Value chain reaction

London, 15th May 2017 – The Briefing magazine has published an article about analytics in the legal sector that delves into the Modern Data Platform.

Please read the article below. To read the article from original source, please follow the link (pp. 34-37)

Merlin Knott at SAP UKI and David Milburn at itelligence Business Solutions UK say law firms must sharpen their appreciation of how analytics can improve the whole business value chain to drive improvement in profitability.

Traditional responses to business analytics in law firms have tended to provide isolated silos of capabilities that don’t fully enable end-to-end business improvements. E-discovery often remains isolated, predictive analytics is implemented in functional silos, and traditional focus at firms still centres on basic reporting and data warehousing.

However, dramatic changes occurring in the sector mean firms are faced with a nexus of forces, which impose big stresses on a business. Traditional data warehouses and reporting cannot adequately address these, and may be causing firms to be left behind.

One of the surest signs that law firms are indeed under increasing competitive pressure is the rise of the pricing team, which provides commercial guidance to those leading client relationships.

It’s something that Briefing has made a point of tracking in detail in recent years – and whether you have a fully resourced function or not, if anything was clear, it’s that pricing success depends on the transparency of reliable and timely data, as well as the ability to analyse that data to drive greater understanding across the firm about how to price more appropriately. Merlin Knott, vice president for analytics, northern Europe, at SAP, says: “Especially after the financial crisis, most companies in the world are looking for new efficiencies. A typical first port of call is to squeeze your service providers – such as reducing marketing spend.

In the case of an in-house legal team, this tendency to outsource less has – of course – meant offering less work to fewer law firms.

In a more competitive market, being under pressures such as service unbundling by in-house legal teams, firms need to be that much clearer about which customers are really driving profitability,” Knott says.

And as that firm grows – along with its customer base – it increasingly needs to use analytics to access the data that will identify exactly where it’s making or losing money. A lot of overhead allocated to the wrong customers can become very unprofitable, very quickly.

Is the customer always right?

So, the basic promise of the sector analytics solutions developed using SAP technologies is to correct assumptions about which clients and matters really are profitable enough in this business climate – and then to ensure the management of the factors that feed into pricing decisions improves in future.

It isn’t just about reporting on past events, but also being able to identify predictor variables easily as these can impact profitability,” says David Milburn. Clearly, this has the potential to get more complicated as firms globalise on the one hand, and (again, for efficiency) disaggregate aspects of services on the other. Whether merging to take advantage of business opportunities in new jurisdictions or offshoring into lower-cost ones, management of data presents a greater challenge as you’re growing and changing.

The pressure doesn’t stop there. Milburn adds: “As well as market competitiveness, there’s increasing internal pressure from partners and fee earners for better insight into the profitability of their individual practices.

Meanwhile, clients also want access to more robust and detailed information in a timelier manner, about work in progress for them. “A host of challenges come together to deliver a proper data and analytics solution that is much more compelling as an investment proposition.

Ultimately, of course, both firm and client have an interest in better understanding the factors that make up a final price, alternative fee arrangement (AFA) or otherwise. Clients want that price to represent good value – while firms may want the same, but also need profit. Analytics not only helps both sides to understand the history of behaviours and outcomes that have affected prices past, but also to appreciate which variables impact on pricing, enabling both parties to reach something that is at least more predictable.

If we’ve already done a type of matter many times, can we explore the size of case and the pricing to learn from these past cases?” says Milburn.

“Analytics provides accurate facts, figures and predictive variables to feed into the next case that comes along of a given type.” As with not taking on a new client, analysing the chances of winning from experience could even lead to declining a case, thereby avoiding an unprofitable situation in the future.

Keeping it real time

Knott continues: “SAP provides a platform for real-time insight into business operations – which means you can analyse all the information points you have – all the time, and quickly.”

That makes for improved long-term decisions as well as more timely immediate one.

Historically, organisations have had silos of data, so they either had to exclude certain pieces of information from a view or perform analysis at a higher or lower level of granularity – typically a data warehouse.

But that adds assumptions about results. As an example, customer revenue figures could exclude debtor days and the collection process from the final cost of servicing that customer.

By contrast, he says, SAP’s technology provides a ‘point in time’ profitability measure for each customer, which considers each and every aspect of cost.

It enables, for example, firms to distinguish between the customers that need ‘premium’ service, the customers that could be influenced to become more profitable by changing engagement models, and even those that can be released because they cost more to service than they make. In short, it can drive customer strategy.

Milburn adds: “Obviously, challenges such as these grow as you try to scale as an organisation. If there’s a business that’s five legal entities, there’s that much more happening. Few organisations are equipped to support that level of activity, both in terms of managing the complete analytical lifecycle, and unearthing extra value.

Table talk

However, there’s more to managing a legal business than making sure your customers are profitable.

At a recent roundtable, SAP and itelligence discussed how firms such as DLA Piper, Herbert Smith Freehills and Linklaters are using SAP to help with other data management challenges. Even firms with support and resources on this scale are alert to the need for rigorous regulatory compliance and appropriate risk management as they navigate clients’ changing demands.

We discussed the way compliance with the EU’s General Data Protection Regulation would affect management of customer records – as well as the demands of hosting client portals,” says Milburn. “Clients increasingly want a tailored report to show billings across several different regions, and that requires more agile responses from IT delivery.

It’s a very time-consuming exercise to pull that data together, and very possibly an inefficient one. However, you could provide premium services to clients enabling their own access to self-service reporting.” SAP has already introduced this option for businesses in several other industries, he says. Knott adds: “Whether big or brand new, firms also need to be operationally agile.” For example, some global firms have launched ‘pop up’ centres that may only take temporary advantage of a set of circumstances for more efficient delivery. There’s clearly an accompanying data management and analytical effort in establishing this

Knott adds: “Whether big or brand new, firms also need to be operationally agile.” For example, some global firms have launched ‘pop up’ centres that may only take temporary advantage of a set of circumstances for more efficient delivery. There’s clearly an accompanying data management and analytical effort in establishing this set up.

You could have a situation where you need to work on one specific case, in a specific location, for a specific period of time. You also need the right structure for delivering on your information needs during that time,” says Knott. SAP has invested in cloud-based analytics to support an exercise like this. “It integrates with our existing technologies, but also gives customersa new level of flexibility,” says Knott. And like everything else, that leads to a greater chance of the final price being right and the firm being more profitable as a result.

 

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