Strategic Legal Technology

I have long advocated open source law. If more lawyers and clients put documents in the public domain, legal costs might drop and consistency rise. At least one start-up is working to make this happen. 

I recently spoke to Veronica Picciafuoco of Docracy, an open source law website. She is Director of Business Development and Community and is a lawyer who keeps an eye on the site’s content. The Docracy about us page states a bold mission:

“Docracy is a social repository of legal documents. Our mission is to make useful legal documents freely available to the public. We also hope to make them easier to find, customize and sign. No more crappy templates behind a paywall that you download hoping everything will be alright. Instead: reputable, transparent sources and social proof to help you find something as close as possible to the perfect document.”

When I first wrote about open source law in 2004, the mechanisms to gather, collect, and vote on, if not vet, documents were primitive. Today, with the social web and Facebook generation, the idea that people share content freely, comment on it, vote on it, and download is almost second nature.

Docracy wants to apply this thinking to legal documents for individuals and small businesses. The company’s start illuminates the need it’s trying to meet. The co-founders, two entrepreneurs developing mobile apps, looked on the web for contract templates they could use. They did not like what they found. So what else to do but start a company to fix the problem?

I asked Veronica why a user should trust a document uploaded to Docracy. She said that people already download legal documents from the web from a range of sources, many perhaps dubious. With Docracy she says, the source of the document is clear, the ability to create branches / versions of it allows improvements, and the number of downloads provides an indication of “social acceptance”. Lawyers likely find that answer lacking but I suspect she is right. Some social vetting is perhaps better than no evidence of usability.

I also asked who will be motivated to upload documents. A general answer is that many people share because they think that’s the right thing to do - look at the open source code movement. As for Docracy specifically, Veronica suggests that some organizations will have incentives to upload vetted documents. Some trade associations and advocacy organizations already provide templates, either for members or the public. They might well want to upload documents to a central source if doing so expands their reach. Docracy, with a concentration of similar documents, likely would achieve higher search engine rankings for document searches, which could benefit the contributing organization reach more of their target audience.

The open source law model should hold much appeal for inhouse counsel. The typical large law department faces many legal issues and transactions that are not competitive differentiators or even all that sensitive. If general counsels were to share documents more freely - across law departments and law firms - they likely would lower their legal costs. I don’t know if Docracy will serve that purpose but it certainly illustrates a path for law departments.

Large law firms are merging again. The Wall Street Journal has a lead article on the trend today. I wonder though, just who mergers help and how mergers improve value for clients. 

Over the holidays, I had a conversation with partners from several large law firms. Most asserted that because their firms had become bigger, they - individually and collectively - were more efficient. I conceded that larger firms had the potential to cross sell more than smaller firms but beyond that, it was not clear how they were more efficient. Though they honestly believed their views, when I pressed, I heard no satisfactory explanations.

Stark Choice for Lawyers— Firms Must Merge or Die in the WSJ today reports that at “least 60 mergers occurred in the U.S. and abroad last year, the highest level since 2008 and a 54% jump from 2010″ (per Altman Weil data). As I read it, merger mania better serves clients by offering more offices and more practices in one entity. And the article closes, quoting Frank Burch, global co-chairman of DLA Piper, saying “More people now appreciate that there are real benefits of scale.”

In my view, this article describes but does not explain. So let me try to fill in the gaps, specifically, examining the benefits of scale. I can think of four potential scale benefits. I’ll take these one at a time.

1. Offer Clients a Broader Range of Services

Perhaps buying legal services is like buying software: the decision between a single, integrated package versus assembling the best-of-breed on your own.

Some general counsels might prefer the integrated package - more practices, more offices, more states, more countries. They can buy more from one firm and, at least in theory, the firm manages the delivery of multiple services as a single whole. This would favor mergers and big firms. Other GCs, however, might prefer to buy the best lawyers and firms and act as general contractor to integrate the effort. This approach does not favor mergers.

The question is ultimately empirical. Unfortunately, I don’t have data to answer this question. But I have heard plenty of clients say “I hire lawyers, not law firms”. And many large firms have struggled to manage both large matters and large client relationships.

2. Improve the Efficiency and Effectiveness of How Lawyers Work and the Value They Create for Clients

It is not obvious that lawyer efficiency and effectiveness (let’s call this “value") improves as firms grow in size. Let’s look at a few key value drivers and if they improve as firms get bigger:

• Technology. It is possible that larger firms can offer more specialized, customized, and feature-rich technology to support higher value. But when I think about large firms that have developed their own technology, not many come to mind. Ones that do include Mallesons, Reed Smith, and Bryan Cave. Whatever benefit a merger might offer in the future has to balanced against the often multi-year effort to integrate disparate systems across the merged firms.
• Knowledge Management (KM). KM offers the potential for lawyers to create more value if they can tap best practices, work in standardized ways, access relevant prior work product and precedents, and locate relevant experience within the firm quickly. Large firms do invest more in KM than small but smaller firms have the advantage of proximity and partners actually knowing each other. Moreover, the KM efforts of larger firms are quite variable, with some hardly investing at all. So size is no guarantee of a KM benefit.
• Training.The more experience a professional has, the more value she typically creates. Good training can accelerate and sometimes substitute for experience acquisition. The open question is whether larger firms are better at training than smaller ones.

3. Reduce the Cost of Providing Support for Lawyers

Lawyers require a lot of support. The cost of overhead - occupancy, secretarial support, HR, marketing, IT, finance, etc. - at many large firms is over $200,000 per lawyer. When assessing mergers and bigger firms, the question is whether the cost per lawyer of key support functions drops. It’s not obvious to me that it does:

• Occupancy. If anything, bigger firms are known for having bigger and fancier offices. My guess is that occupancy cost per lawyer does not vary much by firm size. Sometimes merging firms can reduce occupancy cost because one firm has a long lease and empty space in a city where the other firm has not extra space and has lease that is almost up. That’s called luck. What would really drive occupancy cost down are policies and measures to allow lawyers to work virtually so that offices can be smaller and less numerous. Mega firms have no advantage over simply large firms to do that.
• Technology. On and off over the years, I’ve looked at IT cost per lawyer data across firms. I don’t recall seeing any downward slope in a scatter chart plotting cost/lawyer against number of lawyers.
• Secretarial. I’ve spent a lot of time over the last five years talking to law firms about their secretarial ratios. The data are all over the place. Driving the ratio of lawyers to secretaries higher, which reduces cost, is a function of culture and will, not size.
• Other Support Functions. In theory, other support functions could see scale efficiencies. My view is that the proponents of mergers and size should produce data showing that they, in fact, do end up with lower per lawyer costs for a range of support functions. And they also need to account for the fact that sometimes scale has bad consequences. For example, a purely domestic firm does not have to incur the overhead associated with managing transactions in multiple currencies.

4. Generate More Income for Rainmaking Partners

Rain-making partners certainly benefit if they can make more rain within a firm than if they have to refer work outside the firm. I’m reminded of 1994 book by Galanter and Palay, Tournament of Lawyers: The Transformation of the Big Law Firm, which argued that rainmaking partners had to be able to spread their “excess” business-generating ability over a larger number of lawyers. That same general theory would apply to rainmakers seeking to cross-sell more services.

The ability to do so certainly benefits the rainmaker. Whether that truly benefits clients I don’t know. Separately, given a different set of ethics rules, namely a lifting on the ban of referral fees, size would matter much less.

Conclusion

I have long wondered if larger law firms truly create more value. The WSJ article raises but does not answer the question. Returning to Mr. Burch’s quote “More people now appreciate that there are real benefits of scale.” I’d love to hear him explain exactly what he means and provide the data to support this assertion.

Legal process outsourcing (LPO) hit the legal news almost 10 years ago. Initially, it was controversial. Whatever your views of it, you should note that law firms are now widely adopting its techniques.  

I first observed the trend of ‘law firms becoming LPO providers’ in a blog post I wrote when I was still at Integreon, an LPO provider. In my Integreon blog post, Now, Even Law Firms are Doing “LPO” (November 2010), I reported on UK law firm Herbert Smith opening a wholly-owned document review center in relatively (to London) low-cost Belfast, Northern Ireland. I commented that

“Clients will benefit as more firms opt for centralized, low cost service operations, which provide better value. Firms will benefit because they will retain the higher value work for which clients are willing to pay high rates. And LPOs will benefit because more firms will want low cost centers and many will not want to build their own.”

Last week the Law Practice Today, a webzine of the American Bar Association, published my article The Impact of Legal Process Outsourcing (LPO) You Might Not Have Noticed. In it, I suggest “We Are All Legal Outsourcers Now”. That is, law firms are rapidly adopting the “operating system” developed by LPO providers. That includes process improvement, metrics, project management, low cost labor, alternative lawyer sourcing, and budgeting.

