Category: Legal Operations

Managing outside counsel can sometimes feel like herding cats. There, we said it. Phew. Glad that one’s out in the open.

Maybe you believe one firm is overcharging you on rates, while another is going to town on block billing, and another is staffing partners on tasks a first-year should definitely be doing. You know these things are happening, but do you have hard evidence? Figuring out how to drive meaningful change with your firms can be tough — even simply knowing where to begin is a challenge. 

Smart legal ops teams use, you guessed it, data (!) to manage their outside counsel — and their first stop on the road to crushing department priorities is quarterly business reviews, better known as QBRs. 

QBR meetings give them a platform to discuss performance and rate trends, successes, as well as opportunities for improvement. While it’s of course critical to meet about the meat of your matters, setting aside time to review your business relationship sets you up for success both with your firms, as well as with your internal stakeholders (budget season is coming, amirite?). 

So, what can you expect to get out of a well-prepared QBR? Here are five ways innovative legal ops teams are using their QBRs: 

1. Rate Review

Rate review shouldn’t be a once-a-year task — especially with the sly pricing tricks law firms are known to deploy to rack up their billings. Regular analysis of your law firm’s activity and rates by timekeeper level can ensure that you don’t overpay unnecessarily. 

By surfacing critical data across practice areas and analyzing rates on a quarterly basis, QBRs unearth important trends that can eliminate increases — sometimes even leading to reductions or discounts. QBRs provide the venue to negotiate fair market rates and manage your discounts, regardless of if they’re practice area-specific, volume-related, or otherwise. 

With clear and objective insights under your belt, you can easily open up a data-driven dialogue with your law firms to address any concerns, then start — and win — rate negotiations.

2. Panel Review

Without data on your side, value can be in the eye of the beholder. Consider what you’re paying your firms. Now think about what they’ve done for you in the past year. Are they congruent? Did you truly get what you paid for? How did they stack up against other firms you use in the same practice areas?

We’re guessing you might be feeling a slight wave of regret washing over you. Shake that right off. QBRs are a great fix.

By taking key metrics into account like total outside counsel spend, average hours per matter, and percentage of time block billed, QBRs surface insights on the value your firms deliver and opportunities for value to be maximized. By lining up those metrics against other firms working across the same practice areas — or the same panel — you can begin to see trends that may impact how you allocated work in the future, or even prompt you to change the panel composition.

3. Performance Management 

If you’re like most corporate legal departments we work with, you’re probably paying a partner for something a first-year associate should be doing. We emphasize “probably” because it’s nearly ubiquitous — Bodhala sees this behavior across nearly every firm. We like to call it “partner hoarding”. Some firms are more egregious than others, but it truly impacts your budget when it’s happening on a regular basis. 

With cost-cutting a constant priority for corporate legal departments, QBRs are a great way to easily help correct this problem.

Digging into activity across your practice areas can highlight key metrics, such as average partner hours, average associate hours, and your partner to associate ratio. By clearly highlighting key trends, such as partners logging significant hours on routine work or firms exceeding their associate ratio, you can determine where exactly you need to course-correct and rein in the unnecessary dollars being spent.

4. Reporting to Internal Stakeholders

Many legal departments are feeling the heat from the C-suite to cut costs and run their departments more like a ‘business’. We all know that reporting to internal stakeholders can become a real pain in the…you know what. For many corporate legal departments, reporting capabilities are stuck in the 1990s, leaving them to conduct manual analysis and pore over spreadsheets.

QBRs place all the data that in-house teams need at their fingertips — often in a format that they can pass along to internal stakeholders without any edits or changes. 

Your QBRs should deliver in-depth analysis and actionable recommendations – which can be tough without appropriate software or a robust legal ops team. Setting yourself up with a top-tier legal analytics platform (cough, cough…Bodhala…!) can be the difference between easy-breezy and hours of work. That said, the work is worth the impact and the ability to pass a nice, neat package to the finance department. 

5. Gut-Checking Large Matters

Law firms often claim forecasting a budget for upcoming matters is an impossible feat, citing a lack of precedent or the “unique nature” of every matter. Sure, not every matter is cookie-cutter, but there are absolutely trends. Just like you can dig into historical legal precedent, you can also dig into historical cost precedent. 

A great QBR will drill into top matters from the past quarter and highlight key metrics that you should watch in the future. Even without a sophisticated legal billing analytics engine, keeping a record of such historical analysis can be incredibly helpful in projecting costs — everything from setting expectations around hours and tasks to rates.  

