Strategic Legal Technology

The Wall Street Journal reports on 9/28/05 on the trend toward sending aspects of legal work offshore. 

The lead sentence of Legal Services Enter Outsourcing Domain (page B1) is “It happened with tech support, financial services and catalog order-taking. Now, a growing number of U.S. and British companies as well as law firms are outsourcing legal work to India.” For the most part, the article reports on companies and activities I have previously reported on offshoring.

The New York Times noted the trend in March 2004 (see here). In my experience in technology and management consulting (which includes the grocery industry), once the NYT and WSJ cover emerging topics from particular economic sectors, that’s a sign that the topic has move from “emerging trend” to “it’s actually happening.”

The Washington Times reports on several instances of law firms and departments outsourcing work overseas. 

Spotted on Robert Ambrogi’s Lawsites is the Washington Times article Law firms send case work overseas to boost efficiency. It reports that Venable uses Indian companies to draft patents; “[m]ajor corporations that outsource legal work include United Technologies Corp., Oracle Corp. and Bayer AG, whose officials did not return calls and e-mails for comment.” I would love to know how the newspaper determined which companies outsource.

Joy London of excited utterances and I maintain a list of Outsourced Legal Services.

A group of legal knowledge management professionals recently met by conference call to discuss the need for and interest in forming a national/international group focused specifically on legal KM. 

We agreed that a national group would be useful. Those on the call, including participants from law and consulting firms in the US and Canada, decided to seek feedback and gauge interest from a larger segment of KM professionals before taking the next steps at organization. Please take a few moments to complete this survey and provide your opinion. If, when you click this link, you get a screen saying you need to enable cookies, then copy and paste the following link directly into a browser address bar and it should work: www.surveymonkey.com/s.asp?u=827061357009.

Assuming a group does form, as seems likely, I will post information about it in the future.

I recently posted that SAP appears to be entering the legal market. John Alber, technology partner at Bryan Cave and author of the outstanding article Delivering Actionable Information To Front-Line Lawyers, thinks SAP or any other Enterprise Resource Planning (ERP) system for law firms is overkill. 

“More than one large law firm has now adopted an ERP. I’m not sure how these sales happened–who told whom what, but I seriously question whether these firms looked at the alternatives. Had they done so, I doubt they would have chosen an ERP. First, these firms have no idea how difficult and culturally jarring adopting an ERP can be. IT literature and lore is rife with horror tales of ERP implementations gone bad. They can be managed to a successful completion, but doing so requires looking at your business from the ground up and being prepared to change some fundamentals to make the ERP work. It’s one thing for an ISO 9000 company to undertake such disruption. It’s quite another for a law firm to do so. I don’t know any law firm that has the systems and processes in place to make an ERP work.

A decade ago, you might have been able to make a case for trying an ERP, because there were no alternatives. Nowadays, with the advent of powerful and relatively easy to implement data warehousing tools, I don’t see any reason for a law firm to adopt an ERP. It is far better to rationalize and smooth the data flows from existing applications (accounting, HR, conflicts, new matters, etc.) and then pull them into a warehouse. Modern data warehouses can integrate data from all enterprise applications and afford far more flexibility than an ERP, all at a minute fraction of the cost of an ERP. Our own financial dashboard is a great example of that. Front line lawyers get key performance information about their clients and matters presented in a way they can understand. We didn’t have to spend millions to get that, quite the contrary. Moreover, we now have a powerful and very flexible warehouse that we can use for all kinds of purposes.”

By the way, John took about a decade off from law practice to be CEO of a transportation software company, so he has pretty good perspective on business, law, and systems.

The September Corporate Legal Times features The CLT Ten: 10 innovative law department practices. One-half involve technology. 