For a long time, many in the legal market thought that LPO was all about offshoring work to India. With the passage of time, we can see now that the real story is the drive to efficiency and the search for appropriately priced resources in multiple locations.

So, What’s Your Algorithm? headlines a January 4th Wall Street Journal article. It’s a good question for lawyers to consider, especially in-house counsel. 

The article addresses “How analytics harvested from massive databases will begin to inform our day-to-day business decisions. Call it Big Data, analytics, or decision science. Over time, this will change your world more than the iPad 3.”

I wrote about Big Data last May in Data, Data, Everywhere… Someday in Legal Too. That post focused mainly on how law firms could use Big Data. It only touched lightly on how Big Data might help corporate clients reduce the amount of law we need to do (also known as preventive law).

My idea - and it’s only embryonic - is that we should be able to tap corporate proprietary databases as well as public databases to find relationships that might give us early warning of legal problems. I’ve long been intrigued by the idea of legal early warning systems. In my April 2005 post Legal Radar, I speculated about analyzing blog content “to get an early handle on the possible emergence of a new legal problem.”

Today, Big Data tools allow going well beyond blogs. Big Data is big business, from established player such as IBM to newer but already widely adopted players such as Splunk.

Yet when I search the web for examples using Big Data analytics for preventive law, I find nothing. I am convinced that we should at least try. With tools form IBM, Splunk, and others, general counsels could tap corporate operational data - accounting systems, customer transactions, product returns, call center volumes, complaints, trading records, etc. - to look for patterns that might portend legal problems. This is not easy and it might not work. But it is intriguing: after all, what better way to reduce legal spend than to eliminate legal problems before they occur?

Beyond any inherent analytic difficulty lies a bigger challenge. Who will undertake this analysis? Law firms lack both the interest and capability as far as I can see. Law departments must lead. But, as I lamented in The Case for General Counsels to Invest in R&D (Nov 2010), the GC seems to have no interest in research and development.

Companies with more than a couple of hundred lawyers or legal spend in excess of $100 million should be motivated to conduct R&D on how to reduce legal spend. Sadly, however, I am not sure they are.

I hope that in my lifetime we will see someone undertake this exercise and even achieve success.

Dear General Counsel:

You face ever-increasing pressure to control and predict cost. Here are steps I suggest you take to accomplish this: 

1. DETERMINE WHAT PROBLEM YOU NEED TO SOLVE

Are you trying to reduce risk? Reduce cost? Improve service to your internal clients? Gain a seat at the table? Protect your job? The problem for which you are solving drives what you should do. I’ll assume that reducing cost is high on your list and address the rest of my advice to that goal.

2. DECIDE HOW MUCH LAW IS ENOUGH

The fastest and perhaps easiest way to reduce cost is to do less law. Work with your clients to define risks and trade-offs; educate them on the cost of legal service. You may find that you can reduce your spend by not addressing every issue that comes your way. Impossible you say? If don’t decline to deal with some issues, are you doing your job? So all I am suggesting is that you more systematically decide where to draw the line. Of course, doing less law runs counter to other goals such as reducing risk or protecting your job. So make sure your executive peers are on board with your strategy.

3. CHOOSE THE RIGHT RESOURCES

For issues that really do require legal attention, make sure you choose the right resources. Build or buy is always a good place to start. If you regularly retain outside counsel for similar issues, consider pulling that work in-house. For work you keep in-house, decide if you can assign a paralegal or other professional instead of a lawyer. For work you send out, choose the firm wisely. Can you use a mid-tier national or strong regional firm instead of a high-end, big city firm? Can you identify your efficient law firms and send them more work? Can you can unbundle tasks, for example, use an LPO or managed review provider for high volume work?

4. MEASURE WHAT YOU DO

Get religion about metrics. If you do not use e-billing, start. If you do, remember that it is more than an invoice management system. Get a data analyst to review two years of outside counsel bills: assess which firms are efficient and allocate more work to them. Remember to include judgments, fines, or settlements when you analyze costs. And finally, don’t be satisfied because your spend is comparable to a benchmark group. Unless your peers rigorously analyze and manage their own spend, emulating them proves nothing.

5. GET MORE FOR LESS

The best way to lower cost is to work smarter. For all work - inside or outside - make sure you apply process improvement techniques, legal project management, the appropriate technology, and knowledge management. Ask your law firms how they improve process, use LPM, deploy technology, and rely on KM. You may learn a few tricks. If you don’t, you may well be working with the wrong firms. (As you consider firms, think about what managing partners must do.)

***

As general counsel, your job is not just managing legal risk. It is also managing legal cost and scarce resources. If you can’t do that, others can.

Happy New Year

Since not everyone reads Twitter, I reproduce here a selection of my recent Tweets. I am now organizing Tweets by broad topics 

Mainstream Media Reports on the Legal Market

NYTimes: What They Don’t Teach Law Students: Lawyering http://nyti.ms/uhQK6Q || Is there any hope for US law schools? 20 Nov

NY Times - more lawyers skip partner track to start own practices http://nyti.ms/sXf2Tz || anecdotal but indicates MSM still taking note  24 Nov

WSJ: At GE, Robo-Lawyers: Oil + Gas Unit Tests Online Resolution to Control Costs http://on.wsj.com/uXBGm5 | blip or trend? (w @Cybersettle)  28 Nov

The Price to Play Its Way http://nyti.ms/sBm2lo || NY Times Biz sec cover story rips into ABA law school accreditation (HT @richards1000)  17 Dec

BigLaw Management

The Lawyer: Lawyers and business plans <sigh> http://bit.ly/tp0xeR || time for BigLaw to get serious about strategy  25 Nov

@AmLawDaily ABA Panel Says No to Outside Law Firm Ownership bit.ly/tHTGR8 || Empirical evidence supporting this “client protection"?   5 Dec

RT @gnawledge (3 Geeks) The End of Traditional Billing http://bit.ly/sCpmPz || law firms have lost pricing control  6 Dec

Hildebrandt Blog: Rising expenses and uncertain economy cause firms to re-evaluate staffing http://bit.ly/uXo2wP || Agreed  9 Dec

Legal Process Outsourcing

The Lawyer (UK) analyzes costs of legal + biz support globally. http://bit.ly/tdUQoX || will more firms nearshore, farshore, or use LPO? 21 Nov

RT @redbridgestrat Beyond India – Optimizing the Locations of Offshore Operations http://bit.ly/uJrMbl || Good LPO analysis  23 Nov

@ALB_magazine: Aussie GCs say legal process outsourcing (LPO) here to stay, better than paralegals bit.ly/uJKiwt  28 Nov

Legal Week: Eversheds mulls low-cost service after joint LPO bid falls thru http://bit.ly/tu8BS7 | can firms survive w/o lower cost options?  7 Dec

Fronterion legal processing outsourcing predictions: Ten for 2012 http://bit.ly/veiwyB || LPO has transformed market but faces challenges  12 Dec

@DannyErtel on legal process outsourcing: Selection criteria that are fit for purpose bit.ly/sLWfh7 || gd advice 4 GC looking at LPO  12 Dec

e-Discovery

Pippins v KPMG #eDiscovery: @chrisdaleoxford (http://bit.ly/rDDnmi) on Craig Ball’s http://bit.ly/s9y2xM || holds + proportionality   25 Nov

LeClair Ryan’s @denniskiker: Who Will Save #eDiscovery? Say “Hello” to Big Data! http://bit.ly/rLjiZk || Will we need quant jocks?  2 Dec

a rel="nofollow” href="https://twitter.com/#%21/RalphLosey">@RalphLosey on human doc review limits bit.ly/vc2eR0; I too flagged #eDiscovery Gold Standard bit.ly/tYje7z | more evid today  12 Dec

@DannyErtel post: HP - %5 legal process outsourcing doc review in 2006 to 80% in 2011 bit.ly/w3oWAs || #eDiscovery #LawFactory  20 Dec

Legal Tech

Two New State Bar Ethics Opinions Suggest Cloud Computing OK http://bit.ly/s3jzqe (via @catalystsecure @bobambrogi) || BigLaw CIO take note

The cloud’s dark lining. Connected MS OneNote to SkyDrive to sync to iPad. With OneNote saving to cloud, as fast typist, I see lag. #in  14 Dec

Dear BigLaw Managing Partner:

You recognize that the Old Normal is gone. Inertia may carry you a bit but change looms. If you are not retiring soon or if you want to help your younger partners, you need to take four actions to thrive in the New Normal. They’re hard and will take time, so start now. 

