Consolidating Outside Counsel Can Save Money If All Relevant Factors Are Identified and Considered

In my April 19 blog post, I reported on a study by a legal software company in Inside Counsel that indicated as companies consolidated legal work, rates at those firms tended to increase so that overall, the consolidated legal work tended to cost more, not less.  The study also showed that matters staffed by newer associates tended to cost up to 20% more.

At first, I tended to write that counter intuitive study result off as it was just one more example of how some corporate legal departments can fail to properly execute on what should be a slam dunk way to save on outside legal costs.   But as I considered the matter further, I realized that there certainly are ways consolidating claims legal work into fewer law firms actually can wind up costing more money.

Of course, one of the chief reasons to consider consolidation is to save on legal costs.  After all, with all other things being equal, if you are not going to save money by consolidating legal work, why do it?  So it is that many insurers have found that consolidating legal work within fewer law firms results in a net savings on legal costs through being able to bargain for better hourly rates or other cost concessions (e.g., reduced travel costs).

But saving on legal costs is just one factor to consider when consolidating legal work.  Insurers also need to consider indemnity results achieved and cycle time reports on files handled a firm.  For any legal costs savings achieved through consolidation can quickly evaporate if indemnity payouts and cycle time go up. Continue reading

E- Billing Vendor Statements on Legal Cost Savings

Are They Factually Correct or Just Exaggerated Vendor Hype?

If you are in insurance claims management or corporate legal management, you likely have received (or have been bombarded with) marketing materials from various e-billing vendors.  I got a marketing piece recently from a vendor.

The marketing material I got stated that by using the company’s e-billing program, the user could save 10% to 15% off their legal bills. There was no asterisk or any sort of qualifier. Just the flat statement that any company that uses their program could save up to 10% to 15% in legal costs.

If it were just this one e-billing vendor making this claim, I would not be writing this piece.  But the fact of the matter is that many e-billing vendors make similar claims of saving up to 15% off outside legal costs simply by using their product.  Just go to their websites.  One vendor’s website even promises customers a 1,000% ROI on the cost of their e-billing product.   Since e-billing programs generally cost about 1.5% of the gross amount of legal bills run through the e-billing system, I must admit that I am still trying to figure out how one can get a 1,000% ROI. Continue reading