International law firm McMillan LLP will begin using predictive analytics to create pricing models for its legal services to provide more cost certainty for clients.
By leveraging IBM’s comprehensive predictive analytics system, SPSS, and running the system on IBM Cloud, McMillan aims to remove subjectivity from the pricing process, according to announcement from McMillan and IBM. By analysing and interpreting McMillan’s internal data, the cloud-based solution will also help identify case issues most likely to affect price.
The Problem With Legal Pricing
For a client, the hardest part of hiring a law firm is often not knowing what it will cost. Most legal work has traditionally been billed by the hour, so the final bill depends on how long the work takes, and that’s hard to predict at the start of a deal or a dispute.
The firm usually has a rough idea based on experience, but that idea lives in the heads of senior lawyers. Two partners can look at the same matter and come up with very different estimates. That’s the “subjectivity” McMillan wanted to take out of the process.
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Predictive analytics tries to replace gut feel with patterns in past data. If a firm has records from hundreds of similar files, including how long each stage took, which issues came up and what the final cost was, a statistical model can estimate the likely range for a new one and flag the factors that tend to push the price up. SPSS is IBM’s long-standing statistics and modelling software, built for exactly this kind of analysis.
“We’ve seen how cloud and big data can transform business,” McMillan CEO Teresa Dufort, said in the statement. “We’ve chosen to be at the forefront of the legal industry using advanced analytics to service our clients. By partnering with IBM, we are looking to provide clients with greater transparency on the timing and cost of transactions.”
Dufort adds that the extra data and intelligence will allow the firm to better manage change and improve staffing, and provide clients with alternative fee options. The firm also plans to use IBM’s Bluemix platform to develop new app services, which will be exclusively available to McMillan’s clients.
Why Alternative Fees Need Data
Alternative fee options are the other half of this story. Instead of billing by the hour, a firm might offer a fixed fee for a defined piece of work, a capped fee, or a fee tied to certain stages of a matter. Clients like them because they know the cost up front.
The catch is that the law firm takes on the risk. If it quotes a fixed fee and the work runs long, the firm absorbs the difference. A firm can only offer fixed or capped fees safely if it knows its own costs well, which is why better pricing data and alternative fees tend to go together.
“Analytics can be a catalyst for innovation to help organizations uncover data insights to solve business problems and yield real-time results,” says Tim White, Vice President, Software, at IBM Canada. “Data is the world’s new natural resource.”
McMillan has several practice areas including antitrust, commercial real estate, M&A and natural resources.
About McMillan
McMillan is a Canadian business law firm with offices in Vancouver, Calgary, Toronto, Ottawa and Montreal. Its roots go back to a Toronto firm founded by Newton Rowell in 1903, and it grew through a series of mergers, most recently combining with Lang Michener in 2011 (McMillan LLP). A firm that size generates a large volume of matters, which is the raw material any pricing model needs.
What Happened to the Technology
The IBM tools named in this announcement have changed a lot since 2016. Bluemix, the cloud platform McMillan planned to build client apps on, no longer exists under that name. In October 2017, IBM announced it would fold Bluemix and SoftLayer into a single IBM Cloud brand.
IBM’s wider AI business has also been reshaped. In May 2023, the company announced watsonx, an AI and data platform built around foundation models and generative AI, which is now the centre of its enterprise AI offering.
For law firms, that shift matters. The 2016 approach was about predicting numbers, like hours and cost, from structured records. Newer AI tools can also read and summarize documents, which opens up uses in drafting and review as well as pricing. But the starting point McMillan identified hasn’t changed: a firm needs clean, consistent data about its own past work before any of these tools can tell it something useful.
What It Means for Professional Firms
The lesson reaches beyond law. Accounting, consulting and engineering firms all face the same question from clients: what will this cost? Firms that record their work consistently, by type of matter, stage and outcome, are the ones that can answer it with confidence and offer pricing clients actually want.
For startups selling into professional services, it’s also a reminder of where the opportunity sits. The firms that want predictable pricing usually need help organizing their data first, and that groundwork is often a bigger job than the analytics itself.
Frequently Asked Questions
How did McMillan LLP plan to use predictive analytics?
McMillan planned to use IBM's SPSS predictive analytics system, running on IBM Cloud, to build pricing models for its legal services, remove subjectivity from pricing and identify the case issues most likely to affect price.
Why is legal pricing hard to predict?
Most legal work has traditionally been billed by the hour, so the final cost depends on how long the work takes. Estimates often rely on senior lawyers' experience, which can vary from one partner to another.
What are alternative fee options?
They're pricing arrangements such as fixed fees, capped fees or fees tied to stages of a matter. Firms need good data on their own costs to offer them safely, because the firm takes on the risk if the work runs long.
What is McMillan LLP?
McMillan is a Canadian business law firm with offices in Vancouver, Calgary, Toronto, Ottawa and Montreal. Its roots go back to a Toronto firm founded in 1903.
What happened to IBM Bluemix?
In October 2017, IBM announced it would merge Bluemix and SoftLayer into a single IBM Cloud brand, retiring the Bluemix name.