1. IMPROVE VALUE BY PRACTICING LAW MORE EFFECTIVELY AND EFFICIENTLY

To meet the growing client demand for better value, you must improve how your lawyers practice.

Yes, partners don’t like others poking around what they do. But you can’t credibly say to clients you are one firm when every partner works differently. Figure out best practices, develop check lists, and standardize. Tell your partners this frees them to be creative where it really counts.

That will take time. So meanwhile, get cracking on legal project management. Whether your process is good or not, someone other than the billing partner needs to manage it. Grow or hire real project managers.

If you don’t have good KM and IT to support better process and project management, get it.

2. DIAGNOSE AND IMPROVE YOUR BUSINESS OPERATIONS

Have you taken a good look at your staff functions? Lay-offs reduced cost but did not fix underlying inefficiencies.

Find the fluff in your finance, marketing, IT, HR, library, secretarial, recruiting, and facilities. Figure out what you can centralize and streamline. You almost certainly have too many staff in your most expensive office space. If you don’t have the scale or stomach to open a low cost service center in a place like Wheeling, Dayton, Manila, or Nashville then consider outsourcing. Or consolidating operations in one of your own lower cost office locations.

3. ENGAGE YOUR CLIENTS

Delivering a brief, advice, or deal document is easy and billable. But to truly engage clients your lawyers need to know their business. Partners must read the news and attend the events important to clients and spend non-billable time talking to them about their business and legal problems ("what keeps you up at night?").

Separately, you personally need to know what big clients think of your firm. Find out what your clients think; have regular conversations and act on what you learn.

4. ADOPT METRICS AND FORMAL GOVERNANCE MECHANISMS

You won’t succeed with the above unless you measure what you do. Decide what’s important prospectively, then measure to see if you hit targets. Rinse and repeat. You’ll also need a governance structure: who does what when you don’t hit the targets.

***

Your work is cut out for you. But you have one other task to do support all this: quit saying “non-lawyers”. Dividing the world in two serves no good purpose. Teams works best when you eliminate castes. And in the New Normal, it takes a team.

Happy New Year.

I have been doing e-discovery, nee litigation support, since 1989. In the last few years, I have seen the legal market diverge into two new worlds of electronic data and discovery (EDD). How does each look and what does it mean for its inhabitants? 

[Note: This article was first published in slightly different form in InsideLegal Thought Leaders Digest, College of Law Practice Management Issue, October 2011.]

The Old World of Ignorance and Denial World

In the old world, still with us sadly, lawyers and law firms seem unfamiliar with e-discovery. I wish I could say “uncomfortable” but discomfort suggests a degree of familiarity that is absent.

I often hear stories about lawyers who are shockingly unaware both of the legal rules and practical issues of EDD. At conferences, the handful of judges known for their grasp of and decisions on EDD say many litigants (and judges) are clueless about EDD. For example, in October, I attended the Masters Conference, an EDD event. In the session More on E-Discovery Certification, the panelists bemoaned how many lawyers and other legal professionals lack even basic EDD know-how.

I offer two hypotheses to explain the old world. One is ignorance. It’s hard imagining, however, a lawyer missing the hundreds if not thousands of articles, conferences, and advertisements about EDD over the last half-dozen years. Even general legal publications and mainstream media cover it. If, in fact, more than a few lawyers have missed all this, perhaps we as a profession have an even bigger problem to fix.

Another possibility is denial. Some lawyers seem to think digital data is unimportant or that the rules of civil procedure regarding EDD somehow do not apply to them. The willing suspension of disbelief is fine when enjoying a movie, but not for professional pursuits.

Old World inhabitants take a big risk, namely judicial sanctions and malpractice. And let’s not forget ethics: Model Rule 1.1 requires competent representation. Failure to at least consider the role of EDD in a contentious matter arguably violates the rule.

Education is the cure. It is readily and widely available. Now, persuading this world’s inhabitants that they need it… well, that goes beyond my expertise.

The New, Real World

Fortunately, many lawyers and law firms live in the New World. In this real world, they know about and regularly engage in EDD. However, its inhabitants may not yet have noticed that after a period of rapid evolution, their world is entering a new, slower phase.

EDD became a big deal around 2002 or 2003. I characterize its early days as the Wild West. Technology debates loomed large, for example: file formats (TIFF, PDF, or native); review systems (hosted or in-house); and productions (include metadata or not). Litigators and commentators alike hung on every word of the few judicial decisions. The Federal Rules were up for review and were amended in 2006. Vendors came – and they came and they came, from copy shops, Silicon Valley, and points in between. Smart law firms saw opportunity and built document review empires, generating huge profits, while others put their heads in the sand and ignored EDD. Corporate law departments struggled with information governance and retention policies.

Two events in October caused me to realize that the New World has vastly slowed down. EDD today has matured; it has become a business battle. Of course, not every debate is resolved, but the areas of contention have narrowed considerably.

First, when I was at the Masters Conference, I had many private conversations with EDD experts, some leaders in the field. They confirmed that the market is maturing and consolidating, even if it is still growing, even if debates on computer-assisted review loom large.

The Wild West has been tamed. Now, it’s a matter of case law development and convergence on a few technologies and processes. The action today seems more in the realm of marketing than of solving fundamental problems. (It’s just a matter of time before mythological belief in the reliance on human review falls by the wayside.)

And second, days after the conference, in the October issue of Corporate Counsel magazine I found a two-page ad for WilmerHale’s Discovery Solutions offering, at www.wilmerhalediscoverysolutions.com. This site describes in detail, including pricing, the firm’s approach to e-discovery and document review. The reference to the firm’s low-cost (relative to Washington, New York, or Boston) Dayton service center is via a listing of lawyers in Dayton. This is a substantively impressive site; more importantly, it reflects that marketing and positioning have become primary.

WilmerHale competes for e-discovery and document review with other large firms and vendors. To illustrate, here is my “unaided recall” list of firms (i.e., ones I happen to remember) with dedicated e-discovery practices:

• Pillsbury
• King & Spalding
• Morgan Lewis
• Orrick 
• Fulbright
• LeClair Ryan
• Hughes Hubbard
• Ryley Carlock & Applewhite

Yet law firms have no lock on this business. In fact, in the Wild West days, the vendors dominated. I first started seeing a change in 2007: my blog post Coming E-Discovery Battle between Vendors and Firms noted the emergence of law firms with their own EDD capabilities. I even encouraged this trend with my white paper that year called 4 Ways an eDiscovery Attorney Can Make Your Firm More Successful, suggesting that law firms consider hiring lawyers specializing in EDD.

Law firms listened. They built EDD capabilities to compete with their clients’ in-house EDD capabilities and a still-long list of vendors. So as I see the EDD market, the real action is no longer fundamentals, but a battle for market share based on pricing and feature mixes.

One of my recent Twitter exchanges helps makes the point. I asked re WilmerHale “Do other firms have dedicated #eDiscovery sites?,” to which leading UK EDD expert Chris Dale responded “any firm not doing something similar within 2 years is dead for #ediscovery work.” I think Chris is right.

Any firm that litigates will need not just to understand e-discovery, but also to have the capability to do it. Owning is one option, outsourcing another. Either way, firms that litigate will need this expertise and capability.

Many lawyers are “outstanding”. Clients take that for granted. They also take for granted decent technology and process. So law firms need to persuade ever-more-sophisticated clients that the firm can do the EDD work cost effectively. Go ahead, tweak your process, tune your technology, but make sure you have the right business strategy and marketing.

As EDD capabilities grow and converge toward standards, competitive differentiation is increasingly hard. Price, service, and marketing become the keys to winning. Okay, I am forward thinking. We may not be quite there yet but, to paraphrase Churchill, in the New World, we are way past the end of the beginning.

Evan Koblentz of Law Technology News asks today Will Tablets Replace Laptops? I think the answer is yes for some and false dichotomy for many. 

I was a late tablet adopter, buying an iPad 2 in September of this year. A year earlier, at ILTA, I talked to a lot of my friends about tablets because the iPad 1 was so hot then. Based on my conversations there, I held off buying one. I realized that I create a lot of content, working frequently and intensively in Microsoft Word, Excel, PowerPoint, and OneNote. Full-featured desktop applications and a 19″ virtualized external monitor are keys to my productivity. Tablets won’t do for that.

Not everyone, however, is a content creator. Many partners in large law firms, for example, are more content consumers than creators. They, like many experienced professionals, mainly review documents, comment on those document, send relatively short e-mail messages, and reply to e-mail. If those are your primary tasks, I think you can get by with just a tablet. At minimum, a tablet will serve you just fine while traveling - you may still want a notebook at home or in the office.

