Discussion Roadmap. Discussion Roadmap. Benchmarking 2.0: Insights for Volatile Economic Conditions. Industry Trends the key drivers of change

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1 Benchmarking 2.0: Insights for Volatile Economic Conditions Tracy Franklin Robert Swayze Jim Miller Moderated by Mark Medice Discussion Roadmap Industry Trends the key drivers of change Discussion Roadmap Industry Trends the key drivers of change 1

2 Business Trends Innovation and free flow of information primary driver of ever-faster change in business 85% describe business environment as more competitive due to improved capabilities of competitors and growth in number of low-cost competitors Future profitability depends most on knowledge and information trends and forces of globalization Source: McKinsey 2008 Global Survey Legal Business Trends Consolidation of law firms Need to provide data for mergers and acquisitions Pressure on the billable hour as a price point Need to provide data for alternative billing and new profitability models Maximize profit Need to provide data focusing on core business groups Legal Industry Trends Law is an old profession, but really a new business. There is a big opportunity for us to know more about our competitors and our customers. - Managing Partner, AmLaw 50 firm 2

3 Fee Revenue contrast to Loyalty : Fee Growth 15% CAGR 69.3% of the Fortune 1000 said they were "dissatisfied" with their current primary outside counsel $70 $60 $50 $40 $30 $40 $46 $52 $ % have changed their primary outside counsel within the last 18 months (through fiscal 2006) $20 $10 $0 $ billions % + indicated to BTI in this survey that they were seriously considering a change to their primary outside counsel in 2006 Source: BTI Consulting Consolidation Average Firms Used: Fortune 1000 People Growth % 113% Total Firm U sage All Other Firms Secondary Law Primary Law Firms Firms P 100% 80% 80% 70% 60% 40% 20% 8% 0% Law School Grads NLJ 250 AmLaw 100 TOP 20 Law Firm Process Development Function Strategy Management Profitability Management Client Development Talent Management Technology Management Key Typ pical Workflows Lea ader Managing Partner, CFOs, Executive CMOs, Competitive Practice Heads, Executive Committee Directors, Analysts Intelligence, Analysts Billing Partners Developing strategy Business / industry Managing expense to maintain or intelligence Attorney recruiting competitiveness and retention enhance the Relationship competitive position Managing profitability management Professional skills of the firm Managing operations development (legal Marketing Maintain firm brand Ensuring the delivery & business) management Keeping & attracting of high quality Managing Associate Business talent services to attorneys salary costs development Chief Technology Officers Ensure delivery of high quality IT services to firm Evaluate IT purchases & upgrades cycles Manage IT support services 3

4 Discussion Roadmap Industry Trends Benchmarking Benchmarking is a tool to help you improve your business processes. Any business can be benchmarked. Benchmarking is the process of identifying, understanding, and adapting outstanding practices from organizations anywhere in the world to help your organization improve its performance. Benchmarking is a highly respected practice in the business world. It is an activity that looks outward to find the best practice and high performance and then measures actual business operations against these goals. Source: The Benchmarking Exchange Benchmarking the Market Benchmarking must have a broad population for results to be meaningful Currently 94 law firm; 74 of the top 200 participate Representing 45,174 attorneys Approximately 350,000 clients 4

Process Firm Accounting System Time & Billing System Firm Data Accounting Data Mapping Tables Control Application Encryption and transfer software Secure

5 Benchmarking 2.0 Digitizes, web-enables process in real-time inviting rmance Market Perfor Innovative Uses (New) Improved Uses (Better Mousetrap) Time & Adoption Digitized Process Firm Accounting System Time & Billing System Firm Data Accounting Data Mapping Tables Control Application Encryption and transfer software Secure Server (West) Customized Firm Interface, leveraging BI platform Aggregated Peer Data (uses cube technology) Cube Technology suited for legal information Multi-dimensional structure data cube Aggregates data from different perspectives Office Timekeeper Practice Group Measure attribute Collections Realizations 5

On-demand Detailed Actionable Queries (OLAP) Rates and Leverage Time (variable) Office Location Practice Group Revenue Profitability A/R Direct Expenses Broad range of metrics Plus the ability to

Pricing Metrics Data Slicing Factor Automated/ On-Line Typical Benchmarking Tools Timeliness/ Frequency Peer Group(s) Breadth Complete and accurate based on maintained financial application data

On-Demand - should be supplied shortly after month-end close Should allow multiple group plus discovery capabilities; named firms can be requested and group formed Availability of full range of

