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A Guide to Proving Legal Tech's ROI

Proving return on investment (ROI) is without exception one of the most important factors for general counsel when looking at adopting new legal technology. Before getting to the question of what great problems can be solved with new and innovative technology solutions, there’s a fundamental question that should be addressed first: How will that technology save money for the legal department? Whether it’s headcount reduction, streamlining internal processes, or reducing outside legal spend, proving ROI should be the start of the conversation, not just the last slide in a pitch deck.

This article will discuss some of the most common ways in which legal tech can prove ROI for GCs; it will also detail some of the important questions legal tech companies should ask to better understand the in-house budgeting process and help GCs champion new tech adoption with other stakeholders. 

Unlocking savings in litigation and contract workflows 

The beauty of focusing on proving legal tech ROI within legal department workflows is that there are only so many ways to reduce spend, and they largely fall within two buckets: internal headcount reduction/increased productivity, and cutting outside legal expenses. And when it comes to reducing outside legal expenses, there is also a limited universe of ways to save money: reducing billables and improving outcomes. 

In the context of litigation management, legal tech companies pitching to GCs running legal departments involved in thousands of cases per year should look for opportunities to cut spend across the board within litigation workflows. For example, a legal tech solution offering automated notifications when new lawsuits are filed against a GC’s company, as well as the ability to push that data directly into internal applications via APIs can readily show both a reduction in headcount and outside legal expenses. 

By virtue of automating data entry through APIs, a legal tech solution will necessarily reduce the headcount required for manual data processing. It will also result in a further reduction of resources by eliminating the ongoing need to clean up human errors in data entry and the added resources needed when downstream data quality issues arise in internal reporting. 

To calculate the ROI for GCs, legal tech can obtain average salary information online for paralegals/legal assistants in the relevant industry and geographical area, and then multiply that amount by the number or percentage of resources no longer needed for the manual entry and clean-up of court data. 

In addition to reducing headcount, streamlining the process of data entry with APIs and pushing real-time case updates into internal matter management systems also greatly diminishes the frequency of communications needed between in-house and outside counsel. If in-house counsel already has all of the updated case information at their fingertips, the billables from routine progress calls or emails may become a thing of the past. 

In the realm of contract workflows, there are also similar parallels regarding the reduction of headcount and the overall elimination of outside counsel billable hours. For instance, there are now several legal tech solutions such as Seal Software, ThoughtRiver, and HotDocs that provide in-house legal teams with the ability to establish smart playbooks and rules based on internal policies and negotiating points, which largely remove the need for legal to be involved in contract negotiation. 

Assisted by artificial intelligence (AI) review and guidelines developed by in-house counsel, the business can largely operate independently of in-house and outside counsel in contract negotiations for nondisclosure agreements (NDAs), licensing agreements, leasing agreements, and other standard agreements, unless there are escalations requiring additional layers of review. 

To project savings for GCs, legal tech can develop cost-savings models that look at the volume of particular contracts being negotiated within a given period, and estimate both the saved time in-house counsel no longer needs to spend negotiating contracts and the reduced billables from outside counsel reviewing those particular types of contract. 

Whether your legal tech solution touches on litigation or contract workflows, the key to remember when proving ROI for GCs and other stakeholders is the age-old adage: keep it simple stupid. Sticking to basic concepts of headcount reduction/increased productivity and reducing outside counsel billables helps legal tech center on discernable and achievable wins that GCs can understand. 

Anticipating needs and budgeting pain points 

Having worked in legal ops and seen tech projects live and die by the budgeting process, one of the most helpful things legal tech can do is anticipate the needs of their in-house champions who are navigating internal budgeting obstacle courses. Proving ROI for GCs is only half the battle. 

Taking the time to ask GCs about the pain points they experience is an important first step for mapping out potential minefields that may lay ahead, and also a critical step in becoming a partner in the budgeting process, as opposed to just another vendor waiting to reach the internal funding finish line. 

But before asking questions about pain points, it’s equally important for legal tech to fully appreciate where GCs are standing: at a four-way crossroads between needing to (1) take advantage of advances in tech, (2) save money and reduce overall spend, (3) prove ROI to the rest of the C-Suite, and (4) protect the interests of their company from ongoing risk and existential threats. 

Here are some initial conversation starters that may help produce insightful offshoots for continued discussion: 

  • What are the most common hiccups and hurdles that you’ve seen derail technology projects in the past? 
  • Who are the key stakeholders involved in your approval process? Are there any potential holdouts who we need to win over, and how can we help you in that regard? 
  • Are there any specific reports or costs savings analyses you are required to prepare for your approval process? How can we help reduce this burden? 
  • Are there any particular pain points you are wary of that we can assist with? 
  • What is the typical length of time it takes to obtain the internal approvals in your budget process from start to finish? 

Understanding the basics about how long a budget approval process takes, who’s involved, what hoops you have to jump through (whether any are on fire), what’s required reporting-wise, and how you can assist throughout the process can be huge for uncovering and removing otherwise invisible blockers. 

In addition to asking GCs about the budget process in which they operate, legal tech companies should also anticipate and proactively provide answers to or at least be prepared to respond to the following questions: 

  • How long will it take to implement your technology solution? What internal resources will be required? 
  • How many other clients have you worked with on similar projects/integrations? Can you share any case studies? 
  • What level of support can you provide? Will you be assigning dedicated resources? 
  • What does your roadmap look like for the next three to six months, and the next year more generally? What type of enhancements are in your roadmap that can improve current ROI even more? 
  • What other supporting materials can you provide (e.g., white papers, process flow charts, data models) to help calculate ROI? 
  • What value added benefits can you provide? 

Being upfront about ROI and the actual costs of technology adoption puts clients first. No matter the great features your technology solution has to offer, or the AI driven insights you can provide, at the end of the day, GCs are still standing at the four-way crossroads and need to prove ROI to themselves and other stakeholders before moving forward on adopting new tech.

About the Author

Jeff Cox is the director of content and data acquisition for UniCourt, a SaaS offering using machine learning to disrupt the way court records are organized, accessed, and used. He is a Florida attorney who loves all things legaltech and volunteering with local legal aid programs in Tampa.

The information in any resource collected in this virtual library should not be construed as legal advice or legal opinion on specific facts and should not be considered representative of the views of its authors, its sponsors, and/or ACC. These resources are not intended as a definitive statement on the subject addressed. Rather, they are intended to serve as a tool providing practical advice and references for the busy in-house practitioner and other readers.