Strategic Legal Technology

A relatively new discovery document review developer has been acquired. 

Anacomp announced it has acquired CaseLogistix. From the press release: “Anacomp Inc. (OTC: ANCPA), a leader in document and business process management solutions, today announced it has completed the acquisition of CaseLogistix Inc., a leading provider of evidence and litigation management solutions. CaseLogistix market leading solutions allow legal teams to quickly collect, review and produce any amount and type of discovery information.”

Law firms should understand the difference between customer relationship management (CRM) and relationship discovery. 

CRM is hard. Lawyers must enter and share data. Few large law firms use it effectively. BigLaw should ask where the value in relationships lie.

Much value lies in tapping relationships for business development and client service. Figuring out, however, who knows whom, is hard. CRM is neither necessary nor sufficient to identify connections. What I call “enterprise relationship discovery” software (ERD) solves this problem. And lawyers need not input data for it to work.

ERD easily leads rainmakers and marketers to connections their lawyers and staff have. Savvy lawyers use this not only for business development but also for making connections for their existing clients. ERD works by analyzing e-mail traffic and contact; it has mechanisms to protect relationship owners.

Rich Rifkin, formerly of Hummingbird, now with Contact Networks, recently demoed his company’s flagship ERD product. It looks good. Firms wanting to tap their own relationship assets should consider ERD. (I cannot comment on alternative products; I have no relationship with Contact Networks.)

ERD is close to “something for nothing.” Sure, it does cost to buy the software and users do need a bit of training. But this effort is much less than what’s required for many knowledge management and all CRM projects. With ERD, lawyers don’t have to change what they do - this avoids the failure point in many law firm initiatives.

[ERD should not be confused with social network analysis (SNA). The latter is typically a more customized analysis designed to understand your own organization at a deeper level.]

One of my new productivity tools for 2007 is a VOIP business phone. This post will interest readers in small offices or in their personal capacity more than those working in large organizations. 

[To learn more about VOIP, click the more link below.]

I recently converted my business phone line from a traditional copper phone line to Sunrocket brand VOIP. The two big benefits are easier management of voice communication and lower cost.

Sunrocket offers a very simple web interface to manage the phone. Examples:

• Forward with one mouse click. (With my local phone service, forwarding is very clunky.)
• Receive a text message and/or e-mail alert of new voice mail messages.
• Listen to voice mail on my PC, in a web interface. This is easier than listening by phone because all the controls (pause, replay, save, delete) are obvious - no arbitrary numbers to remember. Separately, I recently traveled to Europe where listening on the web was much easier than finding an easy and inexpensive way to call my business line.
• Review call logs (missed, incoming, and outgoing).
• Control the number of rings before callers get voice mail.
• Pick up messages by phone from a pre-determined phone number (in my case, my mobile) without having to punch in codes.

These and other great features are typically unavailable on traditional phones. Plus, Sunrocket costs a fraction of what I had been paying. (I pay about $200/year, including domestic and Canada long distance. Overseas calls are less than one-half the cost I had been paying.)

As a legal technology consultant, I work in a small office but serve big organizations. So I see consumer, small business, and enterprise systems. The typical large LED display on an enterprise VOIP handset does not, in my opinion, effectively inform users how to use the phone. Granted I’ve not had training on these systems. Learning Sunrocket took about five minutes – no training required. It seems clear to me that the future of managing the phone is on the computer screen, not the handset.

Update 7/19/07: Sunrocket as ceased operation. See my latest Sunrocket blog post of 7/19/07. I’m still a fan of VOIP and have signed up for Packet8 service.

What is VOIP? (more…)

The Future Of Legal Outsourcing: What Every Law Firm And Corporate Legal Department Needs To Know. That’s the topic of a panel discussion at the ALM Outsourcing Conference 515pm session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.

