October 27, 2005
Microsoft® and General Motors on E-billing Objectives
The Juris® User International Group held its annual conference last week. I had the opportunity to serve on a panel with Steven Levy from Microsoft® and Michael Gruskin of General Motors.
Michael, previously a practicing attorney, joined the legal area of GM nine years ago. Among his other duties, he handles negotiations with GM’s outside counsels. Steven Levy leads Microsoft's efforts to drive efficiency through technology in the legal space. He is the Senior Director of Information Systems for Legal and Corporate Affairs where he is setting the strategy and direction for using technology to enhance business processes and the practice of corporate law. Steve was recently featured on the front page of Corporate Counsel in recognition of his outstanding contribution in applied technology within the corporate legal area. Both men are deeply involved in the LEDES Oversight Committee and in project Aquarius. Aquarius is an effort to rid the e-billing process of unnecessary friction and cost.
Other panelists included representatives from two Juris law firms. One issues over 5000 bills a month with a large number transmitted electronically. The second law firm increased its realization from 87% to the high nineties by working with the Juris team to apply technology to the task of auditing time and expense transactions against corporate engagement rules prior to the billing process. That compliance technology is now built into Juris, Inc.’s most recent application release, MyJuris®.
In discussing e-billing and corporate motives behind the movement, Michael Gruskin emphasized the point that while law firms talk about professional services and clients, the fact is that law firms are vendors and corporate legal departments are customers. “This is business and law firms have to conduct themselves as such.”
Steve Levy made the point that from the consumer of legal services standpoint, there are three levels to e-billing:
Level 1 is to assure law firm compliance with engagement rules.
Level 2 is analyses to improve efficiency.
Level 3 is strategy to avoid cost.
E-billing has removed manual line item review from legal department personnel, increasing efficiency. Michael noted that GM receives over 50,000 law firm bills per year. Manual review is no longer an option. From Microsoft’s side, compliance testing and resulting adjustments for billing errors reduces Microsoft’s outside legal cost by 2-3% per year. From the law firm’s standpoint, that 2-3% is a downward adjustment in realization on amounts previously billed. In addition, if early compliance testing benefits are an indication of what other law firms can expect (realization improvements in the 10% point range), law firms are losing far more due to errors in the billing process. We are talking big dollars.
In addition to the material impact of billing errors on legal fees, billing errors create friction cost that is of value to no one. Every rejected bill has to be reworked and rebilled at significant system-wide cost. Every adjustment imposed by a corporate customer of a law firm results in additional handling cost. Michael noted that one large law firm has five people who do nothing but handle GM billing. That cost has no benefit. It needs to be removed from the process by applying technology to assure compliance, remove errors and smooth the electronic submission process.
LEDES stands for Legal Electronic Data Exchange Standards. I was one of the original board members of the Oversight Committee leading to the development of the current standards. The current Juris representative on the LEDES Oversight Committee is Jay Hennessy, VP of Juris, Inc. Steve, Michael, Jay and the other members of LEDES are working on a revision of the standard that is targeted to reduce the number of formats law firms currently are required to deal with. The Aquarius project is moving in the direction of automating the delivery of engagement standards (rules) to the law firms, keeping everyone on the same page.
Automatic compliance testing before billing using MyJuris, the Aquarius project and a wider adoption of an improved LEDES standard will financially benefit both law firm and corporate client. There is, of course, a caveat. Corporate customers will want to share in law firm’s financial benefits through lower prices.
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