Article: A Short Comparative Analysis of Document Management, Contract Lifecycle Management and Contract Discovery and Analytics Technologies and Systems

INTRODUCTION

Based on LegalShift’s long legacy of consulting to General Counsel on areas of operational efficiency, cost reduction and technology improvement, LegalShift finds that corporate legal departments are often confused by conflicting terminology and unclear descriptions of various types of electronic content capture, search and retrieval systems.

Software companies often blur the lines, claiming their systems to have similar functionality to other software categories.   The reality is that, today, there is no single system that serves as an “all-in-one” technology solution to the following functional categories:

 

We argue that, in many cases, no two software systems listedare reasonably addressed in a single platform.

LegalShift recommends that a thorough and structured requirements analysis be conducted so that the legal department understands and identifies their unique requirements and how they apply to the differing software categories and products.

Too often we see this confusion leading to mis- or under-used software products and investment.

 

 

 

This short overview is intended to address what LegalShift sees as a significant education gap and misunderstanding of the differences and benefits of each class of technology.   Our goal, then, is to de-mystify these automated software categories.

Document Management Systems (DMS)

Document management systems streamline document creation, leverage existing work product, facilitate document collaboration, and provide a central repository for document storage.  While the legal industry commonly uses the term, “document management”, other organizations sometimes prefer “content management”.

A DMS typically manages each of the following document stages:

  • Create/Capture:A DMS facilitates the creation and storage of documents in multiple formats (Microsoft Office, Adobe, etc.). They allow for the re-use of existing knowledge since they can include “best of breed” documents, templates, or other helpful information, and thus can be useful in contract drafting.

 

  • Manage/Version Control: A DMS includes mechanisms for controlling versions of documents, access and security, tracking physical files or allowing check-in and check-out of electronic files. Because they log transactions, they provide an audit trail of versions. Document management systems use metadata from documents to create document profiles including information such as document type, date, author, and more – information that can later be used for m
    anaging obligations and compliance.

 

  • Deliver:A DMS provides a collaborative workspace for publishing and team review, which can be used to facilitate the approvals process. They provide full-text indexing and offer offline, remote access.

 

  • Retain/Archive:A DMS offers a central storage repository; they can also be integrated with enterprise applications such as corporate record management systems.

A DMS can be used to manage some stages of contract lifecycle management within the law department; in particular, drafting (including tracking revision history) and storage.  They do not, however, include functions for tracking negotiation and execution of agreements, nor do they automate contract management such as post-execution obligations management, renewals, or compliance (although they may provide the information needed to perform the tasks), discussed in the next section.

Contract Lifecycle Management (CLM) Systems

Contract lifecycle management systems (sometimes termed “contract management systems”) are specifically designed to do just that – manage contracts throughout their lifecycle. They are targeted solely to that function and manage contracts throughout the organization. A big benefit of dedicated CLM systems is their use as a centralized, authoritative repository/database of contracts, amendments, and renewals.

 

Most CLM systems include functionality designed to manage each of these contracting stages:

  • Request/Initiation:Those with access to the CLM system, whether from the law department, the procurement department, or business units, can initiate a contract request.

 

  • Drafting: CLM systems facilitate the drafting of contracts using libraries of customized templates and clauses, typically pre-approved by the law department.

 

  • Negotiation: CLM systems track negotiations, including draft agreements, for reference and audit purposes. The system can track changes and versions of a contract and can flag exceptions to standard terms. CLM systems can also automate the approval process using pre-established criteria, sending notifications to the appropriate parties.

 

  • Execution: CLM systems document and track contract execution, including approvals routing and electronic signature.

 

  • Obligations management:  Many provide post-execution monitoring tools to proactively track the performance of obligations and provide notifications when renewals are required or timelines have expired.

 

CLM systems can be integrated with other systems such as customer relationship management (CRM) systems and enterprise resource planning (ERP) systems.  For these reasons, most CLM systems are considered functionally rich, “enterprise-grade” solutions, that can be used by teams both inside and outside the Legal function—e.g., Procurement and Sales.

Contract Discovery and Analytics (CDA) Systems

Most organizations want to leverage their contract terms and conditions to maximize value and minimize the potential for non-compliance with laws and regulations.  Contract discovery and analytics (CDA) systems use latest-generation artificial intelligence (AI) processing to automate procedures and identify opportunities for revenue recovery and risk avoidance.  These solutions can support the systematic review of a large contract dataset to assess and ensure compliance with corporate standard terms and conditions.  This application of a machine-learning platform can greatly reduce the time (duration and resource hours) and accuracy of collection, extraction, testing, and review associated with what has historically proven to be a highly labor-intensive process.

