Until 2006, globally dispersed in-house lawyers at Aon based in 120 countries relied on a diverse collection of software programs to track legal matters, outside counsel invoices and compliance issues. The result was inconsistent reporting of information regarding Aon’s risk portfolio. “We were living in a mud hut,” says David Cambria, director of legal operations.
That year the $10 billion international risk management and reinsurance company migrated its legal operations into a single enterprise legal management (ELM) system.
Cambria wouldn’t say how much his company paid for the system, but he says it recouped the investment in the first few months of operation with a return on investment (ROI) of 300 to 400 percent in the first year alone.
Aon’s investment has paid for itself through faster operations and better control over companywide risk and costs. “Better reporting allows us to analyze the root causes of our litigation risks and work on changing business behavior to avoid litigation,” Cambria says.
Enterprise solutions have brought significant financial, operational and strategic benefits for years to U.S. corporations.
“There are, and have been for many years, existing enterprise-wide systems such as ERP (enterprise resource planning). However, these systems were not designed specifically for the unique needs of legal departments,” says Mark Poag, general counsel and senior vice president at systems provider Datacert.
In the past few years, Datacert and other vendors such as Mitratech have offered legal industry-specific systems known as ELMs. These are designed to integrate with systems in other departments such as finance, compliance and risk management. The recent challenge to legal departments has been rolling solutions out worldwide to support a diverse and expanding number of clients in their global business initiatives, says Poag.
The hurdles inherent in a global solution include incorporating complex and changing foreign tax and regulatory compliance requirements, technical infrastructure immaturity, change management and cultural considerations. But coordinating enterprisewide activities confers a host of benefits.
“Government audits and investigations can take time, so it’s helpful to have a detailed record of the negotiations between the various parties,” Cambria says. “Having an integrated platform allows me to collect this information from all across the globe and compare notes, as well as report on outcomes from a single system, rather than through
Other benefits include enabling Aon attorneys to comply with Sarbanes-Oxley reporting requirements by accessing the reserves balance and payments on a matter simply by selecting a case and clicking its reserve analysis tab. Prior to implementing the enterprise system, paper versions of settlement memos were distributed manually to the legal department and impacted business units for review and approval. “Today we have a secure, auditable process, right up to the point where we cut the check,” says Cambria.
Enterprise solutions also enable global legal departments to standardize e-billing and track outside counsel spending across different currencies.
Law departments can display and manage financial data in a user’s preferred currency, including invoices, budgets, timekeeper rates and accruals, by using standard Uniform Task-Based Management System (UTBMS) codes and international Legal Electronic Data Exchange Standard (LEDES) electronic invoice formats. A system can incorporate business rules that automatically make line item adjustments to an invoice based on fee agreements. It can automatically reject or warn reviewers about duplicate invoices or billings over an allowed number of hours, and warn about an approaching budget threshold, says Poag (see “Automated Arrangements”).
Other positive outcomes that can accrue from an ELM system include enterprisewide reporting. Scott Giordano, corporate technology counsel at systems provider Mitratech says an ELM system can produce reports that reveal enterprise data such as actual expenditures versus budget, the state of all legal holds, elapsed time to settle pending claims and staff compliance with directives such as HR training. Such reports are useful in demonstrating regulatory compliance, he adds.
Another aid in compliance is the ability to gather data on proposed and new regulations and place it in context of the company’s existing regulatory requirements. The raw data can come from the websites of regulatory agencies or from data vendors such as LexisNexis or Westlaw, and it is jurisdiction specific.
The total cost of ownership (TCO) of an ELM includes initial outlays for hardware and software deployments, costs of support personnel, integration and training. A complete enterprise solution can cost $100,000 or more, Giordano adds.
Some of the work can consist of replacing “point solutions,” software that is narrowly tailored to perform a given task and is not easily expandable. “No longer are point solutions the answer as they simply don’t provide the necessary visibility to control risk and are too costly to manage and maintain,” Poag says.
Some ELM service providers offer software tools that allow their clients’ IT departments to develop and integrate new solutions on their own, without requiring continued programming expertise from the outside vendor.
Designing systems without disrupting business is a particularly important consideration. If a company already has deployed an ERP system such as SAP or Oracle or an enterprise content management system such as FileNet, these can be connected to an ELM system using standard application programming interfaces, which allow systems to speak through a common protocol or “language.”
“It’s like everyone going to the United Nations building and speaking the same language,” says Giordano.