a technology vendor in the financial services space in early fintech waves, you were wondering how to get in the door at Goldman Sachs or at the small hedge funds. It was all about word of mouth or who you knew and a lot of transactions were taking place just with a handshake.

But a lot of those preconceived ideas become immediately disrupted once you have a successful proof point. These proof points are typically much easier to achieve when you’re focusing on the niche solution and a very specific aspect of a problem. All kinds of digital transformations begin by addressing a very narrow, niche problem that opens the floodgates.

RG: Why do you think we’re seeing more — and will continue to see more — activity in the private equity, growth equity, and venture capital space around legaltech?

JML: The number one reason is clearly valuation. Tech companies, especially if you’re a SaaS business and have a predictable model, attract much higher valuations than less traditional growth-type companies.

Secondly, I think that it’s because a lot of private equity firms like very systematic, predictable, measurable models. Because of the nature of SaaS businesses or technology-enabled businesses, it’s easier to understand businesses and put systems in place around them that mimic what private equity people want to see.

As a SaaS operator, you’re already tracking some very specific metrics that are very attractive to private equity firms. If they want to invest in a more traditional retail business, for example, there are systems in place, but they don’t necessarily align as well with investors as technology-enabled businesses would.

I think the main driver however is still the valuations and if tech starts cratering substantially at some point, then I’m sure private equity will get very excited about something else at that point.

RG: For a convergence of sectors — in procurement, legal, regulatory, and compliance — to happen, obviously a lot of investment dollars have to flow in. If you look at the top PE shops in five years, do you think they’ll have double the number of portcos in these sectors?

JML: They won’t necessarily have double the number of portcos, but they will have much more revenue associated with the space.

When convergence like that happens, it follows a model. A good investor wants to find a reliable, solid, healthy platform that is already well managed, well-run and has some good, strong independent growth on its own. Then, they want to start bolting on several pieces to turn that platform — both organically and through acquisition — into a broader and more converged platform.

There are still very few massive platforms out there which is why private equity firms are still very excited about finding any kinds of business that could be a platform to build on.

Private equity shops are obviously investors in tech, but also are huge consumers of any kind of tech — whether it be procurement, legal, et cetera.

RG: Is there any threat to the notion that private equity will continue to invest in the legal space and then also become consumers of this space? What are the big macro forces that might challenge your premise?

JML: I’d worry more about a disruptor — someone who understands the concept of the fourth and fifth waves of innovation and who has come up with a great AI-based solution that completely turns around a process to make it more efficient. That’s truly very existential at that point.

Knowing my gut, being a technologist and having seen several innovation cycles and disruptors come on the stage, I’m more worried about a brand-new disruptor that nobody saw coming who investors are now enamored with.

RG: As you touched on earlier, when you’re a small business you’re thought of as an add-on to another platform. But as you get bigger, you hope to eventually be thought of as a platform.

To other founders out there, how should they think about the journey that they need to take on day one? Should they think of their businesses as a platform from the start or is it more organic than that?

JML: I think most people have thought it is that a platform is a business that could organically, even if it just stays in its own space, continue to build and grow at a very attractive pace.

So, for example, if your business cannot organically grow 15 to 20 percent, it wouldn’t be thought of as a platform. A platform is really about having enough customers that you can start selling them more and more stuff and have a predictable, sustainable source of growth that can allow you to do small acquisitions, organic experiments, etc. But it’s also about scale to some extent, total addressable market, and total standalone organic opportunities.

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Legal industry innovation is happening today — albeit slowly. But Bodhala is on a mission to create a transparent, functional market for legal services, using data to illuminate price discovery, drive competition, and foster innovation.

Want to be part of the next wave of legaltech innovation?

Get in touch with our team of legal industry experts to find out how Bodhala can help you run your legal department like a business with data.

Most corporate legal departments haven’t the slightest idea about the should-cost of their legal services, leaving them to be idle price-takers to law firms’ exorbitant fees.

But Bodhala is changing that.