Having this information on hand helps in-house teams gut-check future matters of similar volume and complexity. Not only that, but great QBRs should offer the opportunity to make the appropriate changes needed to rein in extraneous expenses and keep your budget in check, such as revisiting how work is allocated, renegotiating your practice area discount, or updating your outside counsel guidelines to eliminate unreasonable billings. 

Sophisticated Reporting + White Glove Service = Better Business Outcomes

Data-driven conversations are foundational to the success of not only your law firm relationships but your entire legal department. 

QBRs are a great opportunity for in-house teams to get their feet wet in legal data analytics and see how transparency — and even just incremental change – can drastically reduce your legal spend and eliminate budget overages. Transparency itself can often be a major catalyst. Ever notice that when someone knows you’re watching, they start acting differently? QBRs can produce that same effect, known as the Sentinel Effect — let them know big brother is in the building, and they’ll clean up their act. We wrote a whole piece about it — check it out.

If you’re resource-constrained or you don’t have a legal ops team, don’t worry. We got you. You don’t have to be a data scientist for QBRs to transform your legal department — that’s our job :). 

Ready to learn more? Get in touch with our team to discuss our QBR Program and the savings that await!

The annual awards program recognizes Bodhala as Overall Legal Analytics Solution of the Year

Bodhala, the leading provider of AI-powered legal spend analytics, benchmarking and market intelligence, today announced the company has been named winner of the “Overall Legal Analytics Solution of the Year” award in the second annual LegalTech Breakthrough Awards.

Bodhala is at the forefront of creating better technology services to improve the legal market. Bodhala’s platform optimizes buy-side legal spend while also creating the transparency necessary to drive competition and foster innovation across the legal industry.  

With over $20 billion dollars worth of invoice data as well as publicly available and proprietary third-party data, Bodhala’s machine learning engine delivers actionable insights informed by the market. Bodhala’s solutions give corporate legal departments an unparalleled grasp on the legal work being performed so they can determine the value their law firms provide for the rate they’re being paid.

General counsels and their legal ops teams, spanning from mid-cap to Fortune 500s, can tap into digestible data and benchmarks to accurately compare and contrast their outside legal work while also evaluating work within individual firms and across panels.

“We founded Bodhala with the belief that great legal talent should come at market-driven prices, and we’re incredibly proud to have built the most powerful solution on the market for legal spend analytics. This award from LegalTech Breakthrough reinforces our role in tackling the longstanding, unchallenged and one-sided marketplace,”  said Raj Goyle, CEO and co-founder of Bodhala.

The mission of the annual LegalTech Breakthrough Awards program is to conduct the industry’s most comprehensive analysis and evaluation of the standout technology companies, solutions and products in the legal technology industry today. This year’s program attracted more than 1,300 nominations from over 12 different countries throughout the world. In 2020, Bodhala was recognized by the awards program as “Legal Spend Management Innovation of the Year.”

“The legal industry’s lack of transparency has been a huge elephant in the room. Legal teams need deeper insights that allow them to better analyze, interpret and optimize outside counsel spend at competitive and market-driven rates,” said Bryan Vaughn, Managing Director of LegalTech Breakthrough Awards. “Bodhala is the first tech company to apply machine learning and AI to legal billing data to bring clarity to the billable hour and real economics to the market. 

Bodhala recently announced that it has been acquired by Onit, the leading provider of enterprise workflow and artificial intelligence platforms and solutions. By joining forces, the businesses create the most complete enterprise legal management solutions on the market, allowing corporate legal departments to evolve analytics into actionable intelligence to optimize outside counsel spend.

About Bodhala

Bodhala, the leading legal spend analytics and management platform, provides corporate legal departments with in-depth analytics and spend optimization solutions based on real-time market intelligence. Powered by machine learning and AI, Bodhala transforms messy data into actionable, high-impact insights to help companies save up to 20% on their outside counsel spend. The company, an independent subsidiary of Onit since 2021, serves clients across the Fortune 500 and critical services economy industries. Bodhala was named a LegalTech Breakthrough Award Winner for Legal Spend Management Innovation in 2020 and 2021, and One to Watch in Legal Technology by the Financial Times. For more information, visit bodhala.com.

