Technology - Legal Service Providers Meeting In-House Counsel's Need For Electronic Invoicing And Legal Spend Management Solutions

Thursday, September 1, 2005 - 01:00

Editor: Eric, please tell us about DataCert and how it was founded.

Elfman: DataCert is a Houston-based software company that provides electronic invoicing and legal spend management services to corporate legal departments. Companies use our technology to strategically manage their legal spend with their outside law firms and vendors. Our primary product, Advanced Invoice Management System (AIMS) is a secure web-based application that facilitates the approval and payment of electronic invoices, while applying business rules and automated workflow to make invoice approval and payment faster and easier. AIMS is also designed to help general counsel and corporate legal managers measure, report and analyze legal spend at various levels of detail.

DataCert was founded in 1998 after I realized that the market needed technology that would allow law firms and corporations to communicate electronically. Previously, I helped start a company which developed software for analyzing electronic legal invoices. Analysis of law firm invoices was relatively easy, but the technology was not available for moving billing information electronically. DataCert emerged as a result.

Seven years ago our mission was simple: to serve as a web-based application service provider to standardize electronic billing data generated by law firms and transmit that data in a usable form to law departments. Today, DataCert is a total solutions provider of legal spend management services. We offer an entire suite of products and services uniquely designed to help corporate legal departments implement a comprehensive legal spend management solution. Our products provide highly configurable invoice workflow, review and approval, budgeting and reporting for spend-focused corporate legal departments.

Editor: What problem does your product address and how does it minimize that pain?

Elfman: Fortune 500 corporations typically have hundreds of law firms and vendors working with their legal departments. These vendors submit thousands of invoices annually accounting for tens or hundreds of millions of dollars. Many of these corporations have spent hundreds of thousands of dollars attempting to develop proprietary software to receive electronic invoice images or word processing files from their outside law firms and vendors. However, these attempts have failed largely because corporate legal departments receive invoices from so many law firms and vendors and managing all of those connections has proved too difficult or impossible. More importantly, dealing with these huge numbers of invoices and dollars in an efficient and practical way is impossible without applying technology.

Our technology solves these very pains. AIMS automates and speeds the invoice approval cycle from months to days while optimizing cost savings and getting high-value professionals back to focusing on their core competency, practicing law, or managing those who practice law. Using AIMS, in-house lawyers no longer have to worry about invoice administration. Managers can use the invoice data to optimize outside counsel performance, improve sourcing and the selection of outside counsel, and leverage buying power for better pricing and terms. This type of legal analysis is simply not practical with a paper-billing system.

Editor: What is particularly unique about AIMS?

Elfman: Unlike all of its competitors, AIMS lives behind the corporate firewall, unexposed and secure from outside intrusion. This is particularly important in a post-Sarbanes world where audit trails, accountability, privacy, privilege and security are now paramount.

Being installed behind the firewall allows AIMS to much more easily integrate with the systems with which it works and upon which it relies to complete the corporate financial system of record in a completely paperless environment. Integrating applications across the Internet and through corporate firewalls and security protocols is not only difficult, but routinely not possible in a secure and predictable fashion.

Finally, and unlike its competitors, having AIMS behind the firewall allows the corporation to truly own not only the application and its processes, but all the data that is collected. AIMS and its integrations can grow and expand as the corporate need demands without requiring full vendor enablement and support because it is behind the firewall, owned and operated by the clients themselves.

Editor: How does AIMS help a legal department turn its financial reporting information into valuable data?

Elfman: Today, all billing systems can output electronic invoices. The challenge is to manage the data flow so that the information supporting the invoices can be reviewed in a meaningful way. We take all of the invoices from the law firms serving a company, standardize them into one common format, run the company's outside counsel guidelines against every line item in each invoice and highlight potential problems in the bill. For example, if a company does not pay for online research, we will flag any line items with that description. When the in-house attorneys receive the invoice, they can look at the flagged line items and quickly see the deviations from the company's guidelines. Invoice review quickly becomes exception handling rather than line-by-line review.