Bodhala CEO, Raj Goyle recently sat down with Darius Gant, host of The Darius Gant Show, to discuss his journey from congressman to tech entrepreneur, the broken economics plaguing the legal services market, and how Bodhala is leveraging data to create pricing transparency for corporate legal departments.

It’s a great listen — check it out!

Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.

For many corporate legal departments, data analysis is like buying tickets to a cover band for your favorite group and expecting it to be just as good. Sure, the tickets were less expensive but the group is a little pitchy, and they don’t hit the high notes like your favorite lead singer would. 

Many corporate legal departments onboard eBilling systems expecting them to play double duty: eBilling plus real-time, data-driven analytics and insights. In almost every case, the legal operations team – and the GC – is disappointed when they realize how long ebilling implementation takes, and that they can’t get the analytics they expected and need.  

So what’s the problem? While eBillers can be great at helping you facilitate payments, they are just not set up to deliver accurate analytics or meaningful insights. 

Have you ever heard the phrase “garbage-in, garbage-out”? Legal billing data is tricky – it’s inconsistent, mis-tagged or categorized, and many times it’s missing altogether. Sometimes referred to as “bad” or “dirty” data, a messy data set means messy reports and misleading insights. 

Unfortunately, eBillers suffer from this garbage-in, garbage-out problem. They don’t do the necessary cleaning and restructuring necessary for accurate reporting, which often leads to poor decisions based on faulty data insights. 

Even though eBillers were not purpose-built to surface actionable insights, by layering on a sophisticated legal spend management solution that ingests, cleanses, and enhances your data, you can compound the value of your eBilling investment. 

So what’s the impact of “bad” data?

1. Incomplete Narrative on Outside Counsel Spend

It might be easy for you (a human being) to look at an individual invoice and determine that hours billed for ‘Gibson’, ‘Gibson Dunn’, and ‘GDC’ can all be attributed back to the same firm. Computers aren’t as smart. A computer needs the name to be identical to crunch numbers for that firm. 

To get your software to do what you need, you would have to make sure that all the mentions of ‘Gibson Dunn’ are the same across all invoices – a near impossible feat to accomplish manually. 

As we mentioned, while eBillers are great at facilitating payments, they are not so great at cleansing data. So when you go to an ebiller to crunch numbers – whether about an individual firm or in comparison to other firms, you’re almost certainly not seeing the entire picture. In fact, you might be seeing numbers that relate to less than 25% of invoices per “firm”. The results can be extremely inaccurate and misleading. 

You may be thinking, “well, my data is definitely not that bad.” Au contraire, my friend. 

Bodhala completes an average of 41,063 law firm name standardization every year – per client. Average annual timekeeper name standardizations per client? 63,552. But don’t fret, you’re not alone. Even the most sophisticated corporate legal teams suffer from this challenge. 

Without cleansing and standardizing your data, it’s tough to to accurately analyze key metrics, such as:

• Average spend per law firm
• Average partner/associate rate per law firm
• Average practice area spend per law firm

These metrics are critical to obtaining a clear picture on your overall outside counsel spend. What’s more, you likely rely on these numbers – and many others – to make your most important strategic decisions. Without accurate insights on these data points, how can you ensure you’re really hiring the right lawyer at the right law firm at the right price?

2. Overpaying for Inexperience

It’s not uncommon for partners at one firm to equate to associates at another firm. Matriculation standards vary from firm to firm, as do business models. And it’s not unheard of for firms to inflate titles to boost billings. This can lead to misleading data for corporate legal departments.

This lack of title standardization prevents true apples-to-apples comparisons, making it really tough to compare ‘partners’ or ‘associates’ from firm to firm. 

Without a basis for accurate comparison, how can you confirm that you’re really getting as good of a rate as your law firm claims? Leaving inaccurate timekeeper levels in the mix enables law firms to continue costly antics that rack up your rates and pad their wallets.

Bodhala completes an average of 2,711 timekeeper level corrections per client every year. Those kinds of numbers can make a serious difference in the average partner rates, making accurate comparisons really tough. 

