NRG Energy, Inc.: Legal Tracker e-billing return on investment study

Executive summary

IBM Global Services (IBM) was retained by Legal Tracker to conduct this return on investment (ROI) study covering NRG Energy, Inc.’s (NRG’s) use of the electronic billing functionality within Legal Tracker for the twelve-month period ending April 30, 2009.

During its first year using Legal Tracker, NRG realized a return on investment of 1667% or approximately 16.7 times the system cost. The system cost consisted of the monthly fees for the corresponding period plus a one-time implementation fee.

NOTE: Savings from other Legal Tracker functionality (e.g. matter management, budgeting, accruals, document management, reporting, etc.) were not factored into the calculation

Description of savings categories

Category I: Improved invoice review savings—Legal Tracker provides invoice auditing features that include the ability to mark down bills automatically if they exceed custom rules set by the law department. In addition, company invoice reviewers can use Legal Tracker to reduce individual line-item entries, to reduce timekeeper rates, or to reduce the amount of an entire invoice. Savings in this category consisted of the amount of invoice reductions that NRG directly attributed to Serengeti’s enhanced invoice auditing, analysis, and markdown functionality.

Category II: Paperless office savings—This category represents the savings the company realized due to the elimination of paper invoices and attachments, including paper, printing, photocopying, and storage costs.

Category III: Invoice review time savings—Legal Tracker provides configurable invoice approval routes and accounts payable (AP) routes, so electronic invoices are automatically coded and routed through the approval chain. Approved invoice information is then sent in electronic format to the company’s AP department for payment. To calculate savings, the fully burdened employee hourly rate was multiplied by time saved due to Legal Tracker’s automated invoice processing capabilities.

Additional categories of savings 

NRG reported that Legal Tracker’s overall value is significantly greater than the savings detailed above. Since implementing the system, the company has also realized the following benefits:

• Increased law department efficiency: All NRG legal matters are managed through Legal Tracker and available online. Within each matter, the information is organized, searchable, and accessible. Attorneys can quickly find budget and spending information as well as matter details, and staff members have reduced copying, filing, and paper routing time. Also with Legal Tracker, NRG staff can immediately identify firm mistakes—such as posting invoices to the wrong matter—and reject the invoice back to the firm before time is wasted reviewing incorrect invoices. As a result of having all matter spending and other information centralized in Legal Tracker, law department attorneys and staff can focus on higher-value work rather than menial tasks.
• Improved spending predictability: Tracker has enabled NRG’s law department to enforce its requirement that outside counsel provide a budget on every matter. In Legal Tracker, in-house attorneys can see spending compared to budget at a glance, so they can work proactively with firms to control costs, alter strategy, or adjust the budget to accommodate developments. Giving attorneys quick access to reports on all their matter financials has significantly enhanced the department’s quarterly forecasting and planning process as well.
• Timely, accurate accruals reporting and other accounting benefits: Prior to implementing Legal Tracker, NRG collected work-in-process and unbilled amounts from outside firms through a tedious process of contacting each firm  individually and hand-keying the numbers into spreadsheets. Firms were reluctant to comply with reporting requirements because current and historical spending information was not readily available. Without knowing how much they had spent compared to the budgeted amount, the firms had a difficult time estimating future spending. With Legal Tracker, budget and spending information can be viewed instantly at any time, which has helped firms overcome their resistance to reporting accruals. Law firms now reliably enter their accrual data directly into the system, where the information is immediately available to NRG.
  As a corollary, the law department’s monthly closing process is now greatly improved. Legal Tracker provides the financial information necessary for NRG’s accounting department to reconcile accounts payable accruals against spending amounts applied to the current period, and the accountants have confidence in the accuracy of the data. In general, the time spent performing AP accruals related to the law department has dropped significantly since the implementation of Legal Tracker.
  Also, Legal Tracker supports NRG’s need for granular spend tracking and reporting—the system allows NRG to break down spending by matter, firm, practice area, or organizational unit. This type of detailed data parsing was time- and cost-prohibitive prior to the implementation of Legal Tracker.
• Efficient auditing: Now that financial data is consolidated in Legal Tracker, the law department can respond to auditing requests more quickly and easily, and the auditors’ satisfaction regarding the quality and availability of data has improved significantly. NRG has further increased efficiency by granting limited Legal Tracker access to people in other departments, such as accounting, so that they can respond directly to auditors’ inquiries.

Methodology

IBM performed the following functions:

1. Collected data directly from NRG and from NRG’s Legal Tracker database.
2. Verified return on investment calculations in categories I-III.
3. Validated Additional Categories of Savings qualitative benefits section with NRG staff.
4. Ensured that any subjective estimates and descriptions were reasonable/conservative.
5. Summarized results and produced this report.

Legal Tracker is a 100% hosted, web-based legal collaboration and electronic billing platform. No software is installed on client computers, and Legal Tracker does not require the company to dedicate any hardware or network infrastructure resources to the application. Companies pay a monthly fee, based on their overall legal spending, to connect to Legal Tracker. Outside counsel connect to the system and upload all invoices and information free of charge.

This report summarizes data provided directly to IBM from NRG for the period May 1, 2008 to April 30, 2009. To calculate return on investment, the one-time implementation fee plus the monthly service fee paid by NRG to Legal Tracker for the corresponding period was compared to savings outlined in categories I-III above.