About LegalTech Breakthrough
Part of Tech Breakthrough, a leading market intelligence and recognition platform for global technology innovation and leadership, the LegalTech Breakthrough Awards program is devoted to honoring excellence in legal technologies, services, companies and products. The LegalTech Breakthrough Awards program provides a forum for public recognition around the achievements of LegalTech companies and solutions in categories including Case Management, Client Relations, Data and Analytics, Documentation, Legal Education, Practice Management, eDiscovery and more. For more information visit LegalTechBreakthrough.com

Data-driven conversations are pivotal to successful law firm management and relationships — and for many smart legal departments, it all starts with quarterly business reviews (or QBRs).

That’s why we are launching the Bodhala QBR Program: to simplify the process for those already doing it and jumpstart a critical best-practice activity for those who aren’t. 

Using data to make better, more strategic decisions on key management issues, like rate review and panel review, has become table stakes for many corporate legal departments — and the trend is growing. Bodhala’s QBR Program will turn a cumbersome, seemingly never-ending task into a piece of cake, from start to finish. 

And the best part? It’s a completely white-glove service. By leveraging our advanced machine learning and AI, coupled with detailed analysis from our team of data scientists and legal industry experts, Bodhala QBRs deliver deep analysis and actionable recommendations, giving you the tools you need to effectively manage your objectives. 

So what do you get with Bodhala QBRs? We’re glad you asked.

1. Full Transparency & Trend Spotting 

By surfacing critical data and analyzing it across practice areas and firms on a quarterly basis, QBRs unearth important trends across important metrics like partner and associate rates, work allocation, and block billing. Detailed insights provide detailed insights on your law firms’ performance over time, highlighting areas you need to keep an eye on. 

2. Actionable Insights & Improved Reporting

Our QBR Program surfaces critical insights and provides you with clear recommendations for how to improve your desired outcome – whether it be negotiating a better rate, improving task-to-talent alignment, and everything in between. 

3. ROI Projections

Specific ROI estimates accompany each QBR recommendation. Designed to be easy to execute, with a clear associated value, you have a direct line of sight to the impact of your actions. 

You can be confident in the results – and the knowledge that you will be able to manage your budget more strategically. 

As pressure for accountability and proactive budget management continues to trickle down from the C-suite, data is no longer a nice-to-have but a need-to-have for corporate legal departments. Regular, data-driven conversations with your key stakeholders and law firms will not only set the foundation for stronger partnerships but will be a catalyst for better results. 

The Bodhala QBR Program will give you the tools you need to not only save time, money, and improve your outside counsel management. You will also be completely prepared to “wow” the internal stakeholders demanding visibility into your spend. 

So what are you waiting for? 

Book a demo with our team of legal experts to get started!

Corporate legal departments are increasingly expecting more from their firm relationships. In-house teams are now feeling executive pressure to effectively manage their budgets, save where possible, and demonstrate the value their firms deliver for the prices they’re paying. 

So how are they doing that? Innovative in-house teams are using analytics and sophisticated benchmarks. Armed with “smart benchmarks” that are informed by market data and purpose-built to establish apples-to-apples comparisons, corporate legal departments are leveraging AI-backed benchmarks to influence their law firm relationships for the better — and you can too.

But when do benchmarks give you the leverage you’re looking for? 

Here are three ideal opportunities, and some simple tactics to help you get started with benchmarking: 

1. Rate Negotiations

Rate negotiations can be uncomfortable — but with data, they don’t have to be. Though your firms may describe your rates as “great”, is that actually the case? Are they in alignment with the going market rates for similar firms doing similar work? You’re not going to get the answer from your firms — they’re inherently biased. It’s important you look to trusted third-party sources for market data. 

A smart benchmark will provide you with actual market rates for similar work from similar firms — which is critical. Comparing claims litigation rates to complex litigation rates, or an AmLaw 25 firm with a hyper-regional firm won’t result in usable data. They’re not meaningful comparisons. Make sure your benchmarks leverage contextually relevant competitors executing on similar matter-types and practice areas. 

Benchmarks also help you know when it’s worth the effort to negotiate at all. If it’s clear that the firm you used for all complex litigation matters is charging marginally more than similar firms handling similar matters, then perhaps the juice isn’t worth the squeeze.  

If you don’t have access to smart benchmarks from trusted third-party sources, you can still drive value by conducting a rate card RFP. That can help you at least benchmark firms’ bids against each other, and give you leverage with individual firms based on other firms’ bids. 

But be aware that the bids you receive are only telling you your law firms’ self-evaluated price — what they think they’re worth — not what they should cost. 