By using a system that will normalize timekeeper levels, you can properly model the rates paid to partners versus the rates paid to associates and ensure you’re getting the value you expect and experience you need for your matters.

3. Inaccurate “Should-Cost” for Matters

When it comes to your matters, you need to have realistic expectations of what they will cost. But a lack of standard practice area taxonomy, and missing or mis-tagged practice areas can leave your team in the dark when it comes to benchmarking upcoming matters. 

Without standardization and accurate data, it’s impossible to gauge key metrics such as:

• Average practice area spend
• Average matter cost
• Average matter duration

Again – you guessed it – this is an extremely common problem, even for the most advanced legal ops groups. Per client, Bodhala averages 34,131 practice area adjustments every year. But by using AI and machine learning to clean, standardize, and backfill blank practice areas, we enable meaningful analytics and actionable insights. Bodhala even enhances your data, supplementing it with sub-areas and matter tagging for more granular analysis.

So, where do you go from here?

Armed with insights gleaned from clean data, your team can make more strategic decisions, accurately forecast costs, and ensure you stay on budget.

The events of the past year have accelerated corporate legal departments’ need for and reliance on data. But you don’t just need data, you need good data!

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Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.

With mission-critical legal matters in play, it might seem easier to “deal with it later” when it comes to data or budget management. But with companies expecting their legal departments to do more with less, legal spend management software can deliver the tools and data you need to maximize every dollar and improve collaboration across departments. Actively managing your spend – from firm selection to staffing and invoice review – is no longer a nice-to-have; instead, it’s a necessity for modern corporate legal management. 

At Onit, we often see corporate legal departments invest real money into eBillers with the intention of simplifying bill payment and supporting data-driven insights. While eBillers are great for paying invoices, they are not purpose-built for providing sophisticated analytics, let alone surfacing actionable insights. 

But what exactly should you expect from your legal spend management solution? Here’s just a few of the challenges the ideal software should immediately resolve: 

1. Garbage-In, Garbage-Out

One of the core challenges our users often have when trying to extract insights from their eBillers is data quality. This isn’t usually a problem with the eBiller itself; the problem comes with the data fed to it. Missing or inaccurate data leads to misleading reporting, which can result in inaccurate conclusions and poor decisions. This is sometimes referred to as “the garbage-in, garbage-out” dilemma. 

A good legal spend management platform shouldn’t just crunch your numbers – it should clean them first. Cleaning and enhancing your data, and then restructuring it into a healthy data set produces the accurate reporting and meaningful insights you need it to deliver. A foundation of cleansed, structured data is essential. It’s the basis for the value of your analytics, and the decisions about how to best deploy your spend.

Think you don’t have this issue? Think again. Even the most sophisticated legal departments suffer from bad data. Onit processes tens of thousands of data corrections and enhancements every year – per customer.  

What to look for: You don’t need a tool to just house your data; you want your data to be processed, cleansed, and enhanced. To do that, it needs AI and machine learning. Without advanced technology, it’s impossible to cleanse data at scale.  

2. Uncontrollable Annual Rate Increases

Your law firms might claim that you’re getting the best rates available, but can they prove it? 

To get the best, market-appropriate rates, you need market data. That means benchmarking. Benchmarking is a critical part of any good legal spend management system. However, it can’t just be routine benchmarking. The system you select needs to provide  smart benchmarks. 

So, what is a smart benchmark? Well, you wouldn’t compare the rates for an associate at an insurance litigation firm with the partner rates at a top tier antitrust litigation firm, right? Neither would we. 

Make sure the software you select can provide benchmarks that drill down across key attributes like practice area, matter type, and timekeeper level (among others). The software should be smart enough to know which firms play in certain specialties, and to understand that there are tiers within specialties. For example, across specialties, there are “challenger” firms who may have just as much experience, but whose value proposition is to charge less to gain clients from the marquee firm brands. Your system should be smart enough to consider all the above and more when benchmarking. 

