How to make the business case for a spend management solution

Law department leaders know it takes more than good intentions and belt tightening to reduce legal spend. Law department spend management requires a meaningful, upfront investment in technology and time to live up to its promise. This meaningful investment often requires support from the CFO and other business partners as you shift budget — and even priorities — to implement the system.

Enter the business case. This article will look at how to make a compelling case for investment in a spend management system and suggest data to help make your case.

Components of a spend management business case

Before you write a business case, you will want to socialize the idea of implementing a spend management system with your business partners and leadership. Talking informally about the opportunity it presents can help in three ways. First, these early conversations will help you understand objections and address them proactively in the business case.

Second, you can start to talk about cost in general terms, lessening potential sticker shock related to new systems or time and energy. Finally, these conversations will provide examples of language your business partners might use to describe the opportunity. Incorporating their words into your business case can help make it stronger.

The five key components every business case needs to address are:

• The problem
• The solution
• The ROI
• The risks
• The timeframe and implementation

Related: Want insight into how other corporate functions are approaching business case creation? Check out “Essentials to building a winning business case for tax technology”

Define the problem

Many legal departments considering implementing spend management systems struggle to balance demand from the business with their internal and external budgets. They depend on homegrown solutions and manual methods to manage spend, and they have little insight into whether they are paying fair rates for their outside counsel or getting accurate invoices.

A recent Forrester Total Economic Impact study on Legal Tracker found these common challenges for legal departments:

• Need to reduce legal costs
• Insufficient review of invoices
• Inconsistent process for approving timekeeper increases
• Time-consuming manual procedures

The result for the legal team is that they are running too thin, providing the best legal guidance they can while spending as responsibly as they can without any insight into the larger trends in the industry. The team may start to burn out. Conversely, leaders may struggle to get approval to replace them without being able to clearly articulate how they are managing spend and why replacing a particular role or adding new ones is necessary.

As a result of these inefficiencies, the legal department may not be able to respond to shifting business needs effectively. The department may be spending more money than it needs to. The Forrester report found that a model composite Legal Tracker customer would save approximately $2.5 million per year in lower timekeeper rates. That’s money you may be spending now unnecessarily.

Paint a picture of the solution

You’ve shared the pain your department and the business are experiencing. In this section, you show the path forward: how to realize the savings and other benefits of a legal spend management system.

Be sure to explain that law department spend management is a complex system that involves reviewing, tracking, analyzing, and reporting on both in-house and outside legal costs. Most companies that create spend management processes and systems use technology like Thomson Reuters Legal Tracker to support and manage this system, taking advantage of insights, analytics, and automations that allow them to scale much faster and more effectively than they could with manual processes.

Spend management will look slightly different in every organization, as the priorities of the legal department will shift based on the needs of the business. To make the case, you’ll need a clear sense of the spend management strategies, priorities, and opportunities your business faces. With that in mind, you can describe how your department can be even better stewards of company resources while delivering on the top priorities.

Present a clear return on investment

Use this section to define the investment you’re looking for in terms of incremental cost and the employee time required to implement new software and processes correctly.

Once you’ve shared the investment, you can outline the return the business can expect. Review your list of challenges and estimate the dollar value of solving those challenges. For instance, the Forrester report mentioned earlier quantified the average savings realized across the challenges it named. It found that organizations were able to see a 372% return on investment in Legal Tracker with $2.99 million in net cost savings and payback in less than six months.

Spell out the timeframe and implementation

Complex software implementations take significant time and planning. Your business case should include a high-level overview of the timeframe and stage gates for launch, as well as your plan to ensure employees adopt the new tools and practices.

• Prework. You’ll want to be able to define your challenge in a way vendors can respond to and then select a vendor. You may have done much of this work in preparation for the business case.
• Implementation. The Forrester report found that Legal Tracker implementations took the equivalent of half of a full-time employee for six months. Your software provider may be able to help you estimate this portion of the timeline. 
• Onboarding and ongoing engagement. Once the system is built for your department, there will be a period of training and reinforcement to get the whole team comfortable with new processes and the tool.

Be open about the risks

There is little downside to implementing a law department spend management system. Still, your business case should explore any perceived risks you uncovered when you socialized the idea. Some people may fear you’ll jeopardize relationships with outside counsel if you push back on fees. You can address this by saying that having insight into the rates they’re charging other clients or that other firms are charging for the same work takes the emotion out of the conversation and makes it firmly about value delivered based on market rates.

One type of risk you should consider is implementation plan risks: what could get in the way of your department delivering the ROI? Do you have the right people in place to serve as internal champions? Have you taken other work off their plate, or will they feel compelled to treat this as something extra? If business partners notice a change, are they supportive?

Addressing these risks upfront can help you get support to solve them or give you a point of reference if circumstances change.

Selling your business case

With these five components defined, you have the ingredients for a compelling business case. By combining the very real ROI other enterprise organizations have seen with your company's circumstances, you can make an airtight case for investment in legal spend management. The financial ROI alone can be jaw-dropping — 372% ROI and payback in six months for Legal Tracker. Add to that the potential for reduced staff burnout and handling more work in house, and you’ve got a case that’s hard to say no to.

The Forrester Total Economic Impact of Thomson Reuters Legal Tracker provides details on the data presented in this article. Read the full report.