This is the last post of the day. Hope that readers find this helpful. I realize the format is not great but that’s a price for being real time]

Panelists
- Jason Brennan, VP, Legal Services, OfficeTiger
- John Croft, President, Global Sales and Marketing, Integreon
- Bradford W. Hildebrandt, Chairman/Founder, Hildebrandt International
- Peter S. Pantaleo, Partner, DLA Piper US LLP

1. Where is LPO going?
a. John Croft
i. Trend is unstoppable. Support is easier to understand. At Integreon, the LPO part has huge momentum. For example, at a top five UK firm…. The litigation partner at the law firm talked to his COO about a huge litigation matter for a long-standing client. He said I am competing for this client’s work in the open market. I have heard about offshore document review. While we could do this internally, I need to add value for this client. Our value is to win the case, we can let someone else do the document review. This is a firm that had not outsourced document review that is now doing so.
b. Jason Brennan
i. Firms are focusing on boosting revenue and reducing cost. They are thinking about new services to clients, enabling lawyers to work on higher value work
c. Brad Hildebrandt
i. The corporate law department is more apt to outsource substantive legal work. They look to their own corporations and Wall Street and are comfortable. Law firms are less likely to rush to outsource. The back offices of law firms are not as big a relative cost as they are for corporations. Not clear that law firms want to hassle with transition for savings. On the other hand, costs _are_ going up faster than revenues, so there are some pressures.
d. Peter Pantaleo
i. I founded an outsourcing company (CBF) five years ago that Integreon purchased. I am no longer involved. I am managing partner of NYC office and I am on executive committee. Law firms do not think that outsourcing their primary way of making a living is a good idea. There are 130,000 lawyers in NLJ 250. That is 200 millions hours that they have to bill. Billing them in Bangalore does not help them.
ii. That said, DuPont and GE, known as efficient consumers of legal services, can move commodity work offshore. Firms like mine do not need to intermediate this for them. But the first time a GE or DuPont vendor makes a discovery mistake a la Morgan Stanley, they will pull back.
iii. It makes more sense for law firms to focus on expense reduction. Law firms manage the back office very poorly. Firms today outsource backoffice work to Merrill or Bowne or others because they do not want headache of managing the functions. If you look at secretaries, they cost $90k/year. It costs my firm about $50/hour for each secretary. We need to make them more productive. Use outsourcing to rationalize that expense. It was hard at DLA to make the transition to moving work to CBF in Fargo.
iv. There is no viable business model for law firms to outsource legal work.
2. If outsourcers move up the value chain via law departments, will firms and vendors clash?
a. Brad - Law firms are turning work away now as it is. Firms should work with clients to figure out what work to send offshore. Points out the moderator firm Milbank is recruiting lawyers in Sydney. Firms have more work that they can handle
b. Jason - Firms are already using contract lawyers extensively.
c. Peter - It does not take a big percent of the market for outsourcers to thrive. We use contract lawyers on document reviews. Privilege and responsiveness review _should_ go to India.
d. John - it may not make sense to outsource every matter, but document review is ideal task to offshore. Young lawyers do not want to do this work anyone.
3. Will mid-tier but still high quality firms face different pressures? The very top firms may be able to avoid offshoring, but can smaller firms outside of major cities? Will firms band together for share services?
a. John- Orrick is stand alone example. Brad - other firms will not buy from Wheeling center run by Orrick
b. Brad - in event of legal market down turn, offshore work will be pulled back
4. Peter - clients spend huge sums on document review. It’s possible that this will go away in five years via technology. Within five years, we will be able to automate document review. This will eliminate a lot of commodity lawyer work.
a. We cannot increase productivity (utilization) much more - lawyers cannot bill more hours
b. We cannot increase rates that much more - we are reaching the limit
c. We cannot improve realization when we ask associates to work like maniacs
d. Increasing leverage is hard absent UK model of making lawyers retire at 55
e. The only lever is expenses - outsourcing can move it.
i. DLA has 36 conflicts clerks in the US. It still takes a week to open a matter. We can do better on leveraging this type of expense down.
ii. LPO talk may matter to clients but it’s not to law firms
iii. We retain Brad and he tells us every year to cut our expenses
5. Brad - In corporations, the internal clients want to see their lawyers. With SOX, they are risk averse and want lawyers nearby
6. What will be different in one year? In five years?
a. John - more of the same. Law firm support service is a big growth area as is corporate GC use of offshore lawyers
b. Brad - law firms will continue to seek ways to control expenses, onshore and offshore. Substantive work is not going to move
c. Peter - clients will beat us up on costs. We will see stratified law firms. Selling to law firms takes forever. COOs never get fired for saying no. This will slow down expense control
d. Jason - in one year, there will be aggressive offshoring but it will swing back five years out