What to look for: Good legal spend management platforms provide contextually relevant benchmarks, ensuring you compare only similar firms for similar matters. Make sure the software you select not only understands the basics (like timekeeper levels and practice areas) but experience as well. You might be better served going to a smaller regional firm for certain types of matters, and your benchmarks should help you identify those opportunities. 

3. Mounting Pressure to Optimize Spend and Allocate Budget Wisely

The business world’s focus on cost-cutting efforts shows no sign of slowing down. As organizations search for more places to optimize, the legal department is in the direct line of fire. But optimizing legal spend isn’t as simple as finding less expensive vendors. 

A good legal spend management software will solve this problem. Just like other business verticals, legal can use data to identify optimization opportunities; usually those opportunities take the form of improving work allocation. 

Analytics are key here. However, it’s more than just reports. Your legal spend management system should not only provide reports on how work is allocated but insights and recommendations on where allocation can be improved. 

For example, you may not need to send every M&A matter to your marquee firm. Or your go-to firm for most matters in a certain practice area may not be allocating tasks appropriately (no one wants a partner doing depo prep, for example). 

What to look for: Effective tracking and reporting are a great start, but your legal spend management software should not just provide great analytics about how work is allocated. From firm selection to task allocation, your software should also provide actionable insights on how you can improve that allocation. 

4. Inability to Effectively Analyze and Compare Law Firms

What’s the best way to compare your law firms? Until recently, true analysis has been tough. From the lack of hard data to the historical “old boys club” nature of the industry, real analysis has often been placed on the backburner in favor of relationships and market reputation.  

Even if you have put together an all-star panel, how do you evaluate your panel firms on performance or rates? How do you know who will provide the most value for the dollar on an upcoming matter while maintaining best-in-class outcomes? 

A good legal spend management software is (once again) key. Advanced legal spend management software should not only provide market benchmarking, but also allow you to benchmark your panel firms against each other. Strong reporting is important but purpose-built report cards are better. 

Firm report cards should provide visibility not only into the “official” panel firms, but also on any firms you may have used for similar matters. They should include comparisons to the other firms in the panel. For example, on average, how much more or less are a certain firm’s partner rates than the panel’s overall average partner rate? What about average hours billed per matter? Or average matter cost in specific practice areas? 

A good firm report card isn’t just useful to you – it’s also useful to your firms. Sending a report card on a regular basis that provides aggregate comparisons to your other firms doing similar work (panel or not) incentivizes better behavior, tighter rate control, and attention to detail. 

What to look for: Look for software that makes it easy to not only benchmark the market, but also allows you to compare your current panel of firms. The best legal spend management software will carefully package up those benchmarks into convenient report cards that can be shared with your firms on a regular cadence. This is not only convenient for you, but it’s also a powerful tool for tacit management. Sharing firm report cards on a regular basis will ease potentially tough conversations by giving you a factual basis for your discussion. 

So, what’s the takeaway? Everyone, from CFOs to board members, is demanding accountability and transparency on how every dollar is spent. That means actively managing your outside legal spend is more important than ever. 

But you can’t manage what you can’t measure. As data plays an increasingly indispensable role in managing your legal spend, best-in-class legal spend management software is no longer a nice-to-have — it’s a must-have.  

Most corporate legal departments needed legal spend management software yesterday! Time is money, and the more time you go without leveraging sophisticated legal spend management software, the more money you’ll see drained from your bottom line.

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Get in touch with our team of legal spend management and data experts to find out how Onit can transform your legal department.

Check out Bodhala CEO, Raj Goyle’s, latest feature in Bloomberg Law on how in-house teams can leverage data to identify opportunities, navigate strategic decisions, strengthen outside counsel relationships, and run their legal departments like a business.

Reproduced with permission. Published May 2021. Copyright © 2021 The Bureau of National Affairs, Inc. (800-372-1033) www.bloombergindustry.com.

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Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.

Your law firms might insist that you’re getting the best price they have to offer, but can they prove it? Corporate legal departments are routinely overcharged by outside counsel. With limited access to price discovery, GCs are often stuck without the data they need to effectively benchmark rates, AFAs or other pricing structures.