Benchmarks, on the other hand, are clear, objective, irrefutable data. Armed with that kind of data you’ll have the negotiation leverage you need to get the rate reduction you want.

2. Measure Outside Counsel Value & Effectiveness 

It’s no secret that law firms can be expensive and it can be hard to determine the value you’re getting for the rates you’re spending. But benchmarks are a great starting place for ascertaining law firm value. 

It’s understandable to want to work with a firm you like and trust, but your legal department should evaluate law firm relationships through a mix of qualitative and quantitative factors, like benchmarking. 

Beyond smart benchmarks, Firm Report Cards are another way to do basic benchmarking. Firm Report Cards allow you to drill down by practice area, matter type, timekeeper level, and even tasks to analyze the firms in your panel. From there, you can benchmark your panel firms against one another to determine who will deliver the most value to your organization and do so efficiently.  

Leading a data-driven discussion with your law firms will enable you to incentivize improvements — or even reward your top-performing firms by paying them more (yes, paying more isn’t always a bad thing).

3. Determining a Matter’s Should-Cost 

Law firms are notoriously vague when scoping costs for upcoming matters. Like many elements of the law, it’s not always clear upfront how complex a matter may be or how contentious your opponent will be. That said, law firms have the data to give you estimates – otherwise, how would they be able to make bids for large matters? They have the data – they’re just not sharing it. 

Having your own benchmarks for matters — estimated hours, allocation of tasks, and rates — is an incredibly valuable tool. By combining a smart market benchmark with historical data on similar matters, you can make a reasonable estimation of the expected cost — within a tolerance of course.

Market benchmarking will help your legal department set realistic and competitive expectations for your matters. With this knowledge, you can make data-driven, strategic decisions when it comes to matter allocation, ensuring you’re retaining counsel that delivers maximum value and acts in your best legal and financial interests. 

Benchmarking is critical to more strategic, informed decisions.  

Organizations are increasingly leaning on General Counsels and their teams to not only mitigate risk for the business but also act as a strategic partner. To be a true strategic partner, you don’t just need data — you need insightful, smart benchmarks.

Relevant benchmarks based on your own historical data, or third-party sources are indispensable and are a key ingredient for strategic success. The insight gleaned from benchmarks is the required ammunition to enable effective negotiation, improved firm management, and more accurate forecasting to keep your department on budget and be the strategic partner the business demands.

Smart rate benchmarks offer corporate legal departments a wealth of knowledge — but just knowing the benchmark only gets you so far. To truly make the most of your rate benchmarks, you have to draw insights, develop a strategy, and then action it. 

Here are three key ways to strategically leverage rate benchmarks (and make sure to check out our recent post on when you should benchmark!): 

1. Improve Performance with Data-Driven Discussion 

Working with law firms can be tricky, especially when it comes to conversations about rates or performance. Many in-house teams have a hunch when their law firms aren’t operating as efficiently or effectively as they could be, but lack the evidence to prove their suspicions

Benchmarks — both amongst your panel and against the market — are a valuable starting place for meaningful discussion with your firms. Data doesn’t lie — which immediately negates many tired arguments. With quantitative analysis like benchmarks, it’s simple to highlight areas where improvements could be made — and indisputable. 

Plus, the data lends itself to actionable insights. It’s easy to spot outliers and ask the right questions about why their numbers are so far off from the pack. They may have perfectly acceptable explanations — or they may have to make changes to how they work to fall more in line with norms.

If there’s one thing your law firms do not want, it’s to lose your business. Using benchmarks will help you to drive transparency through data-driven conversations. 

2. Make More Strategic Decisions on Law Firm Selection & Matter Allocation

Firm selection and matter allocation are other areas where benchmarks can make a huge difference in cost, value, and quality of service. It’s no secret that law is a relationship-driven business. Hiring decisions are often colored by old work relationships or law school friendships. Having a history with a person — or a firm — doesn’t necessarily mean they’re right for an upcoming matter, or for your business in general.  

One easy way to improve firm selection is to leverage benchmarks during your annual rate card review process. Conduct a Rate Card RFP, asking firms to re-submit rates across all or specific practice areas. Then benchmark the firms to establish the bid’s relationship to market prices — but make sure the benchmarks are contextually relevant and level-specific. Your market benchmarks must only compare a firm against similar firms for similar work, and that you’ve got specific benchmarks for each timekeeper level. 