Outsourcing Return On Investment: the Myths, the Methods and the Means. That’s the topic of a panel discussion at the ALM Outsourcing Conference 315pm session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Panelists
a. Moderator: John Croft, President, Integreon
b. Mike Bryant, CEO, Integreon North America
c. Chris Bull, COO, Osborne Clark (UK)
d. Christian Cooley, CFO, Sidley Austin
2. ROI Case Study: Internal Integreon processes for document production
a. Typically, doing ROI starts with labor cost arbitrage opportunity
b. A law firm customer (disguised) case study
c. Look first at “work ready” hours - how many hours per year are staff available and what’s the cost
1) For experienced legal secretaries, if you assume 100% utilization and fully loaded salary of $85k, then hourly cost is$50. But if you make more realistic assumption of productive time (utilization) of 80%, hourly rate is over $62/hour.
d. Law firms have limited ways to manage these admin expenses.
i. Central production pool is one way to manage document production. A lot of doc production occurs during non-core business hours when secretaries are not available (and if they are, they cost overtime). That is the business requirement for central pool.
ii. Central document production facilities are expensive
1) A lot of staff
2) Expensive real estate
e. At the firm, overtime cost was $5mil, or 0.50% of gross revenue. The firm wanted to cut this in half over a one year period.
i. This saving would fund the outsourced document production service
f. What savings are possible by re-sizing central facilities and outsourcing some of the work
i. Firm wanted to cut central staff by 20 people
ii. Move secretarial ratio from 2.50 to 2.75 (a savings of $3.5 mil/year)
g. Firm looked at breakeven analysis if it could charge back some Integreon service to clients (shift some overhead that clients might pay for as pass through expense). For example, some of the “admin” work turned out to be litigation support traditionally billed to clients.
h. All the potential savings and revenue made for a an annual savings of almost $4mil.
i. Actual savings turned out to be about $5mil in first year - subsequent years yielded another $3mil for a total of $8mil.
j. This firm did not lay off anyone - all staff savings occurred though natural attrition and by not hiring as much as they would have otherwise
k. The savings are a combination of
i. Substituting low cost for high cost resources
ii. Re-engineering processes (that could occur independently of outsourcing but often does not)
3. Osborn Clark outsourcing experience
a. Services outsourced
i. Document services
ii. Catering
iii. IT network support and help desk
iv. Training
v. Research and analysis (mainly market and business research, not legal)
b. Have now identified 100 jobs in the firm (cost of $8mil) that is non-core and could be sourced externally. Considering options now.
c. ROI
i. Cost elements of doing work with full time employees
1) Direct and allocated staff costs, bonus, benefits
2) Overtime
3) Uniforms, expenses, travel
4) Occupancy
5) Training
6) Recruitment (rule of thumb: one year salary if you factor in all the costs)
ii. Make sure you understand the cost elements of outsourcing
1) Open book costing - understand all elements
2) Transition from internal to outsourced - be able to justify any change to partners
3) Seek forward looking efficiencies - guarantees for productivity improvements or additional cost savings
4) Dealing with early termination
5) Clarify or cap annual increases
6) Seek procurement from providers if they have bigger scale - but what is the extra cost of doing so
7) Cost recovery potential
iii. Intangibles
1) Back-up and substitution (what does it cost for back-up service)
2) Flexibility (build in short-term variability into contract; estimate savings based on both peak and trough loads)
3) Quality - define by SLA, measure time savings, increased availability
4) Value add - figure out extra value and see if you can value ("value account")
a) We ended up willing to pay a lot for elements we did not initially understand to be valuable
b) In law practice, “value account” can be access to information, secondments, or other “extras” that law firms can provide law departments. In UK, firms’ fees can be reduced if these extras are not delivered
5) Track impact of outsourcing on client acquisition and retention. May be hard to find but worth looking for
4. Sidley Austin, Summary of Outsourced Services
a. Office services
i. Copying
ii. Purchase and delivery of paper to copiers and printers
iii. Mailroom
iv. Supplies
v. Messenger, courier, delivery
vi. Facilities assistance (office moves, room set ups)
b. Word processing
i. Word processing
ii. Proofreading
iii. Desktop publishing
iv. Fax services
c. Benefits
i. Some financial
ii. Some is avoiding headaches
iii. Providing higher touch services to over-worked lawyers
d. Ability to arbitrage labor costs now is better than a few years ago
5. What happens after the immediate benefit of cost arbitrage is recognized? What’s next?
a. Chris Bull - experience so far is disappointing
b. From provider perspective, there is a lot of upfront cost to learn a customer’s work processes and cultures. Integreon tells clients that initially, it will need more people, but over time, fewer people will be required with experience, so savings can increase.