Bodhala recently partnered with Buying Legal Council to lead general counsels, legal procurement, and legal operations professionals through an insightful discussion on how to leverage benchmarking data to secure a fair market price.

The discussion – fueled by an all-star panel including Bodhala CEO, Raj Goyle, Citi’s Director of Outside Counsel Management, Chris Ochs, and MetLife’s Director of Legal Procurement, John Smith – took attendees through:

• The current challenges surrounding law firm benchmarking
• The implications of bad data
• What metrics really matter when evaluating law firm rates

Check it out!

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Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.

eBillers facilitate payment for legal services. They’re great at paying legal bills but were not built to support data analytics – forget actionable insights.

Bodhala is not an eBiller. Bodhala is purpose-built for legal spend analytics to deliver strategic insights and actionable benchmarks so you can better manage your firms and optimize your spend.

But here’s the headline: You save more with both.

The Bodhala Difference: Hercules

eBiller data is very raw – unstructured, chaotic, and impossible to use for accurate comparisons and analysis.

Bodhala’s proprietary machine-learning engine, Hercules, automatically cleanses and organizes your data, filling in gaps and creating alignment across your entire spend.

The result is a clean, apples-to-apples data set that can then be augmented with engineered and 3rd party data to deliver everything from internal and market benchmarking to RFP optimization.

Future-Facing Insights

eBillers use historical data to impact how you pay invoices. Bodhala uses historical data, along with machine learning and 3rd party data to deliver actionable insights and a holistic view of your legal spend.

From optimizing your rate negotiations to firm selection and management, Bodhala’s actionable insights help you shape the future of your firm relationships with informed, strategic decisions.

Granular, Apples-to-Apples Analysis

A restructured, easy to analyze data set means you can compare anything from staffing and partner hours to rates and diversity across firms, practice areas and matter-types.

Bodhala also lets you deep dive and compare individual matters, timekeepers, and even do task cost analysis – unlike your eBiller.

Benchmark Against the Market

Bodhala’s Hercules engine uses machine learning and 3rd party data to benchmark your firms against relevant competitors for similar types of work,. The result is truly valuable ammunition to start rate negotiations with your existing firms or make informed decisions on new firms for your panel.

eBillers also don’t leverage 3rd party data or machine learning, leaving you without any true market intelligence.

ROI Calculation

Without a sophisticated rate tracking system, eBillers can’t project how a rate change will impact your overall spend.

Bodhala’s comprehensive rate tracking system and Savings Calculator accurately projects how broad rate card changes, as well as how minor changes impact your spend. Don’t be afraid to get granular – even an associate rate at a specific firm in a specific practice area can have a significant impact.

Improve Processes & Outcomes

Bodhala not only streamlines the RFP process for rate cards and individual matters. We also help you optimize the outcome.

By providing you with key metrics to inform your decision-making process, Bodhala is a critical partner for effectively selecting and managing outside counsel.

Invoice Review vs Guidelines Analysis

eBillers do simple invoice review, helping identify rate inconsistencies and block billing.

Bodhala takes a holistic look at your guidelines and can identify the simple inconsistencies, as well as an extensive set of other guideline issues from overstaffing meetings to excessive partner hours.

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Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.

We’re excited to share that Built In NYC has recognized Bodhala on its list of 21 NYC Companies to Watch in 2021. Designed to highlight New York City’s growing technology sector, Built In NYC’s list recognizes innovative and growing companies that are making waves in their respective industries.

It has been one year since we announced our $10M growth investment led by Edison Partners and this recognition from Built In is a true testament to the growth and success we have experienced over the past year. 

We’re proud of our team here at Bodhala and we’re excited to continue driving innovation and transparency within the legal services market. 

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Interested in joining our high-performing team of smart, scrappy thinkers and doers? Check out our open positions.