So, how do I use my iPad? When I am away from the office for a day of meetings, I find the iPad _very_ useful. If I have an hour break, I can read and reply to many e-mail, read my RSS feed, and read the daily news. All this is _much_ easier on the big screen of tablet than on a smartphone. Carrying the iPad is much easier than carrying a PC.

It’s true that coming generation of PC Ultrabooks may serve this purpose. Ultrabooks are an emerging category of notebooks, designed to mimic the Mac Air in thinness, lightness, and fast boot-up. But they will be expensive to start and I’d rather not buy the first generation. Moreover, when my only task is reading documents, handling the iPad is much easier than a PC. I can be sitting, lying down, or even standing waiting for a train and use a table. I’m not persuaded that Ultrabooks will substitute for that.

So my own answer to Evan’s question, for the next two years at least, is “No, tablets will not replace PCs” for users who need to create a lot of content. Content creators will still need a full-fledged PC, at least in the office or home.

Tablets may replace PCs for users who mainly consume content. In the legal market, however, where time is money and partners at least can afford multiple devices, I think they will co-exist.

[End Note: Although I am pretty good at typing on the virtual screen, I also have a Bluetooth wireless keyboard, Apple brand. To me, the minimal extra weight and space is worthwhile for the faster typing on an iPad.]

Two recent general counsel surveys give us an indication of the current state of legal market. Do you want the good news or bad news first? 

Below I highlight survey findings by Altman Weil and Corporate Counsel magazine. The italicized leaders are my words / interpretation of specific survey findings, quoted or paraphrased.

Here’s my take away: The bad news is that for all the talk by general counsels about controlling cost, I see little evidence of success in the data. The good news is that GC still have plenty of opportunity to do better. And while law firms may have less to worry about than they think, ones that offer creative and value-enhancing services have a good shot at gaining share.

The survey highlights:

Altman Weil recently released its 2011 Chief Legal Officer Survey. Findings include:

• Budgets Up. More than one-half of law departments had higher budgets in 2011 than in 2010, with the median up 7%.
• AFA Limited. “84% of law departments report using some non-hourly fee arrangements… Non-hourly fees accounted for 14% of total fees”.
• Light Pressure on Law Firms. CLOs do NOT think law firms “are at all serious about changing their service delivery model, rating them a median 3 on a 0 to 10 scale.” But on the same scale, they assess themselves at 5 for pressuring firms.
• Limited Law Firm Evaluation. “Only 35% of law departments regularly and formally evaluate outside counsel”.
• Big Opportunity to Expand Offshoring. 10% “offshored some of their legal work in 2011, and 91% expect the amount of work offshored to stay the same or increase next year.”

Taking Your Measure in Corporate Counsel Magazine (1 Dec 2011), reports on its GC survey (click on PDF link in article for survey details). Findings include:

• Limited Use of Metrics. “Only a third of respondents said their departments had set up performance measurements and benchmarks.”
• Budgets Up?? The survey found 27.6% of departments cut their 2011 budgets; of these, the weighted average cut was 9.1%. The survey does not report on whether the 70%+ that did not cut had increases and, if so, how much.
• AFA Limited. 75%+ “of legal departments surveyed are initiating talks with their law firms over alternative fee arrangements, but these rarely bear fruit”

So why the title “New Surveys Show Still More Talk than Action by Law Departments?” Altman Weil’s survey found that the highest 2012 priority for law departments will be controlling costs. This has been a high priority for several years but the I just don’t see it reflected in the actions GCs reported in these two surveys.

How much “law should we do?” Companies seeking to reduce legal spend need to start by asking this question.  

General counsels may invest too much solving legal problems. Today, GC control cost measures include moving work in-house, establishing alternative fee arrangements (AFA), and adjusting the resource mix. These answer the question “what is the best and cheapest way to do legal work?”. The better first question is “what work do we need to do?” After all, avoiding legal work altogether reduces expense far more than doing it at lower cost. ("There is nothing so useless as doing efficiently that which should not be done at all.” - Peter Drucker)

The problem is that we lack a good analytic framework to answer the question. We may be doing too much or too little law. Business managers, working with lawyers, need to make risk-adjusted decisions about which legal work is really necessary. This will be hard.

Consider a related question: defining the value of legal services. GCs struggle with this. The ACC Value Challenge does not define value. Pfizer, which has fixed annual fees with a couple dozen law firms, struggles with this question according to a recent College of Law Practice Management conference presentation. And UK law firm Nabarro recently issued a report, General counsel: vague about value?, which finds GCs have trouble defining value. (NB: excellent read overall.)

If GCs cannot value legal services, I suspect they will find valuing legal problems even harder. Without the ability to do so, however, how can we know the right amount of legal work to do?

One example of how we might “do less law” is settling more law suits. Mark Ohringer, General Counsel of Jones Lang LaSalle Americas, Inc., said, also at the COLPM conference, that if it becomes clear that a dispute is well-grounded, his company investigates and, if something did go wrong, writes a check to fix the problem rather than litigating. If more in-house counsel took this approach, total spend (fees plus settlement plus judgment costs) likely would drop.

Two recent New York Times articles about healthcare provide an interesting contrast and perhaps some ideas. Sports Medicine Said to Overuse M.R.I.’s (28 Oct 2011) reported that 90% of the shoulder MRIs of “perfectly healthy professional baseball pitchers [who] were not injured and had no pain” showed abnormalities. The next day, Considering When It Might Be Best Not to Know About Cancer explained that some experts propose less screening for some cancers because early detection does not reduce mortality and the test have risks.

Could lawyers be doing too much scanning, screening, and treating as well? How would we know? What are the right metrics? Tough questions. We need to start developing a rigorous and quantifiable framework to ask and answer them. My guess is that technology will play a role, for example, tools to analyze BigData or decision trees to support litigation risk analysis.

Since not everyone reads Twitter, I reproduce here a selection of my recent Tweets. In this Roundup, I cover Tweets since September 2011. Plus I’ve highlighted several articles about the legal market from mainstream media sources. 

MAINSTREAM MEDIA

Economist on AI impact on knowledge workers, incl lawyers http://econ.st/rQdDY1 || AI may outrace ability to replace jobs. HT @jkubicki  6 Nov 2011

NYTimes: Selling Pieces of Law Firms to Investors http://nyti.ms/vFLXCz || more MSM on emerging legal issues nyti.ms/vFLXCz  29 Oct 2011

The Australian: Law firm ‘Staff on chopping block as slump hits’ http://bit.ly/v7NKRA || Beaton analyst: partnering with LPO is a must  27 Oct 2011

WSJ: What’s A First-Year Lawyer Worth? http://on.wsj.com/p5u9pS || MSM picks up on legal economics. More on contract lawyers.  17 Oct 2011

OTHER UPDATES

Carolyn Elefant post: Proposed ABA Ethics 20/20 Rules requires oversight of Lexis, Westlaw http://zite.to/uJncE4 (HT @gnawledge) || !  18 Nov 2011

@DiscoverReady Team Holds Summit on Quality in Document Review (post) bit.ly/tYoFro || look fwd to these #eDiscovery results  17 Nov 2011

Legal Week: 80% of GCs see cost as important but most slow to measure value and efficiency of efforts http://bit.ly/w1Tg40 || surprising?  17 Nov 2011

The Decision Tree, Step by Step: How Much Is Your Million Dollar Case Worth? http://bit.ly/sR0N0N || decision tree example (HT @gnawledge)  14 Nov 2011

Great @MorganLewisLaw LTN article on automating #eDiscovery http://bit.ly/sSgTvM || Beginning of end of human review?  12 Nov 2011

@gnawledge post - bet farm legal market shrinking ow.ly/1zFCks || Good insight - I agree  2 Nov 2011

@vmaryabraham post: Seyfarth’s Success Story [#Ark] bit.ly/ru3SDt || great write-up of Lean Six Sigma at a firm  1 Nov 2011

Above the Law: O’Melveny & Myers Replaces 75 Humans With Technology http://bit.ly/ofj9gV || outsource to Williams Lea in Wheeling WV  18 Oct 2011

@DannyErtel post: Useful Scorecards for Legal Process Outsourcing bit.ly/qB6qTx || good matrix to evaluate LPO   15 Oct 2011

LTN: Contract Management Software Helps Lawyers Gain the Upper Hand http://bit.ly/qXNvSI || Big opening for law firms that embrace CMS  11 Oct 2011

WSJ Law Blog: @LegalZoom Sues North Carolina Bar http://on.wsj.com/pK0BPJ || seeks declaratory judgment re no UPL   7 Oct 2011

SNR profits drive prompts new push in low-cost Milton Keynes arm http://bit.ly/ || another cost lowering insourcing strategy   6 Oct 2011

Freshfields holds off on launch of alumni network temp project until 2012- Legalweek http://bit.ly/px95jD || tweaking a good idea   6 Oct 2011

Last month I wrote a two-part blog post about the new model law firm Clearspire. Subsequently, I had a chance to see Coral, the firm’s custom-developed law practice and business management technology platform. I was impressed. 