CDA systems include functionality designed to manage the extraction and review stage of contract analysis:

 

  • Extraction and Review – CDA systems are designed to extract relevant policies and provisions that represent potential opportunities for revenue recovery and/or risk mitigation and cull these agreements into a contract subset for further strategy and execution.

 

Additional benefits in ongoing use of a contract discovery and analytics system include:

 

  • Aid in contract classification and metadata extraction in preparation for intake into a contract lifecycle management (CLM) system;
  • Assistance in identification of areas of regulatory and internal policy non-compliance and opportunities for additional revenue recognition;
  • Access to a true web-based SaaS solution that can be accessed from anywhere (as opposed to having to invest in purchase of software and its installation and use on premises).

 

CDA systems functionally complement the use of CLM systems to properly monitor and control contracts.  As a result, many organizations subscribe to both CLM and CDA solutions as a means of managing the contract lifecycle while leveraging its value.

Summary

Document management systems (DMS) are electronic repositories for document storage, search and retrieval.   Contract lifecycle management (CLM) systems are specifically targeted for the management of an organization’s contracts. Contract discovery and analytics (CDA) systems focus on extracting and reviewing terms and provisions that exist within existing contracts.

As confusion often exists between DMS and CLM technologies, we offer the following advice:

CLM systems facilitate each phase of the contract lifecycle, automating much of the process.  DMS systems are not ideal for enterprise-wide, full lifecycle contract management but can be useful for some aspects of contract management within the law department, where they can serve multiple functions.  DMS solutions do not offer the functions specifically tailored to contracts that can be found in CLM systems, such as automated approvals or obligations management and the related automated notices. They can, however, be tailored to assist with some contract management functions within the law department.  Specifically, they can facilitate contracts drafting using templates and prior examples, track revisions, provide a central, collaborative space facilitating approvals, and collect profile information that can be used for subsequent contract management.

Document and contract management systems can be integrated with matter management systems and knowledge management systems, facilitating the drafting of a variety of law department documents in a collaborative environment.

Many law department organizations subscribe to both document and contract management systems and use them for different purposes and in achievement of different results.

For more clarification, please contact us at www.legalshift.com.

 

 

Article:Technology Upgrades at Big Law Firms

Lizzy McLellan with The Legal Intelligencer recently published a very informative article entitled Boutique Lesson for Big Law Firms: Rip Off the Technical Band-aid.   McLellan explains the reluctance of larger law firms to adopt new technology and common misconceptions associated with these upgrades.   LegalShift’s President and CEO, Dan Safran, provides his thoughts in the article.

 

Article: The Law Firm “Reverse Leverage” Problem. LegalShift’s Views…

Budgeting – A Practical Approach to Reliable Estimates

Article: Earned Value Management – Assessing and Controlling Project Success in Law Firms and Law Departments

You have a well-constructed budget and routinely check actuals against it, but your case or transaction is rapidly approaching or already exceeds initial projections. Legal clients don’t like such surprises, especially cost overruns.  Properly monitoring and controlling a legal project, often called a “matter”, requires adherence to the triple constraints of scope, budget and time. Managing to these assumptions can be tricky as the facts of the matter may change, in turn affecting the scope, budget, and/or timeline. If not communicated properly, this often results in uncomfortable conversations with clients requesting a budget increase or timeline extension.

Unlike other industries whose project management fundamentals are more mature and formal, perceptions as to the current state of a legal matter are too often determined by actual cost (AC)—i.e., how much money has been spent to date—against the matter budget (more formally referred to as budget at completion (BAC)). However, this type of informal “budget to actual” analysis can—and will—cause misleading performance measurement and an inability to properly control costs. For example, let’s assume that we are $20,000 into a $40,000 project. On a superficial level, things look good because we have not overspent. This analysis typically represents the full extent of legal matter cost assessment and status reporting. In fact, we have very little information regarding:

  • How much work have we actually completed? (we already easily know what’s been spent)
  • Have we got to where we want to be?
  • When are we going to finish?

To answer these questions, we must turn to a more structured approach for monitoring progress against the constraints of the project/matter. This is needed so that preventative measures can be taken to avoid budget overages and ensure schedule adherence. Fortunately, such an approach has already adopted and in wide use in many other industries. Called Earned Value Management, or EVM, this form of financial analysis has become a significant branch of project and cost management. The importance of EVM can be exemplified by the fact that in 1991, Secretary of Defense Dick Cheney canceled the Navy A-12 Avenger II Program due to performance issues detected by EVM. For those who claim that “you cannot manage what you cannot measure,” a clear grasp of EVM principles and their institutionalized application to legal matters and projects is essential.