Comparing the rates from the different bids, along with the market rate, will help you understand which firms deliver the most value. For example, certain practice areas may have very complex casework or subject matter and therefore require more specialized (and expensive) expertise. Regardless of the practice area, benchmarks and bids will put you in the driver seat to get the best firm at the best rate for your panel or matter.  

3. Negotiate Fair Market Rates

When it comes to rates, law firms are always adamant that you’re receiving a “really good” rate — even “lower than what other clients pay!”.

But we all know that seeing is believing — or as Cuba Gooding Jr. put it in Jerry McGuire — “Show me the money!”.

The apples-to-apples comparisons gleaned from smart benchmarks enable in-house teams to analyze exactly how their rates stack up against other firms that handle similar matters for similar clients within the same domain. 

As we all know, law firm objections are commonplace throughout rate negotiations. With this information, you have all the ammunition you need to lead data-driven conversations with your law firms and justification as to why you should pay a lower rate.

After all, competition is healthy. If your law firms really value your business, they will see the indisputable logic in your data and adjust their pricing to reflect a more fair market rate in order to keep you as a client.

Benchmarks Fuel Better Business Decisions

You cannot effectively manage what you do not measure. Benchmarks should play an integral role in your legal department’s operations — from relationship management to firm selection to rate negotiations and more. 

The startup journey is tumultuous, full of highs and lows, sometimes scary – but always exciting. From raising our A round in April 2020 to growing over 400% in a matter of months, the last 18 months have been quite a ride. 

But today, I have the honor of announcing our most exciting news yet: Bodhala has been acquired by Onit, a long-time friend of the company and true innovator in legal technology. We are now an independent subsidiary of the market leader in legal technology. 

Like Bodhala, Onit is committed to innovation and disruption. They share our vision for the business of legal – where data, machine learning, and actionable intelligence drive better strategic decisions and create a transparent market for legal services. 

From day one we believed that legal business data – from rates to hours to outcomes – would be the key driver of decisions in the future. It will not only allow legal leaders to operate their departments like a business, but it will also level the playing field and force innovation. 

Onit is the indisputable market leader in enterprise legal management, contract lifecycle management, and business process automation solutions. Bodhala’s analytics and legal business intelligence solutions not only complement their products, together we create the most complete solution for corporate legal business needs, ushering in a new exciting phase of legaltech: the era of legal business intelligence. 

I want to take a minute to thank everyone who has helped us along the way. So to our investors, families, and every member of the Bodhala team: We didn’t do this alone. Your support, advice, and hard work is what got us here today. You made this possible. 

So, what’s next? From new teammates to new features – Bodhala’s journey is just beginning. We couldn’t be more excited to create the future of legaltech with Onit. 

Below is some additional information about the acquisition, Onit, as well as top FAQs.

Sincerely,

Raj Goyle, CEO & Co-Founder

When procuring new technology, one of the first things prospective buyers want to know is — “What kind of ROI can I expect?”

Bodhala’s market intelligence has helped corporate legal departments around the world save hundreds of millions of dollars on their outside counsel spend by identifying inefficiencies and opportunities to save. But one of our key learnings along the way has been that for many GCs and legal ops leaders, ROI isn’t just about dollars and cents. Sometimes streamlining operations to save time or resources is the number one goal or reallocating spend for an important (and expensive) matter. Ultimately, it’s about each department’s goals, which can run the gamut from financial to operational — and everything in between.

Here are the top four benefits of a quality legal spend management system (beyond just banking the savings): 

1. Operational Efficiency

Ever find yourself wishing there were more than 24 hours in the day? Manual reporting and analysis – digging through spreadsheets – can be extremely time–consuming when it comes to legal data. From aligning data to consolidating various file formats, it wastes incredibly precious time and resources.

Sophisticated legal spend management systems allow in-house teams to run reports and analyses with ease. The best ones (ahem, Bodhala) also clean and structure the data as it enters the system, ensuring you get the most accurate data and best analytics possible. 

The right software can streamline your department’s internal reporting – everything from QBRs to panel analysis – saving your team hundreds of hours (or more). 

Crunching numbers doesn’t have to take all day — you just need the right tools.  

2. Investing in Key Players

Without data, in-house teams have long struggled to effectively allocate work and make the appropriate staffing decisions, like whether to hire internally or use outside counsel. 

But data is changing this narrative.