I have evaluated much software over the years. Coming from the large law firm environment, however, I am accustomed to reviewing single-function or loosely-coupled applications. In contrast, Coral is a complete desktop and office environment that encompasses not just document creation / editing and e-mail, but a range of other functions, including real-time communication / collaboration, project management, and financial analysis.

Design Goals

Clearspire had the advantage of starting from scratch. Unlike large law firms, it did not have to graft project management, budget features, and other modern requirements onto legacy systems.

So the firm built Coral from the ground up to meet new client demands for better value, with features to serve clients, lawyers, and the firm’s business managers. Key design goals included ease of use for “non-techie lawyers", collaboration within the firm and with clients, scalability, and the ability to break substantive legal work into separately priced and managed discrete activities ("chunks").

Inspired by Apple, Coral emphasizes simplicity, elegance, and intuition. As I described in my prior posts, Clearspire practices virtually, so Coral is not just software, it is the office. To support remote work, Coral offers visual cues about colleagues’ availability.

Key to Clearspire’s business model is managing work chunks (tasks and projects). Coral helps firm lawyers do so with features built around “matter roadmaps", which break matters into phase, activity, and task. The firm identified and retained the services of 12 leading lawyers to build standard roadmaps, investing $1 million in the effort. These features support the firm’s focus on efficiency and aligning interests: each work chunk is priced and measured separately; if work comes in below budget, the client, the firm, and the lawyers share the savings evenly.

System Architecture

Coral is a three-tier stack. At the bottom are systems for document management, records, conflicts, finance, and unified messaging (instant messaging, video conferencing, voice, social media, and forums). Clearspire licensed 3rd-party software for these functions, customizing some packages so much it negotiated IP grants.

A middle layer integrates and aggregates data from the bottom, providing human resources information systems functionality (including experience location), project management, matter staging and management, and reporting.

The top layer is the user interface: a web-based intranet and extranet. Similar but somewhat simplified interfaces are available across a range of mobile devices. The entire stack runs on a private cloud in a Tier 4 data center (which means fully redundant systems and tight access controls).

The Lawyer Interface and Experience

When lawyers log-in, they see a home page with “my to-do list", matter list, key updates, and colleagues’ availability. The availability feature, which Clearspire calls “hallways", signals to lawyers whether colleagues are at their desks and, if so, whether they are available to talk or IM. Coral offers both a geographic and practice view of colleagues. Color coding and icons signal availability (lawyers can control how their availability displays to colleagues).

Most communication is NOT by e-mail; rather it is in wikis or collaboration forums, which means that message exchanges stay organized and are available to anyone who joins the team mid-stream. I find this feature particularly exciting. In 1992, I tried introducing threaded discussion / forum software in a law firm. Though multiple partners tried and liked the forums, none was willing to give up e-mail. Today, with social media arguably uprooting the psychological foundation of e-mail, the stage may be set for Clearspire to move to the next generation of asynchronous text communication.

The document management system is a collapsible hierarchy that breaks work into natural units for a matter, for example, correspondence, court papers, and working papers. This feature looks similar to many large firms’ matter-centric systems. The difference, however, is that there does not appear to be alternate interfaces that let lawyers by-pass the system-designated folders.

Matter roadmaps drive lawyers work. Coral presents each lawyers with his or own customized task list. As lawyers finish one task, the system notes this and presents the next one. While that may sound like Big Brother to some, I think it is essential to standardizing and systematizing practice. Some firms are beginning to assess the cost of allowing each partner to practice in his or her own way. Those that do will most likely find it is high. While many lawyers may consider themselves artisans who need no guidance, clients likely prefer the standardized approach.

Working in concert with the matter- and task-based approach, Coral also presents lawyers with a news feed customized to the matter. Many firms struggle to deliver relevant updates to lawyers. This feature looks very promising but is particularly hard to assess without actually working on matters and seeing what updates appear.

The Client Interface

Clients see a similar but role-appropriate or contextual interface. A client dashboard includes a matter overview and list of lawyers working across matters. Per matter, clients can see an overview, a subset of documents the firm chooses to expose, billing, a chronology, and prior communications. Financial reports are also available.

Conclusions

I was impressed: Coral is better conceived than most law firm software I have seen. Because Clearspire was not constrained by the infamous “installed base", it built a system that overcomes legacy problems and, as important, meets new needs. In contrast, existing large law firms have a big installed base of users, hardware, and software. They generally face a future of incremental change; developing fully integrated systems could take many years. The cloud may offer firms an alternative but few large firms seem ready to migrate any time soon.

Over the last decade, I have participated in many a discussion about matter-centric systems. I have been skeptical about the value of most instantiations of it. Coral, however, appears to take matter centric to a new level that seems to make it genuinely helpful to lawyers. Furthermore, knowledge management (KM) is baked-in, with search, wikis, and discussions forums active now and other features planned.

So, does Coral really work as well as I suggest? Will lawyers and the firm be more productive? As with any software discussion / evaluation, answering these questions based on one demo is not possible. From my AmLaw 100 experience, I know that rolling out new versions of standard software is often a challenge – gaining adoption of new ways of working is that much harder. Just as Clearspire has avoided the installed base problem, so too has it avoided the “legacy lawyer” problem. Lawyers who join Clearspire self-select for being open to if not eager to adopt new ways of working. And the firm can also screen for these traits as necessary. Consequently, I expect that lawyer uptake will be very good.

A group of large law firm knowledge management professionals of which I am a part recently conducted a survey of legal project management (LPM). Thirty firms participated; here are highlights I found interesting and some comments. 

In 2010, only 40% of the firms had started an LPM initiative. By this year, 62% had and, counting firms that anticipate starting in the next 12 months, the percent goes up to 80%. Given where we were in 2008 - probably close to zero - this is impressive growth. But dig a little deeper and the picture is mixed. The survey has findings that point in both directions. (All stats below are for firms with an LPM initiative.)

Positive signs include:

• Leadership supports LPM. My categorization of free-text answers to an open-ended question about the role firm leadership finds that in 75% of firms, leadership plays an important role. With that much senior support, new initiatives are more likely to succeed.
• Three quarters of firms have “officially launched” LPM.
• The drivers of LPM - specifically, 75% of the firms cite both client demand and the need to meet budgets and AFA - likely will not diminish anytime soon.
• Though LPM may be nascent, it is already affecting how firms practice. About 40% of firms report that that LPM has catalyzed other changes such as using more technology, adopting Lean or Six Sigma techniques, or shifting to lower cost resources.

In contrast, there are negative signs:

• Only 40% of firms have hired anyone into a new position to support their LPM. Given that many lawyers need to help to do LPM, this may not bode well.
• Only one-third are marketing their LPM initiatives to clients. I would have guessed more would advertise LPM to clients. The explanation may lie two other findings: (1) only 40% of firms doing LPM report tangible successes to date and (2) almost all firms say that fewer than 25% of lawyer and fewer than 25% of new matters use LPM. I take heart from some comments saying it is still early days but these are troubling outcomes for LPM advocates.

Additional interesting findings:

• Roll out strategies include a single practice, a small group of lawyers across practices, multiple practices and firmwide. I was surprised that almost one-third of the firms with an LPM initiative are rolling it out firm-wide.
• Of the firms with an LPM initiative, KM plays a leading role in 20%, a participatory or advisory role in 65%, and no role in 15%.
• Only 40% of firms hired a consultant to help with their LPM initiative.

On balance, I would say these findings are very encouraging for LPM believers. Both the introduction of technology and marketing in large law firms arguably took about a decade. So LPM is off to a fast start in comparison.

This is a live post from the College of Law Practice Management Futures Conference. This session is Future View: Do You See What I See?. 

[As with all my live posts I try to capture the highlights of what panelists discuss and report accurately. Any of my own editorial comments appear in square brackets preceded by my initials, RF.]