Here is a brief overview of the five innovations that use technology:
1. Bidding Wars: GE’s uses online auctions (see my prior post).
2. Staying on Track: For years, Countrywide Financial lawyers have monitored legal developments in their practices. The department recently created the New Legal Requirements Tracking Database to track all updates. NLRTD also provides “Countrywide with a complete, step-by-step account of the entire process of complying with new laws and regulations.”
3. Operation Cobalt is a Chevron initiative to manage litigation and push “ownership” of cases to business units. It will soon include an extranet that supports almost all aspects of the litigation process.
4. The Miracle Workers describes how Rib-X Pharmaceuticals wanted to make smarter decisions about inventions for which to seek patents. The law department created a financial model using Excel.
5. Mirco-Management: Microsoft’s law department created custom software (based on MS SharePoint and MS InfoPath) to track small projects that were not big enough to be entered into the law department’s matter management system.

I draw a couple of conclusions from this. One is that law departments are becoming more sophisticated in their use of technology. Another is that law departments don’t have to create new software from scratch. With the exception of Microsoft, the other innovators appear to have used off-the-shelf software (e.g., auctions, Excel) or created applications using a common platform (e.g., Notes).

I previously suggested a Zagat-type service to rate lawyers. A new service may just do so. 

Lawdragon ranks lawyers via a searchable web database and print publication. The home page explains:

“We’ve put to work our 100 years of experience reporting on lawyers to help you find the perfect lawyer to solve your legal problem, large or small. We rank attorneys exclusively based on your evaluations and our independent research. We are supported by the lawyers who pay to list additional information about their services; however, a lawyer does not have to pay money to be listed here.”

A 50+ page listing of the top 500 lawyers in the US (PDF) is available as well; the introduction explains that “to compile this definitive list, we interviewed thousands of people: corporate attorneys, litigators, judges, in-house counsel, prosecutors, law school professors, pro-bono practitioners, law firm managers, and legal recruiters — to name just a few.”

It will be interesting to see the market uptake and impact. I still believe what I wrote in my last post about lawyer ratings: “Arming GCs with outside counsel ratings would bring discipline to the market. Discipline would likely, over time, cause firms and lawyers to adopt more efficient ways of working. And that would lead to viewing technology in a different light, shifting it from mere tool to competitive necessity and differentiator.”

Two recent articles remind me why US law firms should focus their knowledge management efforts on automated approaches. 

The September Harvard Business Review reports in Create Colleagues, Not Competitors on knowledge sharing in executive recruiting firms. Researchers found that e-mail traffic (and therefore presumably knowledge sharing) among professionals is much higher where compensation incentives focus on group rather than individual performance.

My friend Eric Mankin, a business innovation expert, in his weekly update titled Forced to Change, writes about the challenge of changing behavior. He notes that even when individuals face serious health threats, the chances are 9 to 1 against the person changing dangerous behaviors. Similarly, organizations typically change only in the face of powerful external motivators such as supply disruptions, new regulations, or new competitors.

So change is hard and behavior follows external incentives. Law firms should therefore not expect lawyers will change how they work to share knowledge absent significant changes in compensation and difficult change management programs.

Consequently, automated solutions that tap existing information to share and re-use knowledge are much easier to execute than approaches that assume lawyers will work differently. For example, I recently affiliated with Practice Technologies, developer of RealPractice, a work product retrieval solution that makes it easy for lawyers to find useful work product from all other lawyers in the firm. The only behavioral change is learning to use a very simple, Google-like interface.

Other products that help automate KM include West km, LexisNexis Total Search, and enterprise search products such as Recommind and Autonomy. Except for firms willing to engage in big organizational change and/or hire many practice support lawyers or staff who manually collect and catalog information, automated solutions like these or RealPractice seem to be the logical choice.

A new article reports on the importance of technology to the Cisco law department and its outside counsel. 

The Cisco Way in the September ABA Journal reports how the Cisco law department uses “the Internet and technology to improve its in-house legal practice—and any law firm that wants its business will have to do the same.” (Article spotted at Between Lawyers).

