Strategic Legal Technology

Technology is all about change. The job of the CIO is often as much about change management as it is about technology. Sometimes change occurs so continuously and gradually that we do not realize that whole systems and environments have been altered. The role of secretaries in law firms illustrates what I mean. 

Legal Secretaries: Numbers Wane, but Demand Does Not on law.com reports on a study by a staffing agency on the changing ratio of secretaries to lawyers. It confirms that more firms are moving to a higher ratio of lawyers to secretaries. The study also finds, however, that despite the relative decline in demand for secretaries, it is still hard to find good ones. Moreover, the demands on secretaries have increased given their expanded coverage.

Clearly, the advent of PCs and lawyers typing their own documents combined with voice mail and fax delivery to PCs has changed what secretaries do. In my view, there has been enough gradual change in the role of secretaries that firms should re-think the role and organization of secretaries. I have previously argued in The Future of Legal Secretaries (published in the Legal Times, May 2003) that law firms should consider adopting a team approach to secretaries.

My idea about secretarial teams may or may not be right. The point here is to observe a phenomenon - the gradual evolution of the changing secretarial job - and not just assume that incremental organizational adjustments suffice. Forward-thinking CIOs and other senior law firm managers need to consider whether a systemic change may be required.

There are other examples of where “gradualism” can give rise to “wholesale structural change.” Some clear-thinking firms now understand that with the advent of Blackberries and inexpensive home PCs, it is probably no longer necessary to equip every lawyer with a notebook PC. Economics, security, and convenience may mean reverting to less expensive and easier to manage desktop models.

The general lesson is that firms need to “step back” occasionally to look at the big picture, to see the accumulation of gradual changes, and to consider potentially new and different real change rather than mere incrementalism.

Last week at I attended LawNet, one of the leading legal technology conferences. I had a an “aha” moment about knowledge management and return on investment. 

A recurring KM question is return on investment (ROI). I have always been a fan of demonstrating the benefit of KM in quantitative terms. The “aha” moment occurred in a “peer to peer” meeting of large law firms consisting of 30+ CIOs and other senior tech managers. I posed a question to the group: how many had been asked by law firm management to justify tech investments with ROI? Not a single hand went up. Why, I thought, is it that firms invest heavily in tech without asking about the ROI yet want to prove the value of KM, even the expenditure is relatively small?

I have no answer. It reminded me that firms spend a lot on marketing, a discipline (in law firms) of roughly the same vintage as KM. I have spoken to marketing professionals at many firms and my sense is that few analyze their return on marketing dollars. In fact, I am not sure how many firms even rigorously track lead generation and new client acquisition that stem from planned marketing. One CIO with whom I spoke at LawNet told me that his firm regularly spends hundreds of thousands of dollars on marketing events and no one ever asks what the return is. Separately, my sense is that many firms open new offices with nary a thought about ROI.

In a prior post (Applying Solid Business Metrics to KM and Other Decisions) I argued that firms should be consistent in their decision making process. My experience at LawNet only emphasizes this. A firm that quantifies all its decision should apply the same standard to KM. But a firm that does not - and I suspect this includes most - should not apply one standard to KM while it applies a different one to all other investments.

For firms that do not measure ROI for other investments, I think they need to decide whether they want to do KM or not. It’s that simple. Yes it will cost money. Yes there will be benefits. Yes quantifying the benefit is hard. But that is true for most decisions. The lawyer-decision-makers at large firms need to decide how they want to practice and what will keep them competitive.

I happen to think KM makes practice better (for lawyers and their clients) and makes a firm more competitive. But if law firm managers do not believe this, they should just say so rather than couch the discussion in terms of ROI.

Legal publication The Recorder reports in Outsourcing Reaches Corporate Counsel (8/25/04) that more inhouse counsel are finding ways to use offshore labor. Separately, a recent Business Week article discusses some extraordinary security measures Indian outsourcers are taking that might allay some concerns about confidentiality and privilege. 

Here are several interesting points from the Recorder article:

One of the potential barriers I have discussed in prior posts is confidentiality. In Fortress India?, Business Week (8/16/04) discusses how Indian outsourcing companies are clamping down on security and confidentiality to address U.S. and European fears of identity theft. Measures include ID cards, prohibiting workers from taking any personal items into work spaces, shredding conversation notes, call monitoring or recording, watching workers carefully, masking sensitive data, removing any hardware from PCs that would allow downloading or copying data, and video surveillance.

All these measures are designed to prevent Indian workers from stealing data that might allow identity theft. (Editorial aside: it seems to me US operations might emulate these measures as well given the problem of identity theft stemming from within the US.) The measures described in the article are far more stringent than the security I have seen at most law firms. While these steps do not necessarily address the legal sanctions that might be required to protect client confidences (e.g., restraining orders or sanctions), in a practical sense, they would likely address confidentiality considerations that might otherwise inhibit using offshore legal services.

Last week I wrote about the possibility that Orrick might provide back-office services to other law firms. That post generated two interesting comments that question and expand on my conclusion that this could be a distraction. 

On 8/19 fellow blogger Rick Klau commented:

Ron - thanks for the pointer to this article. I recall Orrick’s announcement several years ago to move to this model, it’s interesting to see reports of its success.