With AIMS, in-house attorneys can review an invoice and easily generate reports on the aggregate time spent on a task, by an associate or any other reporting field they've designated. In-house attorneys can then use this billing information for post-case assessment to determine if the amount of time spent by the law firm's partners and associates was appropriate.

Invoice data can also be used in the budgeting process. When basing a budget on last year's total expenses, data must be available to develop an understanding of past spending so future spending can be accurately forecasted. Historical data can be used to assess the economics of alternative billing arrangements with outside counsel. For example, an insurance company may require that a law firm handle 100 slip-and-fall cases in a specific category for a fixed amount. Without the data underlying past expenditures for similar cases, it would be nearly impossible to predict expenses for future cases and set that fixed amount accurately when negotiating with outside counsel.

Billing data also allows reviewing attorneys to make a variety of comparisons. Actual expenditures can be compared against amounts budgeted. Amounts charged this month can be compared with prior months' bills. Bills from one matter can be compared with bills from other matters.

Editor: You have an impressive customer list. Please explain who your typical customers include.

Elfman: Our customer list is comprised of more than 70 corporate customers and over 6,000 law firms and vendors from 80 plus countries. We are the market leader with respect to a number of Fortune 500 corporate clients and law firms. We're proud to claim 6 of the Fortune 10 and 10 of the Fortune Global 20 as customers. Our list includes such companies as American Airlines, DaimlerChrysler, GE, Honeywell, Johnson & Johnson, Merck, Microsoft, SunTrust Bank, Swiss Re, The Home Depot, Toyota and UPS, to name a few. Our clients include 60 percent of the Dow Jones Industrials and 15 private or small-cap companies from every industry sector including manufacturing, insurance, energy, diversified financial, pharmaceutical, technology, transportation, consumer products and retail. Additionally, 97 percent of America's highest grossing law firms (AmLaw 200) and 94 percent of the top global law firms (AmLaw Global 100) are DataCert customers.

Editor: Congratulations on being recognized on the Inc. 500. What has contributed to your company's continued success?

Elfman: Our success can be attributed to numerous different factors but the primary reason is simple: we developed the right solution to meet the market need. Our Internet-based solution was unlike other products on the market because it was web-based. Second, we got the right investors and leadership on board from the beginning. The fact that all of our co-founders are still with the company speaks volumes to having the right leadership. In our seven-year history, we've also been fortunate to have attracted and retained talented employees. I'm delighted to say that numerous employees have been with us for more than five years. In fact, 30 percent of our employees have been at DataCert for at least three years and 20 percent have been at the company longer than four years. Another contributing factor is our dedication to serving our customers. We pride ourselves on offering premier corporate support and implementation services so clients can quickly recognize their return on investment. Lastly, our success can be attributed to our impressive financial growth. Customer orders and revenue have doubled in size on average every year since inception. We've also been responsible for creating a market potential of approximately $2 billion where virtually none existed before.

Editor: Please tell us about DataCert's market initiative in Europe.

Elfman: We announced our European market initiative earlier this year in response to a growing interest and demand for electronic invoicing and legal spend management solutions by Fortune Global 500 corporations in Europe. After 18 months of planning and market research, we discovered that corporate legal departments in Europe and beyond needed more transparency and control around their legal expenses. Surveys indicated that there was a strong recognition of the pain, but there was no strong sense about how to address it. We were uniquely positioned to address these issues because of our proven track record of implementing solutions at some of the world's largest legal departments and thousands of law firms worldwide. Our expansion into Europe included setting up an office in London.

Editor: Why is Houston a good place to launch a business?

Elfman: Houston is a great place to launch a business for a variety of reasons. For starters, Houston enjoys a talented labor market. All of the large oil and gas companies have big IT departments here. HP and other technology companies attract and train specialists with highly sophisticated skills as well. We benefit from this labor pool because many of our employees have worked for these large companies. Houston is also attractive because of its central business location. Reaching both coasts in a matter of hours is a tremendous advantage. Houston is also the home of an increasing number of nonprofit groups like the Houston Technology Center and the Rice University Alliance for Technology & Entrepreneurship, which are great resources for young companies. Lastly, the low cost of living in Houston is an advantage to attracting and retaining employees.