LegalJuly 27, 2019

CLOC 2019: Signaling the maturity of legal operations

Five insights from the most important event for corporate counsel.

The May CLOC 2019 event at the wonderful hotel Bellagio in Las Vegas was filled with large expectations, important announcements, and the warming sense that legal operations is reaching its maturity stage. Since attending the conference, I have been reminded of many of the topics that were featured. They represent a snapshot of some of the most important themes currently on legal operations professionals’ radar.

The President of CLOC, Mary O’Carroll, said it best during her opening remarks that “CLOC is not just an organization. It’s a movement – and one that is growing very quickly.” She pointed to the phenomenal growth experienced in legal operations and the explosive expansion of the CLOC Institute, which reached over 2,200 attendees at its annual US conference and went from one continent to three, all in roughly three years.

Some big announcements helped kick off the event, including Wolters Kluwer’s addition of CLM Matrix, a contract lifecycle management (CLM) solution highly rated by Forrester. The acquisition gives WK a strong position in three of the largest LegalTech markets—e-Billing/matter management, legal holds, and contract lifecycle management—and allows us to offer a near-comprehensive set of solutions to our current and potential corporate legal and insurance claims clients.  We are excited about entering the dynamic CLM market, a $14 billion industry currently growing at 12% per year.

And there’s a lot more. Let’s look at just five of the most important insights we collected from the conference:

1. Contract lifecycle management is becoming essential to legal ops.

Several sessions had one very conspicuous subject in common: the surge of contract lifecycle management. It is clear that contracts are critical to modern legal organizations. The opportunity to leverage technology via automation of manual processes is crucial to CLM, as it is the case in most legal spend and matter management processes.

Overall, the sessions were very inspiring and shed light on some of the great benefits that CLM processes can bring to legal organizations:

  • CLM collects, automates and processes vast amounts of metadata and process data to make contract-related processes much faster and less prone to errors
  • CLM can help protect the business from data breaches via real-time notifications and remediation measures.
  • CLM manages automatic contract renewals, so contracts never go beyond their expiration date
  • CLM ensures regular compliance with always-changing regulations
  • CLM processes also serve a risk management function as contracts can be scored for risk, allowing higher-risk contracts to be given greater attention

2. The Midas touch of artificial intelligence: AI has reinvented many legal operations workflows.

A session offered by our own Alyza Tarmohamed, along with Applied Materials, shed light onto the application of AI in spend management via WK's LegalVIEW® BillAnalyzer product. LegalVIEW BillAnalyzer is an AI-assisted human invoice review service that helps corporate law departments and insurance claims departments save on legal fees. Already comfortable with the concept of AI from having used it in other situations, the Applied Materials legal department was attracted by LegalVIEW BillAnalyzer’s ability to leverage a large dataset, use repeatable processes and well-defined rules, and reduce invoices by up to 10% over standard internal invoice review.

A few thoughts from Applied Materials on the benefits of LegalVIEW BillAnalyzer were:

  • It’s very effective at identifying invoice non-compliances.
  • As the dataset grows, the AI-engine learns, gets smarter, and becomes more efficient.
  • AI, coupled with expert review, drives better results.
  • Long-term AI-enabled services will soon become the new normal.

3. Automation changes “better vs. faster vs. cheaper” to “better AND faster AND cheaper.”

Some panelists took on the broad topic of automation and how legal operations is evolving thanks to it. Legal operations is supposed to be about making things faster, better and cheaper, but in reality, until recently the focus has been on “cheaper.” The discussion at CLOC shows that that conversation is expanding to improve quality and decrease bottlenecks.

Automation is leading the way on that, most notably in contract lifecycle management. An average company with $1B in revenue—not particularly large—can expect to save $4-$7.6M by implementing a buy-side CLM solution. Importantly, a good chunk of these savings comes not in the form of better-negotiated pricing but in reducing deal times (speed), ensuring that contract terms fall within acceptable bounds (quality), and helping ensure that your company gets all the rebates, discounts, and other goodies to which it is entitled (quality). Given that the typical Fortune 1,000 company manages between 20,000 and 40,000 active contracts at any given time, perhaps it should come as no surprise that using technology to manage these issues is cheaper, faster AND better than trying to do so manually—but the big move towards systematic CLM remains far from complete.

4. Best practices are developing around AFAs.

While AFAs are nothing new, some sources claim that AFA utilization has increased from about 20% to 35% of the market in recent years. AFAs—referenced by one CLOC panelist as “Appropriate Fee Arrangements”—can reduce costs, increase cost predictability, balance risk between client and provider, and help teams concentrate more on actual legal work rather than the administration of it.

The panelists offered some best practices on the best use of AFAs in corporate legal departments. Here are some of them:

  • AFA agreements should be written and as simple as possible.
  • Project managers on both sides should be monitoring for scope changes or other issues that would make it important to revisit terms of the AFA.
  • Creating a checklist and standard process to guide attorneys or other law department workers managing AFA work and providing related training and support.
  • Making sure that AFA work is consistently tagged as AFA in your matter management/e-Billing system.
  • Retooling legal analytics to reflect the different sorts of risks presented by AFA work vs. hourly—risks like problematic staffing ratios.

Overall, the conversation around AFAs seems to have shifted from “Should we do AFAs?” to “Since we are going to be doing AFAs, how should we do them?” There seems to be a consensus forming around the sorts of solutions outlined above.

5. Corporate law departments and their law firms are integrating more closely than ever.

CLOC president Mary O’Carroll announced in her opening remarks that CLOC would soon be “beta testing” law firm membership in the organization. Although CLOC members have always been highly aware of law firm perspectives, this move nevertheless signals a recognition that legal operations concepts benefit both lawyers and their client organizations and that a combination of both perspectives has the opportunity to be far more than the sum of its parts.

In fact, this move is part of a larger trend to increase integration between clients and their law firms. In-house legal operations professionals are making relationships with key law firm contacts, including law firm pricing professionals and project managers, and creating better, easier ways of working with one another. At the same time, law firms are starting to refer to their internal business folks as “legal operations,” signaling a desire to speak the client’s language and become more in tune with their way of thinking. Technologies like Passport® Collaboration Portal help corporate law departments and their law firms collaborate and manage projects and tasks.

CLOC events are always a great way to take the pulse of the legal operations community—and this year was no exception. The discussions and insights that attendees and presenters shared were a welcome update and learning opportunity.

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