By Bodhala CEO & Co-Founder, Raj Goyle

Earlier this month, I had the pleasure of sitting down for a conversation with Justin Kan — serial entrepreneur, co-founder of Twitch, and Silicon Valley darling — on a recent episode of Nasdaq’s hot, new World Reimagined podcast. 

Spending this time recording with Justin got me thinking about Atrium’s journey, its downfall (Justin shared a terrific self-analysis of key learnings), and how its efforts related to our mission at Bodhala. As a legal tech CEO navigating the extremely nuanced world of legal services, I wanted to share some thoughts on Atrium’s rise and fall. 

It’s no secret that the legal industry is a laggard on the technology adoption curve. 

But that’s rapidly changing.

The legal services market is a half-a-trillion dollar global industry. Like any massive market, opportunity, disruption — or transformation — is inevitable and is finally starting to take hold. And along with innovation comes investment. More money has been invested in legal technology companies in the last year than ever before — and things are just beginning to heat up. 

That’s why it’s no surprise that Justin started Atrium. He saw an obvious problem — law firms are incredibly inefficient — so he set out to create the “law firm of the future”. A hybrid of technology and technology-enabled services, Atrium would tackle inefficiency while delivering the level of service expected from top-tier lawyers. 

His history of success drew big-name investors like Andreessen Horowitz to his vision, landing Atrium $75M+ in funding by 2018. Fast forward to 2020: Atrium closed its doors for good. 

With a world-class leader, $75M in funding, and an industry seemingly “ripe” for disruption, it seemed to be “all systems go” for Atrium. So what happened? Why do some legal tech startups fail, while others succeed? 

Price Isn’t Everything

The legal services industry is a unique beast. While price is always important to some degree, it’s not as big of a determinant for corporate clients as you might think. Aptly dubbed an “old boys club,” in-house lawyers often source their law firms the same way they picked their kickball teams in elementary school — by choosing their friends (often law school buddies or old law firm colleagues).

This presents a unique barrier to entry. Moving from a relationship-driven selection process to a price-driven selection process can be a major hurdle, requiring buyers to change how they think about not only the procurement process but also the value of the service.

While Atrium’s services and its fixed-fee business model were appealing to its target market, it focused on a practice area that was already relatively commoditized. Startups never had money to burn, and law firms had long been forced to price competitively in order to win business. 

Much like investing in a startup, many firms would give “bargain-basement” rates to get in early with potentially large, long-term customers. In this particular market, there is not a lot of wiggle room to undercut on price, which forced Atrium to set rates at almost a loss in order to be truly “competitive”. Atrium hoped its margins would improve once it could automate some of the lawyers’ tasks, but maintaining a team of lawyers proved to be expensive. The more clients sought out their low-cost services, the more money Atrium lost. 

While undercutting on price is a fair strategy for new businesses to gain traction with customers, it’s not sustainable for long-term growth. When it comes to legal services, corporate clients prioritize expertise and value over the price tag. Their focus lies on finding out the level of value delivered at that price and whether or not they could find equal or better value elsewhere at a lower cost. 

But the opacity of the legal services market and the complete lack of price discovery have made this nearly impossible. That’s why data is a critical piece of the puzzle. 

Data is Key

Legal services are not a commodity product. There is a finite amount of work that is routine enough to be simplified through automation. Atrium looked to become the technology-run law firm of the future, but its maniacal focus on simplifying and commoditizing services failed to recognize the nuances of the services themselves.

When it comes to legal tasks, everything is not always what it seems. Tasks that appear similar at face value can be drastically different in execution, resulting in the “same task” taking 10 times longer to complete in one matter than in another. For example, a task performed for an M&A-related matter might require more expertise than the same task performed for a litigation-related matter, thus making it more time-consuming and expensive. Without extensive, structured legal billing data, it’s impossible to truly identify like-tasks or average time or cost.

Atrium ultimately under-priced its services because it likely didn’t have the legal billing data necessary to appropriately model the costs. As a result, the business’ prices were set so low that it could not even cover its margins. 

Pricing is complicated, but data is key to success.

