A History of Legal eBilling — Part 2: Trends and Future Predictions

As discussed in part 1, the 90s and 00s saw many barriers to widespread adoption of legal e-billing software. With many of these huge logistical stumbling blocks overcome by changes in legislation and developments in software, the last decade has seen more legal departments mandate their law firms to use e-billing so they can better manage spend, budget accurately, and make strategic matter resourcing decisions.

Another driver of this uptake has been the transformation of the legal market in general, such as increased pressure on legal departments to actively reduce spend, or at least demonstrate value from their expenditure. Previously, because of the nature of the legal department’s role, all costs were perceived as necessary to protect the business. This attitude has gradually changed and, like all departments in a business, legal is also expected to operate successfully and more efficiently – hence the rise in legal operations.

Legal spend management software, and the process of e-billing, is essential in managing and controlling legal spend. Although it carries a cost, it more than pays for itself in what it can save the department. However, the traditional, on-premises solutions were cost-prohibitive for all but the largest corporate teams and would not deliver ROI unless legal spend was huge. Although in-house teams understood the benefits, they couldn’t justify the investment.

This prevented the growth of legal e-billing. The rise of cloud-based SaaS solutions lowered software cost, opening legal spend management to more corporate teams and driving faster e-billing adoption throughout the market. The addition of new vendors in the market introduced a competitive element that facilitated faster improvements in the features available to corporate legal departments and their law firms. Additional functionality means that the potential benefits of using legal spend management software are much improved vs. 10 or even 5 years ago, and at a lower cost too!

The demand for legal e-billing software from in-house legal departments meant most law firms had no choice but to embrace truly automated e-billing systems (or face doing it manually…) which means at many firms, e-billing is now fully integrated into the normal billing routines, which means that there is less manual intervention and therefore the costs associated with e-billing are lower. Ideally in these firms there will be validation of time recorded, codes, narratives, rates, timekeepers, and expenses earlier in the billing process; e-bill production will be integrated into the firm’s time and billing system; and there will be checks for compliance with client billing rules before the bill is finalized. These law firms are now much more on the front foot, have well defined processes for on-boarding new e-billing clients, have support for e-billing in client/matter inception and time-recording systems; and their lawyers, secretaries and back-office staff are comfortable with e-billing requirements and processes. They are seeing strategic benefits to e-billing in the same way their corporate counterparts do.

However, it is not necessarily the large global law firms that have led the way in e-billing. In the UK, successful legal e-billing implementations have taken place in several smaller niche firms as well. As corporates move away from the traditional panels of global law firms and increasingly rely on smaller or niche firms, these firms have had to embrace e-billing to stay competitive. The key success factor that marks out these firms is their ability to integrate e-billing into their normal business routines. These firms have changed their internal processes to support the move, have trained all their staff in what is needed to make e-billing work, and made key changes to their systems to support the technical requirements.

They are now able to deliver electronic invoices to their clients in a cost-effective and efficient manner, with a low percentage of billing errors and are now sharing the benefits of e-billing software with their clients.

Latest Legal E-Billing Trends

Although e-billing is yet to be adopted by every legal department or firm, the fact that a large proportion have been using legal e-billing for over a decade is driving exciting developments in the industry as the legal market demands more innovation and further value from e-billing as a legal spend management enabler. Start-ups and developments at existing vendors mean some of these innovations are already possible, though none are embedded as business as usual throughout the industry. Over the coming years, we’ll see development and latest legal e-billing trends in the following areas:

• Collaboration. With the basic processes ironed out, the focus is moving onto optimizing these processes and making them more collaborative. Vendors are investing in improved interfaces between law firm and corporate systems to improve the experience for the law firm (whose e-billing interface is typically sub-standard compared to the in-house teams’), allow admin and set-up tasks to be distributed more flexibility or evenly between firms and in-house so the workload is shared, improve in-software communication and collaboration, automate more processes, and reduce manual effort.
• Work in Progress (WIP) Tracking. With conventional e-billing the client only sees the information at the bill stage, by which time it is too late to challenge any problematic entries and the invoice gets rejected. Despite the growth in fixed-fee arrangements, hourly billing is still common and in-house legal increasingly need to see matter costs and resource staffing in a timely manner for better visibility of matter budgets and status. Interestingly, many law firm systems already hold detailed real-time information on live matters and can retrieve this, “at the touch of a button.” For those that don’t, tools like BusyLamp enable clients to ask their law firms to submit WIP. Thus, the in-house team can see, review, and query this information in a timely manner and avoid surprises and difficult conversations when the invoice arrives, building a better and more trusting relationship. This transparency is also useful for both parties in validating the value of fixed-fee arrangements.
• Managed services. As in-house teams strive to achieve even more ROI from their legal spend management solutions and reduce the cost of low value work, we will see increased outsourcing of the invoice review process itself to vendors and legal service providers so in-house counsel and their external lawyers are spending more time on legal work.
• Artificial Intelligence (AI). Advancements in AI and machine learning will allow more of the e-billing and matter management process to be accurately automated. This and other improvements in automation will in turn make e-billing more integrated into a firm’s day-to-day case management, time recording and billing processes and make it the “normal” way to bill with lower costs. AI is not a magic button though; a substantial volume of good quality data is essential to begin using AI.
• Integration. One of the perennial issues with e-billing has been how to get different software systems to speak to each other and this is compounded by the fact that law firms are at different stages of development and/or using multiple systems. The big international firms are still out in front, having heavily invested in global billing and management information systems. There is now work underway to define a standard set of software tools to facilitate a direct interface between the law firm’s time & billing system and the client’s preferred e-billing vendor system. Put simply, this could potentially remove the requirement to output a free-standing file of invoice and other legal data and then manually upload these files to an e-billing vendor application.
• Platform solutions. Combined matter and spend management solutions are common and some also support integration with contract or document management applications. The trend is towards a single platform to manage the full lifecycle of legal work to prevent having to log-in to multiple systems to do a day’s work. Legal spend management solutions will continue to expand beyond just the process of e-billing to include sourcing/RFP, WIP, reporting, panel review, rate comparison and other “beyond e-billing” functionality that is found in tools such as Onit’s European legal spend management solution BusyLamp eBilling.Space.