EVM BASICS

The project schedule shows how you are progressing on your timeline. The Billing or Accounting department tells you where you are in regard to budget. Ultimately, we want to determine how far along we are in completing the scope of work, referred to as earned value.

There are several guiding principles when performing EVM analysis. To properly monitor and control your project using EVM, you must first plan for two things:

 

Budget at Completion (BAC) is the total scope of work to be performed and its associated cost—i.e., the matter budget

Planned Value (PV) is the matter budget at the current point on the schedule. It answers the question “how much work should have been completed at a given point in time” (e.g., 1/12 of the budget in 1 mo.)

For example, a hypothetical real estate acquisition has work allocated as follows:

  • The matter budget is $40,000
  • Expected timeline is 7 weeks
  • 4 weeks (A)  have elapsed so 70% (B) of work should be completed (first two phases)
  • PV = $40,000 X 70% or $32,045

In monitoring ongoing project status, we must then determine:

  • Percent Complete as of the reporting date
  • Actual Costs as of the reporting date

 Actual Cost (AC) is the cost to date.

  • Billing department says $15,000 has been billed and $5,000 is in WIP
  • AC = $15,000 + $5,000 = $20,000

Once these values are known, we can then determine earned value:

Earned Value (EV) is the value of the completed work.

  • Budget for the matter is $40,000
  • The attorney team has completed the first phase – Fact Gathering/Due Diligence
  • 4 weeks have elapsed but only 30% of work has been completed
  • EV = $40,000 X 30% or $12,000

EVM ANALYSIS

Using the metrics above, it becomes very simple to objectively answer such questions as:

Is the matter on schedule?  In project management terms, this is called the Schedule Performance Index (SPI). The formula for SPI is EV / PV. If SPI > 1, the project is ahead of schedule. If SPI < 1, the project is behind schedule.

Using the above examples:

  • EV = $12,000
  • PV = $32,045
  • SPI = $12,000/$32,045 or .37
  • Since SPI < 1, project is behind schedule

Is the matter on budget?   This is called the Cost Performance Index (CPI). The formula is EV / AC. If CPI > 1, the project is under budget. If CPI < 1, the project is over budget.

Using the above examples:

  • EV = $12,000
  • AC = $20,000
  • CPI = 12,000/$20,000 or .6
  • Since CPI < 1, project is over budget

What will it cost to complete the entire project?   This is referenced as Estimate At Completion (EAC). The formula is Budget at Completion (BAC) / CPI.

  • $40,000 / .6 = $66,666

A NEW, MORE THOROUGH APPROACH

Amazing as it may seem, EVM is not highly utilized in today’s law firms or law departments. Perhaps that is because EVM requires some additional effort in the planning stage of a case or transaction, and lawyers are loathe to engage in planning (focusing instead on execution). Yet, EVM’s adoption clearly provides a far more proactive matter management approach versus the basic “budget to actuals” reporting currently favored by most legal organizations. It is, in fact, an essential Legal Project Management tool whose metrics and calculations allow legal teams to proactively and quantitatively manage their matters and assess the performance of their vendors.

As an industry, let’s begin to institutionalize EVM and other project management best practices to really understand and control project success

 

 

Carey Lambert is a Senior Consultant with LegalShift, LLC.    Carey has over 30 years in Project Management and is a PMI certified Project Manager, Six Sigma BlackBelt and Lean certified.   He can be reached at (601) 227-4301 or clambert@legalshift.com

Article: The Changing Landscape of IT Operations Practices

The Changing Landscape of IT Operations Practici

Developing and maintaining a high-performance information technology function within a law firm is a bit like the game whack-a-mole: Just when you think you have hammered a component of your operations into place, another area pops up demanding your attention. The path to achieving operations excellence is not for the faint of heart.

Base IT operations practices vary by law firm, but every law firm IT function should include a focus on applications, infrastructure and computing, client support, technology risk management, IT business management, IT project/program management, and other elective administrative areas. What does each practice cover, and how is the changing legal landscape affecting their focus?

