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What is legal spend management?

Leading law departments are using technology solutions to reduce legal spend, control cost, and forecast a budget.

Legal spend management is the process of reviewing, tracking, analyzing, and reporting — on both in-house and outside legal costs — in a modern department, usually implemented by the legal operations team as a law-department-specific software package. The goal is to increase efficiency of the legal department, keep track and identify opportunities to reduce costs, and ultimately create spend management strategies on how to achieve sustainable savings for years to come. 

Legal spend management has four main components:

  1. Legal e-billing software. Replaces and automates paper billing and paper invoices from law firms. Legal e-billing can be as simple as a law firm portal to upload PDF or other electronic invoices, or it can be more sophisticated, directly receiving LEDES invoices from the law firm’s billing software, which could also be reviewed and audited with the assistance of artificial intelligence (AI) to enforce outside counsel billing guidelines.
  2. Law firm management. Intersects enterprise procurement and sourcing processes with law department needs, allowing law firms to be onboarded into enterprise vendor management and accounts payable systems — while also recognizing what’s unique about the relationship between in-house counsel and outside counsel, supporting firm selection, diversity and inclusion, and volume discounts or alternative fee arrangements (AFAs).
  3. Timekeeper rate management. Takes inventory and review of all timekeepers, their roles, their law firms, legal matters worked on, hours worked, agreed rates, and any proposed increases. Timekeeper rate management excels when paired with industry benchmark data or comparisons with peers, allowing legal operations teams to understand the going rate for a given legal practitioner with X years of experience in Y domain in Z location, all while considering expected outcomes and contrasting those same timekeeper rates across law firms of different shapes and sizes.
  4. Legal spend reporting and analytics. Provides the ability to slice and dice all corporate law department spend data. Navigate general counsel dashboards, report legal budgets to stakeholders, support data-driven decision making, and export data to Excel, Power BI, or Tableau.

All in all, legal spend management is a foundational building block of any enterprise legal management (ELM) strategy. To get started with ELM, most corporate legal departments rely on legal spend management software — both to save on outside counsel costs and to better track overall costs and matters.

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