Knowledge is Power

Legal billing data is a beast. Cleaning and structuring it is tough and so is building up a critical mass of data to even glean insights from. But it’s a crucial step in understanding the minutiae of legal services. Without it, you’ll succumb to the nature of the beast. 

When it comes to legal services, corporate clients prioritize value over price. However, value cannot be measured effectively without data on your side. And as we’ve learned from Atrium, data can play an influential role in determining whether a startup sinks or swims. 

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Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.

In today’s economic climate, companies are increasingly focused on optimizing both internal and external resources; Legal is no exception. From simple spend visibility to cost control and efficiency, modern legal spend management solutions are helping forward-thinking General Counsels make more strategic, data-driven decisions about how they invest their outside counsel spend.

But what benefits can you expect from your legal spend management system? Let’s break them down here: 

1. Better Strategic Decisions Driven By Data 

When it comes to managing your outside counsel spend, everything (and we mean everything) starts with your data. 

Legal billing — from getting rate visibility to discount clarity — is complicated. For example, your rate card and the effective rates you actually pay may be very different. Understanding that (and many other aspects of your bills) is critical to effective budgeting, forecasting, and strong outside counsel vendor management. 

Knowing your numbers like the back of your hand won’t only help with budgeting or operational efficiency. Data will also help you make better, faster decisions. For example, which firm in a panel is most efficient for certain matter types? Are you overpaying because of inappropriate staffing decisions (e.g., partners executing associate level tasks or consistent meeting overstaffing)? 

Fast access to trustworthy data that can be sliced and diced to support your business’ specific needs and your specific questions will not only save you and your team time and money, but it will also give you the fuel you need to quickly make truly informed decisions. 

2. Clear “Should Cost” Understanding

What should that big matter you have coming up actually cost? It’s a question GCs and finance departments ask themselves all the time, with little success. RFPs are often wildly off when it comes to predicting costs. It’s common for a matter to cost 150-200% of the firm’s original bid. So, what’s the best way to anticipate what a big upcoming matter will cost? 

True, market-driven benchmarking is the only way to not only anticipate more accurate costs for upcoming matters, but also to obtain the most competitive rates or AFAs. 

However, benchmarking can be tricky. Make sure your benchmarking solution considers practice area, matter type, and tier of firm. For example, you can’t compare complex real estate litigation with standard insurance claims litigation. You also can’t compare insurance claims litigation costs for one cause of loss with another, or from one jurisdiction to another. So, make sure your benchmarks allow you to get granular; anything less can leave you holding the bag on a very big and unexpected bill! 

3. Better Governance 

Managing your outside counsel firms can be challenging. Just enforcing guidelines accountability is not only time consuming but can also be like finding a needle in an intentionally large haystack. Even getting visibility on their staffing practices can be tough. 

Modern legal spend management software can remove the headaches of guidelines compliance and provide much-needed visibility on staffing and billing practices for both you and your firms. Some solutions provide easy-to-use firm report cards that show trends over time on everything — average hours per matter, timekeeper breakdowns, rates, and more. When shared with your firms, report cards provide a fantastic basis for effective management; many forward-thinking GCs use them to drive quarterly or biannual reviews. 

4. Clean, Structured, Usable Data

Data can provide a window into performance, highlighting meaningful opportunities for improvement. Most successful businesses have leveraged data for years to inform strategic decisions as well as operational efficiency – but not so much in legal departments. 

Legal billing data is a necessity to understand all aspects of success. However, historically, legal billing data has been a mess (to put it mildly). With no standard taxonomy (way of organizing data), copious human error, and unique domain challenges led to a web of tangled data that in most cases just didn’t line up. With no apples-to-apples comparison possible, data often led to misleading takeaways and potentially poor decisions. 

But, never fear. Advanced legal billing software can help you make sense of your data. By leveraging new technologies like machine learning and AI, cutting edge legal billing solutions can not only structure the data you have but also correct errors and enhance the data to allow for deeper insights. 

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Get in touch with our team of legal billing and data experts to find out how Onit can transform your legal department.