The article describes several innovative technologies Cisco has developed for its own law department though reports that the company is somewhat vague about the types of technologies it expects outside counsel to deploy. But with 70% of Cisco’s $75 million budget for outside counsel going to fixed fees, it’s no surprise outside counsel feel pressure to find technology to reduce costs, especially since Cisco also expects fees to drop over time.

For anyone interested in the likely future of not just legal technology but the legal market, this is a must read. It also reinforces the point that the billable hour eliminates motivation to become more efficient.

I have written before about GE using auctions to buy legal services. Corporate Legal Times reports GE recently used an online auction to choose its final firms. 

Bidding Wars (Sept 2005) reports that GE used 500 firms last year. After a cut based on quality, and then one based on RFPs, the final cut was an online auction to get the “best rates” from the finalists. (Consultant Rees Morrison questions the idea of best rate in his blog post.)

GE also appears to be thinking about developing best practices. The article reports that “in-house lawyers and preferred M&A counsel gathered in July to discuss how GE’s deal process could be improved and made more consistent.”

As I suggest in prior posts, price pressure should drive even top law firms to think more creatively about how they can deploy legal technology to deliver high quality results at lower cost.

SAP, the enterprise software company, has an unusual ad in the current American Lawyer magazine - a shot across the bow for law firm financial software vendors in my opinion 

The ad is an 8-page essay themed with a Hegelian synthesis of law practice and law business via flexible and integrated financial software. (Aside: good thing I read Marx in college.) It suggests that existing financial systems cannot run increasingly large and global law firms. This is not SAP’s first foray into legal; last December I wrote that Howrey adopted SAP.

If I were Elite, Aderant, Redwood Analytics, Whitehall, or any other law firm financial software supplier, I would read this essay and start thinking about SAP as a serious competitor. It’s hard to imagine SAP running this ad in isolation, meaning the company is likely to continue pushing in legal. Law firm managers should welcome the possibility of more choice.

I frequently suggest that law firms make knowledge management client-facing. There is an easy but overlooked way to do so. 

Secondment: “the detachment of a person from their regular organization for temporary assignment elsewhere.” Some law firms second lawyers to clients. Why not second a senior KM professional to a client?

Law departments would gain a lot. Few have deep KM resources and a law firm expert on-site would be a way to learn a lot fast. If the department lacks a KM plan, the visitor would assess needs and develop a plan. If a plan is in place, he or she would help execute it. (Joy London at excited utterances has already pointed out the value of interim KM and project management appointments.)

Firms would also benefit. They would see first-hand what firm content and KM services they could deliver that would actually be useful. Moreover, the seconded person would meet many in-house lawyers. Because KM cuts across practices and lines of business, a KM professional might well return with more relationships than a seconded lawyer.

How do you do this if you don’t have a KM person to spare? Firms can view hiring an extra KM person as a marketing expense. I suspect the return would be much higher than for many other marketing activities. Marketing is all about getting to know your client and meeting their needs; how better to get close to your clients than sending an emissary?

A leading electronic evidence discovery vendor may be changing ownership structure. 

The August 26th Transaction Granted Early Termination published by the FTC (PDF) lists private equity investor Welsh, Carson, Anderson & Stowe, e-discovery vendor Electronic Evidence Discovery Inc., and EED founder and CEO John Jesson.

Under the Hart Scott Rodino act, parties to certain proposed transactions must file a “Hart Scott Rodino” notice and provide the government an opportunity to review the transaction for potential antitrust problems. The FTC web site states that the agency grants “a request for ‘early termination’ … only after compliance with the rules and if both the Federal Trade Commission and Department of Justice Antitrust Division have completed their review and determined not to take any enforcement action during the waiting period.”

I am neither a dealmaker nor merger expert, but I suspect this suggests a transaction between Welsh Carson and EED is imminent. Welsh Carson says that it “believes that its value-added investment strategy is best executed when it acquires operational or board control of companies.”