Moderator: Sally Fiona King, SNR Denton
Panelists: Ross Fishman, Ross Fishman Marketing; Dave Hambourger, Seyfarth Shaw LLP, Janet Taylor Hall, Integreon, Chris Murray, Jones Lang LaSalle Americas, Inc.; Chris Petrini-Poli, HBR Consulting

Sally King Introductory Remarks
The new normal is clear, all prior bets are off, innovation is the order of the day. Law firms are under tremendous client pressure to reduce costs. Total demand for legal services is down. Clients are more sophisticated. Twenty years ago, the only GC lever was spend inside or outside. Today, the GC has many options to adjust and control costs. The GC is aided today by e-billing data stream, which provides insight that allows GC to compare and contrast law firms, determine who has is efficient and who is not. One GC told Sally recently that quality is a given - he cares about cost. Many law firms chase the same assignments. Realization rates are down - they average 84%. Profitability is down.

Some of the questions to consider today:
How should firms improve profitability and ensure their survival?
What should we make of alternatives such as LPO and Lawyers on Demand?
Should law firms embrace? If so, how?

Janet Taylor-Hall re LPO

Q: Where does Integreon expect to grown. What is happening with LPO. Can you tell us more about CMS Cameron McKenna?

Janet Taylor-Hall: Discusses the move from “LPO 1.o” to “LPO 2.0″. The company has grown from 10 legal professionals a few years ago to 750 today. This gives a sense of how LPO has scaled tremendously. These lawyers do work for both GC and law firms.

CMS Cameron McKenna, #13 law firm in UK, has outsourced its entire middle office to Integreon except for some very senior managers, marketing, and secretaries. The lessons learned: it’s not easy to do this outsourcing, either for the firm or the outsourcer. But it’s working because both sides are collaborating. If you talk to Duncan Weston, the managing partner, he explains he decided to outsource because he wants partners focused on clients and client relationships, not on any operational issues.

Ross Fishman re Marketing

Q: How are firms changing the way they market? What are some unsual moves recently? Do you have any insight on CMS Cameron McKenna?

Old advice: Law firms need to avoid brochure cliche. New advice: Law firms need to avoid website cliche. Marketers are fighting the same battles and having the same conversations about marketing for the last 20 years. “Boring cliches still prevalent.”

Notes that in smaller communities law firms have even more opportunity to differentiate themselves because there is less competition so even less emphasis on marketing and positioning. These smaller firms now target BigLaw work. With recession, they now have a shot at success. Large firms now fact skilled spin-offs, litigation boutiques, and competition from other small players. Dave Hambourger notes that yesterday the GC of Jones Lang specifically said he wished more small firms would pitch him.

Small firms still need to build their brand so that if big clients come calling - or if they call on big companies - the buyer has some awareness of the firm. Some of the small firms target specific niches or geographies.

Brochures are dead or very small; big brochures are all on the web now. Brochures moving to mobile device. But they are still boring. Has not seen any useful firm apps.

Social Media: expresses some skepticism about social media. Law firms are not the Chicago Bears or Justin Bieber. Clients don’t form emotional attachments to law firms. So social media has a different function for law firms. Law firms are not inherently interesting; firms must make themselves interesting. But several in audience say that younger generation “swim in the Facebook waters” and that longer term, firms have to find way to play in social media.

Search Engine Optimization (SEO): this will be key for law firms.

Chris Petrini-Poli re Law Firm Strategy

Q: Law firms are changing the way they do business. Given survey you just conducted, what advice do you have for law firms?

Law firms have vast number of acceptable options. They have to choose the right ones. Clients are requesting pro-active interface, asking for new billing and fee ideas. Firms can capitalize on this.

Peer Monitor Index came out yesterday. Demand dropped, expenses are up.

Strategy worked stopped at many law firms in the recession. That is worst time to stop strategic thinking. Firms made many cuts in recession but did not make truly fundamental changes in operations - that is beginning to happen now. Is there a “Tier 2″, a way to fundamentally change how law firms operate? Sally asks about Six Sigma. Chris says firms have not really embraced it in any meaningful or wide-spread way. Janet says in UK, now firm has gone as far as Seyfarth has - but more lawyers today do know what Lean means.

95% of law departments report they are taking active measures to control outside counsel spend. Number one is keeping work inhouse. Inhouse headcount is up. AFA is second biggest. But law departments split 50-50 if alternative fee arrangements really work or save money. Average hourly rate paid to top three firms has gone up. This suggests that GC still willing to pay for premium advice. Sally notes however that even premium firms have realization issues, which suggests that clients may be willing to pay for expensive partners, but not for the overhead (meaning junior associates).

Chris Murray on Space Costs

Q: After people, leases are most expensive cost. Real estate in US is about 8% in US and 12% in UK. Up significantly from past. How are firms dealing with this?

Firms are outsourcing, developing more flexible space.

Client-Facing Space: Conference room utilization has not gone down. Most firms have moved to central conference centers - this allows higher utilization. Many firms used movable walls that go up into ceiling. These are sound-proof. Allow more flexible space utilization. More law firms now provide concierge services for visitors. Some firms focus on consistency of client experience across their global footprint (e.g., be able to plug computer in any office). There is a move toward food service in a common area. This allows more diverse food offering and reduces expenses. Firms not worried about clients mixing because they mix in reception and rest rooms anyway.

Practice Space: Not designed for client visits. Lawyers spend about 50% of their time in “quiet, reflective work”. 35% is in collaboration. This drives design. Many law firms now have coffee areas adjacent to conference center - both a client and practice amenity. In US, outside of lawyer offices, no walls should be fixed. In UK, move to open office landscape even for lawyers. American lawyers demand quiet unlike lawyers elsewhere in world. For one firm, had design sound-proof lawyer offices. In UK, cites examples of 2 firms that started with open lawyer space and a year or two later, built walls. Jury is still out on open lawyer space. In US, interior lawyer offices are becoming a viable option, especially with glass walls, and LEED requirements.

Practice space includes “teaming rooms”. Some are used to store paper, still [RF: !!] but firms are moving away from paper, but it’s still a slow process. More firms are putting in “convenience stairs” so that lawyers can more easily interact across floors. Firm developed lingo: “stair conversations”.

Support Space: As staff ratios go down, less use for interior space. Many firms moving to secretarial teams. The secretaries sit together and serve a group of lawyers. In one firm, a 3-secretary team support 21 lawyers. As secretarial ratio goes up (lawyers to secretaries), hard to find ways to use the space. The more a firm can consolidate support and centralize, the easier it is to plan space. Deciding what support staff can move offsite can be hard.

Dave Hambourger on Technology

Q: Tech is expensive still. How do we harness recent developments? What has the best potential to change the way we work? How should firms protect against firms that force upgrades by refusing to support older versions?

In past, firms would reject outsourcing out of hand. That attitude is gone today. That does not mean cloud solutions are automatically accepted, but they are not automatically rejected. Law firms realize they provide advice and documents; they don’t have to run servers. Lawyers think that inhouse solutions are more secure but Dave points out that cloud providers specialize in what they do and may, in fact, offer better security.

By offloading core services to the cloud (or other outsourcing solutions), IT management can focus on strategic solutions. Slowly emerging is an attitude that good enough is good enough - the tech does not have to be perfect.

Mobile Devices: CIOs historically fought outside services such as social media and mobile devices. Today, the “secret CIO” is the managing partner. He or she brings in a mobile device and wants it to work with firm IT infrastructure. So CIO has to make mobile devices work. Lawyers choose their own mobile devices so if firms enable the devices, the training issue goes away. Lawyers will use services such as Dropbox. CIOs have to figure out how to let lawyers use these services while minimizing risk. Devices are only getting more capable so lawyers will use them even more.

Re managing vendors who strong-arm upgrades: Little to do concerning Microsoft. If legal-specific, you can negotiate with vendors.

This is a live post from the College of Law Practice Management Futures Conference. This session is What is the Future of Price: Defining Value in Value Billing, Part II. 

[As with all my live posts I try to capture the highlights of what panelists discuss and report accurately. Any of my own editorial comments appear in square brackets preceded by my initials, RF.]

The Moderator: Ronald Staudt, IIT Chicago-Kent College of Law
The Panelists: Toby Brown, Vinson & Elkins; Lisa Damon, Seyfarth Shaw LLP; Paul Lippe, Legal OnRamp; Mark Ohringer, Jones Lang LaSalle Americas, Inc.; and Ellen Rosenthal, Pfizer

Lisa Damon, Seyfarth Shaw LLP

Seyfarth Lean Background: About 6 years ago, clients started asking for alternative fees. Lawyers just guessed and, more importantly, were pricing inefficient services. Management wanted to understand how lawyers did the work, re-engineer the process, become more efficient. This led to Lean Six Sigma. It was hard to absorb for lawyers. Ended up keeping parts of it and jettisoning parts. Project management was especially important.

Lean Six now pervades Seyfarth. “Hard to articulate the extent of the change at the firm.” Lean has allowed the firm think differently about how it practices. One element of Lean firm kept is “DMAIC": Define, Measure, Analyze, Improve, Control. Especially important is to find and fix the root cause.

