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The accumulation of spend data in legal departments will, over time, reduce costs

One long-term trend may escape notice: legal departments are steadily stocking more and better data about what it costs outside counsel to handle matters. As David Grumbine, Senior Counsel, Dispute Resolution Group, of Whirlpool Corporation, put it on a panel at the Ninth Annual SuperConference, “Hourly billing rates are irrelevant if data is available for historical measurement.” His point is that the more a legal department knows, from its matter management system, about the costs of previous matters, the more confidently and quickly it can strike a deal with a law firm on a new, similar matter.

Gradually, savvy general counsel will arm themselves with targeted cost knowledge, collecting relevant data for longer periods of time, extracting it efficiently from databases, analyzing it astutely, and applying that knowledge to craft fixed fee arrangements with external counsel (See my post of Jan. 25, 2007 about all processes produce data for mining; July 21, 2005 about a consortium to share legal data for mining; Feb. 19, 2007: fancy term for analyzing data; Feb. 17, 2008 #4: “machine learning” to automating data mining; Feb. 24, 2008: business intelligence efforts by law firms to glean information from their billing records; Jan. 25, 2007: business intelligence and data mining; May 25, 2008: who do law firms not mine their own records; Jan. 20, 2009: data mining software available for five years, but little use; Feb. 7, 2009: huge store of data on patent cases; April 28, 2009: pick a firm to help you dig through your data). Data mining, over time and without much recognition, may transform the pricing of matters assigned to outside counsel.