What are the different types of legal data analytics?

Legal data analytics are objective data points that legal teams may utilise to make strategic decisions. According to CLOC’s 2021 State of the Industry study, 84 percent of respondents claimed one of their key tasks was handling “data analytics.” However, just 43% classified their talents in this area as “advanced” or “leading.”

The value of legal data analytics is not in the information itself, but in how legal departments translate that knowledge into actions that may revolutionise a corporation.

Continue reading to discover the foundations of legal analytics and how to use them to improve company performance.

There are four primary applications for legal data analytics.

Legal data analytics are divided into four categories, each of which is more advanced than the last. It’s a case of “crawl before you walk, walk before you run”: if you’re just beginning started gathering legal statistics, we recommend starting with the top category and working your way down the list one at a time.

Descriptive: Provides a summary of what happened with X. It aids in the creation of summaries.

Diagnose: Explains why X occurred. It aids in the detection of repeating trends and outliers.

Predictive: Ascertains the future influence of X and how X could evolve. Insights from descriptive and diagnostic analytics are used to forecast future opportunities and concerns.

Prescriptive: Specifies what should be done to optimise X. This involves incorporating insights from descriptive, diagnostic, and predictive analytics to develop a success path.

Here’s an example of how this may work:

Last month, outside counsel spending on intellectual property concerns climbed by X%.

The number of unresolved issues increased from A to B. In addition, because the situation was complicated, vendor Z brought in another partner who billed at $X rather than the standard $Y rate.

If the number and complexity of IP concerns continue to rise, our spending will rise by $X in Y months.

To save $X, we might explore bringing certain intellectual property work in-house or negotiate an AFA for more predictable billing.

These four levels apply to both the business of law and the practise of law, which are the two key areas of legal data analytics.

Analytics in the law business

Legal operations use business of law analytics, which generally includes data about legal spend, vendors, billing, and matters. These metrics assist legal operations in functioning as an efficient legal cost control centre. Furthermore, business of law analytics provides legal departments with data-driven evidence to demonstrate how their work benefits businesses.

Spending analysis

Spend analytics are based on total legal spend as well as specifics such as spend to budget, spend by practise area, timekeeper rates, and other factors.

Why do they matter?

General counsels are determined to cut costs by 14-18% between 2021 and 2024. To find cost-cutting opportunities, you’ll need to delve deep into spend data. It is difficult to make the most of your money if you do not have a complete financial picture.

Think about it in terms of your personal banking. If you want to save money, how much you spend month after month isn’t very helpful. To make that data useful, you’d need to know what you’re spending your money on in order to figure out where you can cut back and save (like multiple weekly coffee runs).

The same logic applies to reducing legal expenses. Many legal operations teams are concerned about cutting costs before they have a complete understanding of their spending. Through spend analytics, you gain more strategic insights that can be used to develop an effective course of action. As a result, you can rely on hard numbers rather than your intuition.

Aside from identifying cost-cutting opportunities, spend analytics will assist you in developing more accurate future budgets and labour forecasts. This reduces financial surprises, allowing you to focus on higher-value work rather than putting out accounting fires.

Analyses of vendors

Vendor analytics are based on the total list of vendors, as well as information such as average matter cycle times, hourly rates, the use of alternative fee arrangements, and other factors.

Why do they matter?

According to Deloitte, while legal operations listed “vendor management” as its top priority in 2021, only 34% of teams reported measuring law firm performance using vendor metrics. Vendor analytics assist legal operations teams in determining current vendor spend and performance, as well as optimising for both.

Teams that track law firm data can establish an objective baseline for measuring vendor performance, allowing the company to get the most value out of its law firm partnerships. Then, departments can share this data analysis with vendors, emphasising their strengths and collaborating to solve problems. While you may appreciate their quick matter lifecycle times, they may fail to submit accruals in the appropriate window. This is a problem that can most likely be solved with a straightforward discussion.

Vendor analytics can also be used to support department decisions to end vendor relationships. This could include anything from repeated noncompliance with outside counsel guidelines to higher-than-average hourly billing or matter cycle times. It’s difficult to determine which vendors are (or aren’t) worth working with without this level of detail.

Analytics for billing

Billing analytics are based on the total number of invoices as well as information such as invoice approval statuses, accrual statuses, billing guidelines violations, and other factors.

Why do they matter?

Billing analytics aid in effective vendor management by providing data on whether vendors are submitting accurate accruals on time and adhering to billing guidelines. If vendors do not comply, in-house budgets are thrown off, and accounting and legal are both frustrated.

Legal now has a better understanding of what’s going on and can take the initiative to communicate with vendors and resolve issues before final invoices reach accounting.

Analyses of matter

Matter analytics are based on the total number of legal matters, as well as details such as matter statuses, vendors assigned to each matter, when the matter was worked on, and so on.

Why do they matter?

Detailed matter analytics enable corporate legal departments to make informed decisions about whether to use outside counsel or in-house counsel. They can use this information, along with vendor costs, to investigate reducing the number of vendors and consolidating to law firms with multiple legal services after identifying the most common matter practise areas. To save money, teams can delegate work in high-volume practise areas such as intellectual property to in-house attorneys.

Analytics in the practise of law

Law analytics practise provides in-house counsel with insight that supports legal practise, including data on legal contracts and cases. These metrics assist attorneys in making legal decisions and managing risk. According to Deloitte’s report “Legal Risk Management: A Heightened Focus for General Counsel,” “fit for the future” attorneys will approach legal risk “using a robust framework informed by data and scenario planning.”

Analyzing contracts

Contract analytics are based on a comprehensive list of legal contracts, as well as detailed information about their status, type, renewal dates, content, and other factors.

Why do they matter?

Contract analytics assist in-house legal counsel in organising and keeping track of the thousands of legal agreements they execute. Contract analytics, according to Deloitte, also helps lawyers more effectively “determine the level of legal risk being carried across a contract population,” which is a critical part of their jobs.

Contract analytics have advanced to include suggested revisions from artificial intelligence as legal technology continues to evolve. While many basic legal platforms can sort and categorise contracts, artificial intelligence (AI) legal software reviews them. These tools use machine learning to identify issues in contracts and recommend changes based on their analysis of others in the system. According to American Bar Association columnist Nicole Black, this saves lawyers “hundreds of hours” per year.

Case study analysis

Case analytics are based on the total number of legal cases, as well as information about previous and similar cases, case types, clients, judges, and other factors.

Why do they matter?

By learning from previous cases, case analytics assists in-house counsel in developing their case strategy. Attorneys can use case analytics to see trends in what worked and what didn’t, and then use those lessons to improve their legal strategy. Despite these advantages of hard case data, less than 15% of in-house teams used case analytics in 2021.

According to Bloomberg legal analyst Francis Boustany, this is due in part to “organization-provided legal tech and research tools that do not include litigation analytics as a standard feature or option.” While associates devote approximately 15 hours per week to legal research, there is only so much case data that they can analyse and present to attorneys while juggling other responsibilities.

Attorneys who use case analytics tools gain a competitive advantage over attorneys who rely solely on surface-level research to prepare for litigation because they have deeper, clearer data on a broader range of cases. AI-based software can also help to accelerate the research process.

Legal data analytics benefit the entire organisation, not just the legal department.

When legal operations teams understand how to transform legal data analytics into thoughtful business intelligence and sound legal decisions, both the C-suite and the bottom line benefit. However, attempting to measure legal data analytics across multiple platforms such as spreadsheets and legacy software is difficult and time-consuming. Sign up for a product demo of our legal analytics tool, which keeps all of your data in one easy-to-access location.

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