Applying root cause of law firm problem today is how firms compensate lawyers. This is not for today but illustrates how Lean will ultimately affect law firm management.

When applying Lean to clients, meet with clients, lawyers, and law firm staff. Lawyers will say what they do but then the staff say what the _really_ do. This shows where the waste in the process is. In law, firms are motivated to bill so much until the client fires the firm. Lean and DMAIC avoids this.

The firm has client-facing project managers (PMP certified). This helps matters stay on track.

Data is incredibly important to Lean and Seyfarth. A new matter starts with data analysis. Client comes with a problem; the firm starts with work value per matter, illustrating with a scatter gram comparing value and work. Another key tool is process mapping. Some clients are not interested in this but many are. The more sophisticated clients understand that the process mapping removes inefficiency at both the firm and the client.

Observes that in typical firm, partner only sees what work a lawyer did at the end of the month. At Seyfarth, time keeping is daily. Firm will share this will clients, though many don’t want it because they are on value billing. But this lets project managers and partners see what work is being done.

Firm is working on a scorecard that will eventually change the compensation system. It’s based on the ACC value challenge. Beginning to use this to change partner evaluation and compensation; will eventually cascade down to associates.

Toby Brown, Vinson & Elkins

Made a transition from knowledge management to alternative fee arrangements a few years ago. Has been involved in hundreds of AFA arrangements.

Frequently hears “the question", meaning which AFA and how much? Tries to analyze past matters but the data are not very good. A varian on this question is “which one works?” Points out that there is no consistency. The success keys are trust and communication, not the specifics of the AFA structure.

The benefit of AFA is to become a trusted adviser in a long-term relationship.

Keys to making AFA work:
1. Define goals. Make sure to understand the client’s real need. For example, is it speed, precedent, stall, predictable costs?
2. Define scope. Doing a bid based on a complaint does not support defining scope.
3. Define the fee goal. Is it predictability or certainty, which are not the same: a client may want monthly predictability or certainty regarding total fee. Former may relate to cash flow, latter to budgets. Understand what drives the client and how GC is evaluated. It could be budget, outcomes, some type of audit for fair value.

===Discussion===

Q: How does above discussion relate to small firms?
A: Clients are figuring out that smaller firms in lower cost locations often offer more value. Damon says Seyfarth now collaborates more with smaller law firms. Sees “walls coming down” so that small firms work more with large ones. Brown says his firm competes with small firms and boutiques.
Damon says that all these movements also create alternative delivery mechanisms, including LPO and lawyers working virtually, which firms of all size can use.

Q: How does this apply to consumer law or small business lawyer?
A: Lippe says the same trends apply to all practices. Technology will be key everywhere. Clients will focus on value. 95% of the issues will be the same across practices and firm sizes.

Q: How should firms respond to value billing - where should we squeeze overhead / costs to make up for this?
A: Value billing does not mean less profit. Discounts are not value billing; if you use flat fees or capped fees, you can re-think how you do the work and maintain profits. It’s less “squeeze” than “re-shape how you do the work”

===Wrap Up===

Moderator: how do we keep this conversation going beyond the conference?

Toby: We need a Sedona Conference for value. [RF: Sedona is a leading non-profit that works on e-discovery issues]
Lisa: Lawyers and clients need to share success stories. That’s not happening now. A core change management principle is show success.
Paul: In so many words, “just act” - there are lots of management tools and measures in the market - try and adopt. One step: create inventory of law firm processes
Ellen: Work with other peers in other corporations so that when talking to law firms, the firms hear a more unified message about value. This will help change conversations in law firms.
Mark: Find ways to lower costs (e.g., put people in lower cost locations), use technology and use it well, adjust compensation to align incentives. Successful firms will figure out the right cost structures.

This is a live post from the College of Law Practice Management Futures Conference. This session is What is the Future of Price: Defining Value in Value Billing. 

[As with all my live posts I try to capture the highlights of what panelists discuss and report accurately. Any of my own editorial comments appear in square brackets preceded by my initials, RF.]

The Moderator: Ronald Staudt, IIT Chicago-Kent College of Law
The Panelists: Toby Brown, Vinson & Elkins; Lisa Damon, Seyfarth Shaw LLP; Paul Lippe, Legal OnRamp; Mark Ohringer, Jones Lang LaSalle Americas, Inc.; and Ellen Rosenthal, Pfizer

Ellen Rosenthal, Pfizer on An Overview of the Pfizer Legal Alliance

Gets a lot of questions from law firms about how to value work. She did not have a good answer for how to set the price for a large chunk of work on an annual basis. There are no good metrics. Law firms measure on an hourly basis; Pfizer measures based on value received. The two are not speaking the same language.

Pfizer forbids its lawyers from talking about hours with the engagement partners. Wants to move away from lawyers. But the 500 lawyers of Pfizer push back a lot. They need to think a new way about value, outcomes, and deliverables. Coming up with a language to discuss pricing or value is very challenging.

The premise is that the billable hour is dead. About 70% of its global legal work is non-hourly billing. Pushing to put all of the legal work in the Pfizer Legal Alliance (PLA). The PLA consists of 17 firms; there has not been any turnover. Pfizer views this as a real alliance and collaboration. Pfizer believes that long-term, committed relationships will produce better value. The PLA law firms are integrated with the businesses and each other. The firms really work with each other. They do not hoard work because with a fixed annual fee set at outset of year, there is no incentive to hoard.

Pfizer is heavily invested in training the lawyers in the Alliance. Within Pfizer, three senior lawyers are on a governance board ("Steering Committee") with the Alliance’s Roundtable governance group.

The core value of the PLA is mutual value. Cynically, one could say Pfizer is asking for a discount. But real view is for changed economics and search for non-economic benefits. Thinks mutuality is a key idea of value.

The PLA value proposition:

• Cross-firm collaboration and information sharing and predicable income flow
• Access to learning about Pfizer
• Regular meetings between Pfizer and each PLA firm
• Knowledge sharing platform
• Annual meetings and firm visits

Law firm lawyers enjoy practicing more because they work collaboratively internally, with other firms, and with Pfizer. Pfizer sets a fixed fee a the beginning of the calendar year, payable monthly, irrespective of the level of work. Firms have predictable cash flow; moreover, they have no incentive to say they can do something well just to get the business. Alliance firms get to hear from CEO and other very senior Pfizer managers. There is a secondment program for law firm associates; there is also an associate roundtable (cross firm).

Pfizer sets the price in December. Discussions start soon to discus scope of work in 2012. 70% of scope is known; 30% not known. Staudt asks “how do you discuss scope without raising hours?” Rosenthal: we just don’t talk about hours. Also, we do not discuss specific matters in detail - we address the entire portfolio. But this is the challenge: if we say we are paying a firm $20 million, how much work is this.

Lippe points out that part of value is that it’s better to prevent a problem than fix it. That should drive some of the discussion. Rosenthal sees this more as a tactic than a principle. Pfizer experiments each year with how to refine the value and fees. Trying to focus on risks, level of complexity. Risk has multiple aspects (e.g., reputation, financial). [RF: I wonder if Pfizer or law firms run Monte Carlo simulations to assess potential outcomes in a large portfolio of work.] Pfizer asks, retropsectively, where firms spent most of the resources and then compare that to the value provided. What is the value to effort ratio? Is this at right level and, if not, how should it be adjusted? These are open questions that Pfizer is working on.

There is no true-up at end of year. Bonuses are for collaborative behavior and extraordinary outcomes, NOT for doing more or less work than expected.

Mark Ohringer, Jones Lang LaSalle Americas, Inc.

Company is one of the two largest providers of commercial real estate services such as managing or investing property. CBRE is the main competitor. Jones Lang invented the idea of outsourcing real estate management.

Mark is very frustrated with law firms. Has not found any strategy that is effective to manage and work with law firms. His strategy is to try to minimize work sent outside because fees are “sky high”. It got better for “about five minutes” during the Great Recession. Law firms are like private schools and hospitals - always going up.

Whenever Mark has a lot of repetitive work, e.g., contracts, he will hire a lawyer. His cost of getting a happy, experienced lawyer is about $125/hour. So once he has a full load of work, he hires someone inside. No firm can compete with his inhouse price. Manages 2 billion square feet of space. That means a lot of slip and fall cases in offices and retail space. Has completely outsourced all of this work to insurance companies. So the insurers deal with law firms.