A smart, sophisticated legal spend management solution will illuminate the granularities of your outside counsel spend, enabling you to dig into the key metrics that influence budget allocation.

Armed with these insights, you can analyze key metrics, such as average practice area spend or average partner rate, to identify areas where you’re spending a significant amount of your budget. As a result, you can determine if it’s a more financially sound decision in the long run to make an internal hire in the relevant domain rather than continue outsourcing work.

Digging into other key metrics, like top lead partner or average partner hours per matter, can highlight your top performers. Knowledge of who’s billing hours on the most pivotal portions of your matters will enable you to identify partners who are highly specialized and critical to your success – and who should be compensated accordingly. Yes, that’s right — you should actually pay your “Lebrons” more. But you will want to know where to get those extra dollars – and the data can tell you that. 

3. Investing in New Technology

It’s no secret that the legal industry has long shied away from technology. And even when there is a need or desire to onboard a new tool, there’s no technology budget — it’s a lament in-house teams share far too often.

That’s why actively and effectively managing your outside counsel spend is critical. In-house teams are throwing precious dollars out the window each year by assuming they have zero leverage in pricing negotiations with law firms. But that couldn’t be further from the truth when you have data on your side!

Data gleaned from a sophisticated legal spend management solution will highlight areas where your spend can be reined in. For example, are you paying above-market rates for the partners or associates handling your matters? Did an esteemed partner log hours on a task that really should have been handled by a first-year associate? Did you unnecessarily blow budget dollars on a matter that should have cost you far less?

Armed with these insights, you can make strategic and data-driven decisions that will not only yield savings but also enable you to invest in the technology you need. 

Of course, you’ll want to understand the ROI you can expect from the next solution you onboard, but in the case of a legal spend management software investment, it will be a catalyst for savings and long-term benefits.

4. Rainy Day Fund

Although savings isn’t always about money, having some extra cash set aside never hurts. You never know when the economy might take a turn for the worse, or when you’ll get hit with an unexpected expensive lawsuit.

It’s a smart, strategic move to set aside some of the ROI realized from your legal spend management technology towards a “rainy day fund”. Having some cash set aside can provide you with peace of mind when the unexpected gets thrown your way.

Going Beyond the Dollars

Data should play a critical role in your budgeting and forecasting processes. Although data cannot account for everything, the ROI realized from data-driven spend management should provide you with a safety blanket of savings. 

A good legal spend management solution will save you money. But a great legal spend management solution will allow you to identify opportunities to streamline processes, improve law firm relationships, invest in new tools, and save you money.

With data and a smart, sophisticated legal spend management solution on your side, you can run your legal department like a business and meet your management goals — whatever they may be.

We’re excited to share that Futurology has recognized Bodhala on its list of New York’s Most Innovative Machine Learning Companies. Futurology’s list recognizes cutting-edge startups and established brands that are innovating the machine learning industry and excelling in innovation, growth, and societal impact. 

As we continue to grow our team, enhance our product, and scale the business, we’re proud to see our team’s hard work and innovation recognized. It has been an exciting summer for us here at Bodhala and we look forward to continuing building on our mission, delivering unparalleled service to our clients, and educating the industry on how data can transform the antiquated legal services market.

Interested in joining our team? Check out our open positions!

Legal tech is at a tipping point. Demand for solutions that automate menial tasks and enable organizations to operate more efficiently is accelerating adoption, fueling significant growth across the sector. And with greater adoption comes increased investment. Investors who historically shied away from legal, are beginning to add legaltech companies to their portfolios at a rapid pace.

Jean-Marc Levy, Operating Partner at private equity firm Edison Partners and former CEO of risk and compliance management platform ComplySci, has noted strong similarities between the growth trajectory of fintech, regtech, and now legaltech.

Bodhala CEO, Raj Goyle, recently sat down with Jean-Marc to get his thoughts on these parallels – everything from the convergence of technologies and the waves of innovation that technology businesses undergo, to what makes these solutions attractive to investors and how to build a successful platform solution.

RG: Jean-Marc, thanks for taking the time to chat with me. You have a robust background in fintech and regtech – how did you get into that space?

JML: I’m an engineer and computer scientist by training — I use technology to solve problems. After working for several years at the New York Stock Exchange, I looked at the regulation, compliance, and governance space and it became absolutely striking that these markets had the exact same characteristics as the early fintech ecosystem. They had fragmented and inefficient processes, data sets that didn’t talk to one another, no standardization, and no benchmarks. It was clearly a space where technology could make a huge difference – so I dove in.

