Blog Post

How Legal Departments Can Make the Most Out of Data Analytics

September 18, 2020

Any in-house counsel can tell you: corporate legal departments aren’t like law firms embedded in a business. They’re an extension of the business itself — and they’re driven by many of the same fundamental forces to become streamlined, more competitive, to innovate and evolve.

But legal departments aren’t like other parts of the business either. Constrained by the need to minimize risk and faced with a high cost of failure, legal departments aren’t as free to experiment with their internal processes as other areas of the business might be.

This leads to an interesting paradigm. When adopting any new technology or digital process, legal departments are at once behind the curve and well-positioned to learn from others’ successes and failures. Nowhere does this dynamic play out more clearly than in data analytics.

Data analytics in the legal department

Data analytics helps to inform how businesses design products, target customers, define their market, improve internal processes, and more. How does this translate to the legal department?
In-house teams don’t have customers to market to. Nor do they have products to design. But that doesn’t mean data analytics doesn’t have a place. For example, a well-executed data analysis could be used to:

  • Evaluate legal spend and outsourced legal counsel cost-effectiveness
  • Review contracts for risk
  • Report on contract performance to the business
  • Predict dispute outcomes and future opportunity

There’s essentially no limit to the applications that data analytics can be applied to, and many organizations are discovering this fact.

Because data analytics may be relatively new within legal departments as opposed to other parts of the business, in-house counsels have the opportunity to learn from the biggest mistakes that other business units have made: namely, not being able to access data that is locked within your organization’s documents–and lacking the ability to structure that data to extract meaningful insights.

Any analysis is only as good as the data it is performed upon. If legal departments want to contribute to their organization’s success through data analytics, then they need to do the centralizing, storing, cleaning and management that it takes to produce a robust and actionable data set.

Why unlocking data is worth it

This may seem like it’s adding insult to injury. Incorporating data analytics into the legal department is already challenging enough; now, in-house counsels are expected to serve as data custodians, maintaining the huge volumes of data distributed across servers, in filing cabinets, storage devices, and more?

Where to start

You’ll want to ensure that you have access to data across all of the relevant systems at use in your legal department, including e-billing or e-mailed invoices, matter management systems, contracts, and so on.

This is a huge scope of information to consider and poses a serious challenge. What’s more, a large portion of most organizations’ data is unstructured, trapped in unsearchable scanned documents or PDFs.

That’s why any serious data analytics effort should start with the area that will make the biggest impact. This is a truism for any department interested in data analytics, but in the legal department, the greatest impact is almost invariably found in the contract portfolio.

While gathering and maintaining invoice, process, matter management and other forms of legal data will yield valuable results in data analysis, they aren’t quite as attractive a target as the legal department’s contracts. For one, making your contract data available for data analysis makes it possible to ask a huge variety of questions with potentially high-impact answers, such as:

  • Whether your organization could craft frameworks to speed up commonly structured deals
  • Whether certain types of contracts aren’t worth your organization’s time or are particularly high value
  • Whether certain clauses frequently spark increased negotiation and should be amended in advance

Furthermore, the contract management space offers the greatest pre-existing and legally focused support. Business intelligence (BI) solutions are highly flexible — meaning they require significant support to customize and tailor from one use case to the next. Contract management solutions, however, offer much of the data processing capabilities that an application-agnostic BI software offers without requiring as much tweaking.

You will want to be sure to select a contract management solution that comes with visualization, organizational and relational capabilities designed specifically for use in the legal department. Importantly, legal departments should evaluate such solutions based on whether they can be integrated into other analytical systems and tools to ensure that they can expand their data analysis efforts into other domains in the future.

A stepping stone to better business outcomes

By unlocking the data on their contract portfolio, legal departments can ensure they have a representative set of data in a standardized, searchable format upon which they can conduct an analysis. With a reliable dataset, in-house counsels can contribute to their organization’s goals by identifying revenue leakage, determining risk exposure, or assessing whatever priority question they have for analysis.

Based on the successes or failures met during this process, in-house counsels can then turn to collecting, processing, and analyzing data from aspects of the legal department operations that have greater technical demands. And finally, businesses can stop seeing their legal departments as a cost center and more as a source of value.

Find out more about how data analysis can turn your contract portfolio into a value driver here.