Mark calls his department competition to law firms. Has hired 60 lawyers to work on revenue generating contracts. He cannot pass this cost through to customers (unlike banks). Does as much as possible to keep litigation from going to court. Wants to keep contentious matters out of law firms hands. If it becomes clear that a dispute is well-grounded, company will investigate. If something really went wrong, write a check to fix is better than litigating. Same with HR / employee matters.

So what’s left for law firms is hard to predict work such as M&A. Acquisitions can be global and flow unpredictable plus require specialized expertise such as ERISA and antitrust. For this limited scope of work Mark sends outside, he is willing to pay hourly. But he has people on staff who watch law firms like a hawk. Restrict outside counsel to where expertise is really hard - then watch carefully.

Cannot find way to motivate law firms to get to quick resolution of matters. They have no financial incentive to do this.

Mark recognize he is just one voice. Not claiming this view is a universal gospel. About 3/4 of money on law is NOT for outside counsel. For work that does not yet justify hiring a full-time lawyer, Mark works with Axiom. Legal OnRamp is working with company to automate forms. All this to keep work away from law firms.

Now, so little goes to firms that Mark is reasonably satisfied - as long as he carefully manages and gets just the senior partner and not all the minions.

“Completely flummoxed” with how to deal with law firms.

So the principle here: inhouse law department is the competition for law firms.

Paul Lippe, Legal OnRamp

Key value principles:
1. Always listen to client
2. Consider cost of doing work internally as alternative
3. Always easier to improve value than talk about it
4. Need alignment: common platforms, common incentives

Does a 2x2 grid.
1. Lawyers are actually smarter and act like they think they are smarter: this is status quo
2. Lawyers are actually smarter but act like clients are smarter: out compete other firms
3. Lawyers are not as smart as clients but act like they are: smarter bankruptcy [cites Kodak]
3. Lawyers are not as smart as clients and act like clients are smarter: dramatic success with clients

Lisa Damon, Seyfarth Shaw LLP;

Key value principles:
1. What’s best for the client is best for the law firm. This may mean bills are lower. Just listen to clients and follow-up.
2. Focus on relationships. When you do value right, relationships are different. Go from vendor to business partner quickly. Lawyers are much more satisfied
3. Clear and flexible approach to measuring success. Lawyers resist establishing success criteria. Start with a clear definition with client of success. OK to change this as long as you discuss with client.

Toby Brown, Vinson & Elkins

Key value principles:
1. Reiterate relationship, do what’s best for client
2. Understand the client’s goal
3. Define scope: is it a single matter, a portfolio? What does client expect?
4. Understand the fee goal
5. Price with fees, not rates. Assess fair market value (FMV) of services, not number of hours. But recognizes FMV may be hard to establish. But FMV of rate has not bearing on FMV of fee.

Yet another large law firm has opened a low cost service center. Is this old news that firms can simply note - or a call to action? 

Last week Pillsbury announced that it will open a low cost service center in Nashville, TN. Let’s start with a review of which other firms have already opened such centers.

Several firms now operate centralized service centers in low cost locations. Among US-based firms, Orrick has a center Wheeling, WilmerHale in Dayton, Reed Smith in Pittsburgh, Baker McKenzie in Manila, and White & Case in Manila. Among UK-based firms, Clifford Chance has a center in India, Allen & Overy in Belfast, Herbert Smith in Belfast, and Linklaters in Colchester. Separately, many firms in both countries have outsourced one or more business functions to companies that operate low-cost, centralized facilities.

A service center outside a high-cost city offers two obvious benefits. First is lower cost. Moving jobs from DC to Dayton, London to Belfast, or LA to Nashville reduces compensation and rent. The second is improved efficiency and effectiveness. Consolidating and centralizing a function offers several benefits: more flexibility to adjust staffing to meet peaks and troughs in demand; staff can develop specialized skills; easier to offer 24x7 service; and better potential (relative to dispersed support) to streamline and automate processes.

Now that a half-dozen US firms have opened low cost centers, will the market tip? Do other large firms risk suffering a cost and operational disadvantage if they do not have one? Yes, but the message is less “open a low cost center” and more “figure out how best to centralize support and reduce cost”.

Firms with offices in lower cost cities can centralize support in one of those cities (as Reed Smith did.) Those that operate in high-cost cities may need to open low-cost owned and operated centers or outsource.

Firms that do so should take full advantage of the opportunity. The transition can be costly, financially and psychically. Management should therefor take the opportunity to take a deep look at how they provide support overall. As I suggested in 2009 in Law Firm Staffing Reference Model, the “theory of law firm support” is not well developed. Benchmarking goes only so far. It can instill false comfort since many firms, despite lay-offs, are over-staffed or “wrong-staffed”. Smart law firm managers thus need to ask what support areas are weak or strong, what lawyers really need (and not just want), what training / experience is required to provide the support, and where those staff should sit. Answering these questions thoughtfully will make any centralization that much more valuable.

Firms that do not assess support needs and reduce costs may eventually need to lay-off staff. If the lay-offs in 2008 are any guide, the best they do is cut costs. Without careful planning and analysis to re-tool support, lay-offs are just a short term fix. Whether motivated by fear of future lay-offs or needing to remain competitive, I expect to see more firms open low cost centers or outsource.

Over the weekend I was reminded of how, in the early days of the Net, Google supplanted Yahoo as the place to find websites. And that made me think about the current e-discovery predictive coding discussions. 

The web exploded around 1995. Yahoo! was among the first success stories helping users locate useful websites. And I mean “locate", not “search”. Yahoo!’s approach was a directory, a human-built, nested set of menus.

Good idea - until search engines came along. Google invented an algorithm that used the number of inbound links as a “voting engine” to rank sites. That blew away the directory idea. The automated approach beat the human approach.

A similar story will likely play out in e-discovery. Published studies support what many of us have long known: humans are neither particularly accurate nor consistent. See, for example, Predictive Coding: Reading the Judicial Tea Leaves in today’s Law Technology News.

Human review of discovery documents is like the Yahoo! approach. Fine for low volume. Not so for high volume. We already see today the challenge of scaling.

This does not mean humans cannot sometimes pick better websites / documents than computers. It just means that as volumes grow, the latter are more reliable / consistent than the former.

Ordinary internet users figured this out in a year or two. How long will it take lawyers and judges to figure out that a skilled humans using smart software are better than the brute force of an army of humans?

I like my iPhone and iPod but I am no Apple fanboy. After upgrading to iOS5 and trying to use iCloud yesterday and migrating these devices to a new PC 10 days ago, I am frustrated and have lost a lot of time. 

I’ll start with a condensed narrative of my woes, then draw my conclusion.

The upgrade to iOS5, Apple’s latest operating system for iPhones and iPads, was bumpy. I saw a lot of chatter on the web that many people had problems. In the end, my upgrade worked but the prompts along the way were confusing.

Even more confusing was iCloud, which allows synchronizing contacts, calendars, and other information automatically across i-devices and a PCs or Macs. A blow-by-blow explanation would bore so I point you to Outlook 2010 PC? It’s iCloud Or Google Calendar Sync, Not Both – And Outlook 2011 Mac Gets No Love, a blog post by noted techie / search engine expert Danny Sullivan.

Sadly, I was not able to find any helpful Apple documentation; I had to rely on web searches and hits like the one cited. Along the way, I noticed that in iTunes (the synchronization software), under Help, iTunes Help, I received a “Not Found - The requested URL /itunes/win/10.5/ was not found on this server” error. Huh? This was a freshly updated iTunes.

I had a similar experience 10 days. Once I lost my job, I had to migrate my two i-devices from the company computer to my own. I spent hours in advance trying to figure out how best to do so. My search of the Apple support site for what I thought must surely exist- the one-page, step-by-step guide for this task - yielded nothing very helpful. After consulting web resources, I thought I had it figured it out. I confirmed with a call to Apple support (my iPad is still in the free support period). My plan worked but I panicked initially because I thought all my apps disappeared. Then I realized iTunes had moved all the apps several i-device screens over to the right. Aside from the time to re-organize my apps, no where did I see a warning this would happen.

Running into these problems was a huge waste of time. The conclusion? Either the technology has to be so truly simple that no documentation is required. Or the developer has to acknowledge some complexity and provide adequate documentation. Documentation does not appear to be Apple’s strong suit. There is no question the iPhone and iPad are beautifully designed and wonderful machines. Yet they do entail some complexity. Complexity that Apple appears to ignore.

On and off, I consider switching from a PC to a Mac. After this experience, I am reluctant. With a Mac, I doubt it would be long before I ran into a tech glitch and struggled to find answers.

Law firm CIOs try to keep tech easy but know simplicity is not always possible. That’s why firms train and provide ample support. A BigLaw CIO who took Apple’s approach to complexity (seemingly ignore it) would likely not last long!