RG: You mentioned something recently that really resonated with me – you think that legaltech is currently where fintech and regtech were roughly 15 years ago.

Obviously, you’re an expert in regulatory issues, compliance, and a successful operator and investor so I’m curious to know — what makes you think that? What are you seeing in legaltech that makes you think we’re in the very early innings of something huge?

JML: Taking a step back, if you think about the history of fintech and regtech, we’re probably on the third or fourth wave of fintech and regtech innovation.

The first wave of fintech innovation was primarily around taking any process related to a financial transaction, often a tiny element or the entire workflow, and taking inefficient manual processes and simply automating them — nothing else. No other value-add, quite frankly. But it was enough to create some very successful businesses in that first fintech wave.

Regtech is very similar. The initial first wave was just automation. As a compliance officer, for example, you need to manually review a whole stack of financial statements for your employees. Just allowing you to do that electronically was a huge opportunity. But you could argue there was very little value-add other than simply automating a manual process.

Once people get accustomed to automating very manual tasks, you flow into the second wave of innovation — how do these tasks constitute an overall workflow and can that workflow be enhanced and made more valuable through automation?

In the second wave of regtech innovation, you start looking at how the automated parts of the workflow can actually create more opportunities for value. By definition, as you continue to evolve those processes, you start introducing concepts like standardization, so that certain workflows are always consistent, with reliable data sets.   

The third wave of innovation involves taking all those workflows and allowing them to become interoperable and communicate with one another. It’s all about data standardization, APIs, microservices, and making your platform open enough so it can incorporate other data sets to create more value.

Legaltech is likely around the second wave.

RG: Are you seeing a big convergence between fintech, regtech, and legaltech?

JML: What I’m seeing more and more is actually the lines and the boundaries becoming increasingly blurry and porous. For example, Bodhala could technically be characterized as a procurement tech solution and a legaltech solution, right? But what does the convergence of all of those technology-enabled markets really mean for firms that are specialized in just one of the areas?

This convergence that we’re seeing now in this fifth wave of innovation is both a challenge, as well as an enormous opportunity. It’s a challenge because if you don’t pay attention and keep your focus solely on your core market, a lot of people around you that may not be “pure” legaltech companies, but are adjacent, are going to start encroaching on some of the things that you do.

On the other hand, the opportunity is that you’re not limited to marketing yourselves to one audience anymore so you can expand and specialize within certain areas.

I think the fifth wave of innovation is actually much broader than just a single segment like fintech, legaltech, or procurement tech — I see a huge convergence.

RG: In your experience as a successful tech operator, why do you think people, markets, and sectors do not always act rationally? Why do tech companies have to go through all of these waves of innovation and “cross the chasm” even when the ROI is clearly there?

JML: It’s a combination of things, but I think the most important transformation that I’ve seen in the course of my career is that, even in smaller companies and very much so in larger companies, there is no such thing as a purchase decision that’s made by a single individual. This is a transformation that has taken place over the last 10 or 15 years.

It started with larger companies, but we’re seeing it everywhere now as businesses become more collaborative and less siloed. Almost every purchase decision has multiple stakeholders, so even though the ROI and savings is clear to the General Counsel, for example, others will ask “Are we still going to be using the best vendors? How will this affect our relationships? How can we ensure compliance?”.

There are so many stakeholders involved in these decisions now that you have to be able to sell to all of these personas that have different value propositions.

RG: What are the characteristics of a market that’s right for a technology solution?

JML: Typically very fragmented industries or industries with a lot of niche vendors — like mom and pop shops that solve a very niche problem — and where there is very little standardization of data processes and workflows. And simultaneously, there’s a great deal of pressure to generate customer-facing value and not spend as much time on back-office systems that are not perceived as value-creating.

These are the characteristics of a market that’s right for a technology solution based on what we saw in fintech 30 years ago and what we saw in regtech about 10 years ago.

We’re starting to see this in legaltech now too. There are a lot of really good companies that solve very specific problems, like e-discovery solutions or Bodhala in outside counsel optimization, for example. But what we haven’t seen yet in legaltech is the emergence of more sophisticated workflows within the legal organizations that incorporate several of those niche products.

RG: Legal has a reputation in the investor world as being too hard to sell to because it’s a clubby and relationship-driven market. But you’ve mentioned previously that this is what people used to say about financial services 30 years ago — tell us more about that.