Question - when you say that firms should avoid the distraction factor, what about Womble & their spin-off FirmLogic? Seems to me the gating factor for most law firms isn’t their inability to manage different service lines (and margins on some tech offerings can be just as high, and far more scalable), it’s their inability to be business-oriented in their management.

Do you agree?

I had been thinking about Rick’s question, knowing that I did not agree, but was having trouble articulating the reasons. The next comment sums up my views better than I could have said myself….

On 8/24 John Alber, the Technology Partner at Bryan Cave replied to my post and Rick’s comment:

I disagree with Rick. The business imperatives and core competencies of a technology company are very different from those of a law firm. Very, very few businesses–even the best managed businesses–are able to mix and sustain radically different business models under the same roof.

The law firms who dream of offering their “cost centers” to the world in order to reduce their overhead burden or even achieve profitability from those centers have not learned from the business histories of their clients. Turning cost centers into profit centers was all the rage in the 70s and 80s. Some companies are still licking their wounds.

Technology is best used to create an extraordinary service model within the existing business structures of law firms. Any other use undermines the core business of the firm.

In my estimation, Cisco’s law department is one of the most advanced, both with respect to management generally and to technology specifically. As the company adopts the “DuPont convergence model” in Europe, use of technology and processes will play a big role. 

In Cisco poised for move to DuPont legal model, TheLawyer.com reports that Cisco will consolidate much of its routine UK legal work in one firm, following in the footsteps of a similar effort in Italy. Cisco reportedly wants to pay a single, fixed fee and “other key criteria are international capability and innovative use of technology and process engineering to increase efficiency and reduce costs. ”

I have heard Cisco GC Mark Chandler speak about technology in his law department and am impressed. I suspect Cisco will be rather demanding on the tech front. If other big corporate clients take the same approach, it will inevitably cause law firms to increase the attention they pay to technology and to best practices. It is this type of client pressure that will most likely drive future changes in how law firms think about and use tech. It will be interesting to see if there are future reports about the outcome here, especially since the UK firms are, for the most part, ahead of US firms in thinking about tech and process.

I have written previously about Orrick’s centralized “Global Operations Center” ("GOC") in Wheeling, WV. The Aug/Sep 2004 issue of Law Firm, Inc. has a good follow-up article ("Location, Location, Location") about the GOC. 

Orrick has cut annual operating expenses by $5.6 million by consolidating tech support, operations, finance, and benefits in a central facility in West Virginia. Moreover, the article reports that Orrick is considering offering support to other law firms through its GOC. Chairman and CEO Ralph Baxter says “If we can organize it in a way that provides other law firms the assurance of confidentiality and reliability that they would need, we think we’ve got something there that would be a huge benefit to firms around the country.” COO Douglas Benson qualifies this by saying that the firm would work with joint venture partners to offer such a service.

Certainly there is a market for outsourced services to law firms. For example, the same issue of the magazine reports in “Let Someone Else Do IT” that 130-lawyer firm Herrik Feinstein has outsourced its technology support to Union Square Technology Group. Providing GOC services to other firms would presumably offer Orrick several benefits: incremental revenue, lower unit costs for technology (because of higher volumes), and external forces that instill a disciplined approach to running its operations. But there are potential disadvantages as well: distraction from the core business of law and putting the needs of paying customers ahead of the firm’s own needs.

I applaud Orrick for continuing to think innovatively but on balance, believe that the distraction-factor of re-selling internal services outweighs the potential benefits. I think the firm would obtain greater benefit by devoting time and energy it might spend on selling GOC service to a potentially more lucrative purpose - creative applications of technology and processes to further differentiate and elevate the firm’s competitive position. It’s hard to beat the profit margin of law practice and I think that any speculative or unusual investment a firm makes should be focused on supporting and growing core client service with its traditional margin rather than on an ancillary business that would have no impact on clients and likely carry a lower margin than fee-paying legal work.

It’s unusual for me to focus on hardware, but I’ve found a relatively inexpensive device - the SmartDisk Firefly, an external hard drive - that I think is a productivity booster for work on the road and for back ups. 

PCs typically no longer come with floppy drives. A common way to move files among machines now is with a “USB memory stick.” These are key-chain size devices that plug into a USB drive and typically hold 128meg or 256 meg of data. They work on almost any reasonably current and standard PC. The Firefly, in contrast, is about the size of a deck of cards and weighs only a few ounces. But it holds 20 gigabytes of data and also plugs into a USB port. It does not require a separate power supply.

I bought one about four weeks ago and find that is is very helpful for two reasons. First, I just returned from vacation. I was able to travel with all of my data files. This meant I could access any file I needed from any computer with a USB port. I found this handy, especially since I traveled with a friend who was carrying a computer that I could use. Also, when I checked e-mail at an Internet cafe, I could download files and then review on my friend’s computer at leisure. Second, when at home, I will back-up to the Firefly. I’m already a bit of a nut about making back-ups. I use a web service for nightly back-ups and periodically burn files to CD (and rotate a CD to off-site storage). With the Firefly, I will probably burn CDs less frequently, which saves time since copying to it is much faster than burning a CD.