  1. Applications: The applications area includes IT practices that span requirements identification, selection, design, testing, implementation, management, maintenance and expert support of the software applications leveraged by the firm’s lawyers, administrative team and often clients. This can also include application packaging and development and database management. The adoption of cloud-based and SaaS software applications and the flexibility they provide will continue to reduce desktop and packaging practice requirements. Cloud-based applications will cause the desktop environment to become less customized, which will reduce the focus on some applications testing and packaging practices. Based on this sea change, applications practices are morphing to include a strong focus on vendor management practices. Understanding applications and the analysis of requirements will continue to be strategic practice sets for law firm IT functions. In addition, a subset of the firm’s software applications and associated responsibilities normally found in the applications and program/project management areas may now exist within knowledge management in firms that have a separate knowledge management function.
  2. Infrastructure and Computing: This area encompasses requirements identification, selection, design, testing, implementation,management, maintenance and expert support of the desktop environment, networks and storage, access control, and overall hardware and software infrastructure leveraged by the firm’s lawyers and administrative team. Also included are practices related to data center management, IT backup and recovery, and overall systems monitoring. As cloud adoption drives the evolution of today’s operations practices, the legal market will reduce internal reliance on and investment in traditional infrastructure practices. That migration work could occur over the next three to seven years with a continuing internal focus on high-level system engineering and systems integration practices being owned within the IT function. Vendor management practices are quickly evolving as importance grows.
  3. Client Support: Client support includes the IT help desk, desktop support and user technology training. The past decade of outsourcing help desk, desktop support and client support has yielded mixed results. Some firms have outsourced everything, some use outsourcers only for after-hours support and others use third-party providers for weekday support. One newer trend is for some members of the outsourced team to physically resident on a client’s site as a hybrid outsourcing model, though the financial commitment makes this option less attractive. Training practices are evolving. Technology training is most often owned by IT, but some firms share responsibilities between IT and human resources. Most firms do not provide incentives for lawyers to attend training, so firms are adopting a combination of deskside, classroom, “genius bar” and self-service training (virtual or recorded).
  4. Technology Risk Management: Technology risk management relates to compliance, cybersecurity, business continuity and disaster recovery, and overall business risk management. Law firms have experienced a disruptive focus on risk management practices over the past eight years. Firms have been forced to develop strong practices in many places where none formerly existed, and more firms are recognizing the strong link between technology risk management and the firm’s overall risk management function. Firms are building a matrix structure where operational practices are jointly owned by both IT and risk management (or the office of the general counsel).
  5. IT Business Management: Business management covers shared business services within the IT function, including but not limited to procurement, fulfillment, financial reporting and vendor management. These operations practices have been owned by the IT leader, but many are recognizing that structured policies, processes and tools are required.
  6. IT Project/Program Management Office: The project/program management office is involved in the solution delivery life cycle. This includes business analysis practices required to align the firm’s user community needs with IT. Corporate America has long recognized the value of having good program/project practices to ensure project success and to manage resources, costs and time lines. Law firms have toyed with these models, with few recognizing their full potential. Strong pressure from both clients and internal shareholders is creating a renewed focus on these operations practices. Law firms are experimenting with similar practices (i.e., legal project management) to support the delivery of substantive legal engagements, which should further spur the use of internal practice sets. In some instances, IT’s program/project management practices (and organization) have been co-opted by the firm’s administrative management, as there is an increasing understanding that these practices have applicability outside of IT.
  7. Other Elective Administrative Functions: Depending on the scope defined by the firm, the IT function could also own and manage knowledge management, library or legal research, litigation and practice support, records and filing, and new business intake and conflicts. Firms that do not have a formally defined knowledge management function have recognized the value of having business analysts and analysis practices to ensure the firm’s legal and administrative practices (e.g., practice group chairs, line lawyers and administrative areas) are aligned with the IT function and vice versa. These analysts bring solutions to the practices and ensure that the IT function is responsive and aligned to business needs. Firms with knowledge management functions typically subsume the business analyst practices under that function. A high-performance IT function in a law firm will address all of these operational areas, identifying how operations needs and practices must adapt to the everchanging legal landscape. The firms that have made the most progress on this journey have focused first on assessing their current state and then on prioritizing the IT operations practices they believe will provide the most value for their firm’s business.

Dan Safran is President/CEO at LegalShift, LLC.  His is former EVP at Project Leadership Associates heading its Legal Vertical as well as its Managing Consulting practices.  Prior to this, Dan was President of Project Leadership Consulting and has held a variety of President/EVP/COO and Global CIO roles over his 32 years of work experience in both the legal and corporate business sectors.  Dan spent the first nine years of his consulting career at Arthur Andersen/Andersen Consulting (now, Accenture).   Dan can be reached directly at (312) 560-8932 or at dsafran@legalshift.com.

This article was first published in ILTA’s Spring 2017 issue of Peer to Peer and is reprinted here with permission. For more information about ILTA, visit www.iltanet.org.