JML: If you were a technology vendor in the financial services space in early fintech waves, you were wondering how to get in the door at Goldman Sachs or at the small hedge funds. It was all about word of mouth or who you knew and a lot of transactions were taking place just with a handshake.

But a lot of those preconceived ideas become immediately disrupted once you have a successful proof point. These proof points are typically much easier to achieve when you’re focusing on the niche solution and a very specific aspect of a problem. All kinds of digital transformations begin by addressing a very narrow, niche problem that opens the floodgates.

RG: Why do you think we’re seeing more — and will continue to see more — activity in the private equity, growth equity, and venture capital space around legaltech?

JML: The number one reason is clearly valuation. Tech companies, especially if you’re a SaaS business and have a predictable model, attract much higher valuations than less traditional growth-type companies.

Secondly, I think that it’s because a lot of private equity firms like very systematic, predictable, measurable models. Because of the nature of SaaS businesses or technology-enabled businesses, it’s easier to understand businesses and put systems in place around them that mimic what private equity people want to see.

As a SaaS operator, you’re already tracking some very specific metrics that are very attractive to private equity firms. If they want to invest in a more traditional retail business, for example, there are systems in place, but they don’t necessarily align as well with investors as technology-enabled businesses would.

I think the main driver however is still the valuations and if tech starts cratering substantially at some point, then I’m sure private equity will get very excited about something else at that point.

RG: For a convergence of sectors — in procurement, legal, regulatory, and compliance — to happen, obviously a lot of investment dollars have to flow in. If you look at the top PE shops in five years, do you think they’ll have double the number of portcos in these sectors?

JML: They won’t necessarily have double the number of portcos, but they will have much more revenue associated with the space.

When convergence like that happens, it follows a model. A good investor wants to find a reliable, solid, healthy platform that is already well managed, well-run and has some good, strong independent growth on its own. Then, they want to start bolting on several pieces to turn that platform — both organically and through acquisition — into a broader and more converged platform.

There are still very few massive platforms out there which is why private equity firms are still very excited about finding any kinds of business that could be a platform to build on.

Private equity shops are obviously investors in tech, but also are huge consumers of any kind of tech — whether it be procurement, legal, et cetera.

RG: Is there any threat to the notion that private equity will continue to invest in the legal space and then also become consumers of this space? What are the big macro forces that might challenge your premise?

JML: I’d worry more about a disruptor — someone who understands the concept of the fourth and fifth waves of innovation and who has come up with a great AI-based solution that completely turns around a process to make it more efficient. That’s truly very existential at that point.

Knowing my gut, being a technologist and having seen several innovation cycles and disruptors come on the stage, I’m more worried about a brand-new disruptor that nobody saw coming who investors are now enamored with.

RG: As you touched on earlier, when you’re a small business you’re thought of as an add-on to another platform. But as you get bigger, you hope to eventually be thought of as a platform.

To other founders out there, how should they think about the journey that they need to take on day one? Should they think of their businesses as a platform from the start or is it more organic than that?

JML: I think most people have thought it is that a platform is a business that could organically, even if it just stays in its own space, continue to build and grow at a very attractive pace.

So, for example, if your business cannot organically grow 15 to 20 percent, it wouldn’t be thought of as a platform. A platform is really about having enough customers that you can start selling them more and more stuff and have a predictable, sustainable source of growth that can allow you to do small acquisitions, organic experiments, etc. But it’s also about scale to some extent, total addressable market, and total standalone organic opportunities.

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Legal industry innovation is happening today — albeit slowly. But Bodhala is on a mission to create a transparent, functional market for legal services, using data to illuminate price discovery, drive competition, and foster innovation.

Want to be part of the next wave of legaltech innovation?

Get in touch with our team of legal industry experts to find out how Bodhala can help you run your legal department like a business with data.

Most corporate legal departments haven’t the slightest idea about the should-cost of their legal services, leaving them to be idle price-takers to law firms’ exorbitant fees.

But Bodhala is changing that.

Bodhala CEO, Raj Goyle recently sat down with Darius Gant, host of The Darius Gant Show, to discuss his journey from congressman to tech entrepreneur, the broken economics plaguing the legal services market, and how Bodhala is leveraging data to create pricing transparency for corporate legal departments.

It’s a great listen — check it out!

Get in touch with our team of legal billing and data experts to find out how Bodhala can transform your legal department.