For lawyers at large firms, I suspect the benefits are not that great. Most firms offer good remote access so the need to travel with large quantities of data is not great. Also, most large firms store files in a document management system, which means they are backed-up centrally. But a lawyer who does not want to carry a notebook and who s travels to a location with a computer but limited net connectivity might use a Firefly to have large quantities of files available.

Of course, the advent of inexpensive devices like this will have an impact on e-discovery. Litigators will need to consider yet one more place to seek out files in discovery.

Separately, if anyone can recommend good synchronization software, please comment.

Blogger and lawyer Matt Honman has a regular feature in which he asks five experts to provide five answers to a single question. He recently asked “What five new technologies should all lawyers incorpoate into their practices, but probably won’t?" 

The five replies are interesting reading as a group, ranging from general issues to some very specific suggestions. For mine, click here.

The list of the five experts is:

Jeff Beard - Attorney and Legal Services IT Manager with Caterpillar, Inc. Jeff blogs at LawTech Guru, and is a frequent national author and presenter on legal technology and practice management topics.

Ron Friedmann - Lawyer and legal technology expert. He is the founder of Prism Legal Consulting, Inc. and blogs about “Strategic Legal Technology” here.

Kevin Heller - Attorney and author of the Tech Law Advisor and Kevin Esq. weblogs. Kevin also is a contributor to the The Blawg Channel.

Jerry Lawson - Author of The Complete Internet Handbook for Lawyers and blogger extraordinaire, authoring or contributing to eLawyer Blog, IECJournal.org, Fedlawyerguy.org, Chesslinks Worldwide, and the Netlawblog and Netlawtools sites.

Dennis Kennedy - Attorney and legal technologist. Dennis is a prolific writer and speaker. Dennis blogs at the self-titled Dennis Kennedy Blog, and is one of the founding members of The Blawg Channel.

Taxonomies are an integral element of many large law firms’ knowledge management programs. But building, maintaining, and using a taxonomy can be hard. 

In my recent post on Developments in Full Text Searching, I cited Sharon Flank, a computational linguist, of DataStrategy. Sharon has just released a white paper, Why Taxonomies are Doomed (PDF), that is worth reading. In it, she raises many of the issues that can make taxonomies troublesome.

I don’t necessarily agree with all her conclusions, especially with respect to the legal domain, but the issues she raises are certainly worth considering. My sense is that most large law firms do find taxonomies useful. The debate seems less one of “taxonomy or not” than one of “how deep should the taxonomy be.”

I have seen firms all over the spectrum on this latter point, some with very deep and complex taxonomies with hundreds of entries nested 5 or 6 levels deep, some with only a few tens of nodes in two levels. Partly for the reasons Sharon covers, I tend to lean toward keeping taxonomies simple. But I ultimately view this as an empirical question; the answer for any give firm will depend on its practices, its view of the world, how lawyers use PCs, the number of dedicated KM professionals, and a host of other factors.

One point that Sharon makes that seems especially apt for law firms is the importance of training users on how to search properly. A relatively small investment in the mechanics of searching can have a big pay-off. I recently had the chance to visit with a large firm where I was suprised to see that lawyers really understood how to use wild cards and Boolean techniques to find material of interest. One might think that is the norm, but in my overall experience, more lawyers need to know these techniques. If lawyers don’t know how to search, it’s not obvious to me that a sophisticated taxonomy will help them all that much.

LawNet recently published an e-billing survey, which is well-done and worth reading. It reminds me that client focus on e-billing is misplaced.  

If general counsels want to reduce outside counsel costs, they need to talk about the proverbial elephant in the room. The invisible elephant is how lawyers work. Costs are high because of how lawyers work, not how they bill for that work.

E-billing may save on administrative costs but misses the main point. Now watch out - here comes a mixed and mangled metaphor - e-billing is really just the elephant’s dung heap. Push around the dung, position it more neatly, maybe even pick a bit off the pile, and presto, the problem is gone. But it’s not; the elephant remains with an unending new supply.

To really lower costs, focus on how the dung gets there. Put that elephant on a diet by making lawyers work more efficiently and effectively. I have written about adopting best practices for lawyers and believe they could significantly reduce costs (for example, the use of checklists).

The white paper shows that e-billing adds costs and creates hassles for law firms. I have yet to see empirical evidence that client savings from e-billing exceed the extra costs incurred by firms. (The economist in me suspects that e-billing may add to rather than save total system cost.) I do believe, however, that if clients analyzed e-billing data cross-sectionally and longitudinally, they might uncover ways of reducing costs. What I hear anecdotally, however, suggests that few clients do so.

And if general counsels did this analysis, it would ultimately lead to adjustments in how lawyers actually work, not just changes in how they bill. So if clients are not going to analyze e-billing data, then why not just start with how lawyers work? Why not examine the actual means of practice rather than the small - or not so small heaps - that billing leaves behind?

Where are the bold GCs willing to talk about the elephant and take it head-on? I welcome being proven wrong: if anyone knows of published works or even anecdotes of significant and on-going net system savings from e-billing, please comment.