What are the different types of legal data analytics?

Kara Wen | February 22, 2022 | Articles

Legal data analytics are objective data points that legal teams use to inform strategic decision-making. In CLOC’s 2021 State of the Industry report, 84% of respondents said handling “data analytics” was one of their major responsibilities. But only 43% labeled their skills in this area as “advanced” or “leading.”

The value of legal data analytics isn’t about the information itself; it’s about how legal departments turn that knowledge into actions that can transform a business.

Read on to learn the fundamentals of legal analytics and how you can use them to boost business success.

4 main ways to apply legal data analytics

Legal data analytics are separated into four categories, each more advanced than the last. It’s a “crawl before you walk, walk before you run” kind of situation: if you’re just getting started collecting legal analytics, we recommend collecting analytics in the first category, then moving down the list one at a time.

  1. Descriptive: Gives an overview of what happened with X. It helps you create summaries.
  2. Diagnostic: Explains why X happened. It helps you identify recurring patterns and outliers.
  3. Predictive: Determines the future impact of X and how X may change. This includes insights from descriptive and diagnostic analytics to predict future opportunities and issues.
  4. Prescriptive: Determines what to do to optimize X. This includes combining insights from descriptive, diagnostic, and predictive analytics to create a roadmap for success.

Here’s an example of what this could translate to:

  1. Outside counsel spend on intellectual property matters increased by X% last month.
  2. The number of open matters went from A to B. Additionally, vendor Z brought in another partner who billed at $X instead of the usual $Y rate because it was a complex matter.
  3. If IP matters continue to increase in volume and complexity, our spend will increase by $X in Y months.
  4. We should consider moving some intellectual property work in-house or look into negotiating an AFA for more predictable billing to save $X.

These four levels apply across the two major categories of legal data analytics: business of law and practice of law.

Business of law analytics

Business of law analytics is used by legal operations and generally includes data related to legal spend, vendors, billing, and matters. These metrics help legal ops function as an effective legal cost control center. Additionally, business of law analytics gives legal departments data-based evidence to prove how their work helps businesses.

1. Spend analytics

Spend analytics are based on the total legal spend as well as details like spend to budget, spend by practice area, timekeeper rates, and more.

Why they matter

General counsels are determined to reduce costs by about 14-18% from 2021-2024. You’ll need to dig deep into spend data to identify cost-saving opportunities. It’s hard to make the most of your money if you don’t know the complete financial picture.

Imagine this with your personal banking. If you want to build up your savings, how much you spend month over month isn’t all that helpful. To make that data actionable, you’d need to know what you’re spending money on to figure out where to cut back and save (like multiple weekly coffee runs).

The same principle applies to optimizing legal spend. Many legal ops teams worry about reducing spend before first developing a complete understanding of their spend breakdown. You gain more strategic insights that can be applied to develop an effective course of action through spend analytics. So, you can rely more on hard numbers than your intuition.

Besides finding places to save money, using spend analytics will help you create more accurate future budgets and labor forecasts. This reduces financial surprises, which means you can focus on more high-value work instead of putting out fires with accounting.

2. Vendor analytics

Vendor analytics are based on the total list of vendors along with information like average matter cycle times, hourly rates, the use of alternative fee arrangements, and more.

Why they matter

According to Deloitte, while legal ops listed “vendor management” as its number one priority in 2021, just 34% of teams said they measured law firm performance using vendor metrics. Vendor analytics help legal ops teams determine current vendor spend and performance and optimize for both.

Teams that track law firm data can create an objective baseline for measuring vendor performance, which helps the company get the highest ROI on its law firm partnerships. Then, departments can share this data analysis with vendors, highlighting their strengths and working together to solve issues. While you can appreciate their speedy matter lifecycle times, for instance, they might miss submitting accruals in the appropriate window. This is a problem that can most likely be resolved with a clear conversation.

Vendor analytics also serve as evidence to back up department decisions to end vendor relationships. This can include a variety of factors, from repeat noncompliance with outside counsel guidelines to higher-than-average hourly billing or matter cycle times. Without this type of detailed insight, it’s difficult to figure out which vendors are (or aren’t) worth working with.

3. Billing analytics

Billing analytics are based on the total list of invoices along with information like invoice approval statuses, accrual statuses, billing guidelines violations, and more.

Why they matter

Billing analytics support effective vendor management with data showing whether vendors are submitting accurate accruals on time and following billing guidelines. If vendors fail to do so, in-house budgets get thrown off, and both accounting and legal get frustrated.

With insights from billing analytics, legal has a clearer idea of what’s going on and can take the initiative to communicate with vendors and resolve issues before final invoices reach accounting.

4. Matter analytics

Matter analytics are based on the total list of legal matters along with details like matter statuses, vendors assigned to each matter, when the matter was worked, and more.

Why they matter

Detailed matter analytics allow corporate legal departments to make educated decisions on using certain outside counsel vs. in-house counsel. After identifying the most common matter practice areas, they can use this information along with vendor costs to explore reducing the number of vendors and consolidating to law firms with multiple legal services. Teams can also assign work in highly used practice areas like intellectual property to in-house attorneys to save money.

Practice of law analytics

Practice of law analytics gives in-house counsel insight that supports the legal practice, including data on legal contracts and cases. These metrics help attorneys with legal decision-making and risk management. As noted in Deloitte’s “Legal Risk Management: A Heightened Focus for the General Counsel” report, “fit for the future” attorneys will approach legal risk “using a robust framework informed by data and scenario planning.”

Contract analytics

Contract analytics are based on the total list of legal contracts as well as detailed information on their status, type, renewal dates, content, and more.

Why they matter

Contract analytics help in-house legal counsel organize and stay on top of the thousands of legal agreements they execute. Deloitte also notes that contract analytics helps lawyers to more effectively “determine the level of legal risk being carried across a contract population” — a critical part of their jobs.

As legal technology continues to evolve, contract analytics have also grown more advanced to include suggested revisions from artificial intelligence. While many basic legal platforms can sort and categorize contracts, AI legal software reviews them. With machine learning, these tools flag issues in contracts and offer changes based on their analysis of others in the system. This saves lawyers “hundreds of hours” a year, according to American Bar Association columnist Nicole Black.

Case analytics

Case analytics are based on the total list of legal cases along with information on prior and similar cases, case types, clients, judges, and more.

Why they matter

Case analytics help in-house counsel prepare their case strategy by learning from previous cases. With case analytics, attorneys can see trends on what worked and what didn’t and apply those lessons to strengthen their legal approach. Despite these benefits of hard case data, though, less than 15% of in-house teams used case analytics in 2021.

Bloomberg legal analyst Francis Boustany says this partially comes from “organization-provided legal tech and research tools not including litigation analytics as a standard feature or option.” While associates spend around 15 hours a week on legal research, there’s only so much case data they analyze and present to attorneys while juggling other responsibilities.

Compared to attorneys who solely rely on surface-level research to prepare for litigation, attorneys who use case analytics tools gain a competitive advantage because they have deeper, clearer data on a wider breadth of cases. AI-based software is also a great asset for speeding up the research process.

Legal data analytics benefit the company, not just the legal department

When legal ops teams know how to turn legal data analytics into thoughtful business intelligence and strong legal decisions, the C-suite and bottom line both benefit. It’s difficult and time-consuming to try measuring legal data analytics across multiple platforms like spreadsheets and legacy software though. Save yourself the headache and sign up for a product demo of our legal analytics tool that keeps all your data in one easy-to-access place.

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