6 On-demand Detailed Actionable Queries (OLAP) Rates and Leverage Time (variable) Office Location Practice Group Revenue Profitability A/R Direct Expenses Broad range of metrics Plus the ability to drill deep Indirect Expenses Timekeeper Title and Year A Better Mousetrap? Pricing Metrics Data Slicing Factor Automated/ On-Line Typical Benchmarking Tools Timeliness/ Frequency Peer Group(s) Breadth Complete and accurate based on maintained financial application data Drill down by Office location, Practice Group, Timekeeper Title, etc. On-Demand - should be supplied shortly after month-end close Should allow multiple group plus discovery capabilities; named firms can be requested and group formed Availability of full range of pricing, expense, revenue, and profit metrics None or available only 1 month after year end Specialized static reports Four to five months after of the year (plus possible quarterly reports) Manual process and most often peer group unknown, and large (10+) Often limited depending on scope of survey and timing (annual, quarter) Availability On-demand online & executive reporting Paper Reports Downloadable Yes No Ease of Data Provision Process is automated Manual and usually labor-intensive The Power of Dimensional Data Collection 6

Identify situations where firm is below market rates. Demonstrate that failure to hit market rates in 1 year for a 500-attorney firm can cost just under $30m in lost profits over 5 years.

7 Identify situations where firm is below market rates. Demonstrate that failure to hit market rates in 1 year for a 500-attorney firm can cost just under $30m in lost profits over 5 years. New Uses Peer Group Discovery What-if Analysis & Comparative Modeling Matter-based / Client-based Benchmarking Economic Indexing Marketing & Client Development Flexible Digital Delivery Systems Discussion Roadmap Industry Trends 7

8 Peer Monitor Economic Index (PMI) Real-time composite reflecting rate of change of key factors affecting law firm performance: Rates Demand Peer Monitor Economic Index (PMI) Productivity Direct Expenses Overhead Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 PMI Expectations Against Market While most law firm leaders expect an increase in year over year billings... Survey Results was soft but firms are adjusting challenging quarter Q2 Q vs Q2 Q % Decrease 10% 2% Decrease 6% Stay the Stay the Same Same 2% 29% 7.7% 13.1% 8% 17% 9% 3.5% Increase 96% Increase 65% -2% -1% -4.6% -5% -6% 0% Demand Demand Productivity Productivity Rates Rates Direct Direct Exp Exp Overhead Overhead 8

9 Practice Area Growth Survey perspective is litigation will grow, corporate / transactional will decline Peer Monitor Q1/Q2 Data Suggests 100% 2008 Survey Results Decrease 6% Stay the Same Decrease 33% 60% Practices Strongest Weakest Intellectual Property Corporate (M&A, Regulatory Practices Finance, Capital Markets) Bankruptcy Litigation Geographies 0% Increase 62% Stay the Same 35% Increase 6% Strongest Texas Southeast USA Europe Emerging Markets (China, Moscow) Weakest New York City Washington DC London Los Angeles Litigation Corporate / Transactional Discussion Roadmap Industry Trends What s Next Greater integration of business development & financial information for informed decision-making Community-based measures Client integration Multiple Views to Analysis Real-time market rates 9

Different Views to Comparison Client View Matter View Timekeeper View General Electric - NBC XYZ XYZ Acquisition Acquisition 6 M&A Partners - GE Oil & Gas - GE Capital Labor Labor negotiation

10 Different Views to Comparison Client View Matter View Timekeeper View General Electric - NBC XYZ XYZ Acquisition Acquisition 6 M&A Partners - GE Oil & Gas - GE Capital Labor Labor negotiation negotiation ABC ABC Infringement Infringement Suit Suit 2 IP Associates 4 Antitrust Associates 20 Paralegals How profitable is our work for GE vs. other firms? Compare firm performance against others serving GE How efficiently do we staff acquisitions vs. peers? How profitable is this acquisition vs. similar deals at peer firms? How do our 4th year M&A Partner rates compare to peers? How many hours are our IP associates billing YTD vs. peers? Discussion Roadmap Industry Trends IT and Finance - Expectations Clear implementation expectations Out source provides complete support Reliable systems and stable platform What is the IT support commitment t Know the priority of the system/software Disaster Recovery (how critical is it?) Does it play well with others? Can it run in VM? Physical Sever? Automatic fail-over 10

11 IT and Finance - Expectations Does it meet IT Firm security policies? What is the security wrap? Encrypted File? SSL connection? Secure VPN? Where is password stored? Cache locally? Portal integration Sharepoint integration Web parts? Whose budget does hit? Summary Points & Questions 11

2018 Law Firm Leaders SurveyTexas

2018 Law Firm Leaders SurveyTexas EXECUTIVE SUMMARY 2018 LAW FIRM LEADERS SURVEY: MORE LAW FIRM MERGERS AHEAD IN TEXAS 82% report they 32% are open Most firms prioritize 48% of participating were approached