Contracting and Legal Issues: Navigating the Negotiation Process. That’s the topic of a presentation by Janet Parkhurst, Esq. at the ALM Outsourcing Conference 215pm session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Negotiation process
a. “Boots to the ground and nose to the grindstone”
b. Make sure you have people on the ground in offshore locations
c. Whoever is negotiating the deal needs to do it full time
d. Be prepared for cultural gaps - both between service providers and customers and between onshore and offshore entities
e. It’s always close of business somewhere. Time differences can be advantage in service delivery, but when negotiating, the time zones are hard to manage. Who has to be up in the middle of the night?
2. Deal structure
a. Competitive bidding or soles source. Usually deals start as competitive and then down select to one provider late in negotiation process.
b. Options include Master Service Agreement (MSA) with Statements of Work (SOW), line of credit or facility approach (make service available)
c. If you outsource multiple types of services, you may want to select multiple vendors, for expertise and for risk mitigation
d. Timing is a key consideration. Complexity and short time frame are inconsistent. Avoid creating false deadlines, which can lead to signing in haste
3. Key contract terms
a. Intro: Agreements (any, including LPO) typically are 50 to 80 pages. Deals are complex. Following are terms of greatest concern
   b. Scope of service
i. Know what you do today (your current process)
ii. If you outsource document production, you need to know how you do it now, internally.
iii. Involve subject matter experts (SME) in the service being negotiated
iv. You must include details in SOW. This helps avoid disputes over what service provider must do.
v. “Sweep provision” reflects services not specifically mentioned but necessary to deliver the services specifically mentioned
   c. Performance management
i. Post signing, this is the most critical. Manage expectations on both sides
ii. Service levels
1) Define and align customer expectations. Since LPO is immature, defining service levels is still hard (at least relative to IT). One approach is customer satisfaction levels (by survey) but this may be too subjective. It is better to have more objective measures of success.
2) Define supplier expectations. (Relates to Service Level Agreement, SLA)
3) Create remedies
4) SLA determines and defines success. Don’t expect platinum service if you are only paying for silver. This is sometimes a bitter pill for customers to swallow.
5) SLA and price relate
6) Remain flexible. SLAs may need to improve over time.
   d. Benchmarking
1) Relates to SLA - a provision that lets customer keep up with competing customer organizations and with pricing of other providers. Keep agreement aligned with market. LPO market is immature so benchmarking now is hard. Not clear if there are good benchmarks available.
   e. Governance
1) Oversight is required, not optional. Lawyers must be involved in managing LPO relations, especially where substantive legal w
ork is involved.
2) Spell out which issues will be decide through a formal governance process. But consider what you as customer really want to be involved in. Be realistic about the level of scrutiny and approval you really want.
3) Avoid clauses that reference future “mutual agreement.” Know what happens if you fail to mutually agree
   f. Insourcing and Re-sourcing
1) The right to pull work back in internally or to use a different provider helps manage the performance. Make this right granular (
meaning it does not trigger termination) so you can pick and choose what you change. For this right, expect the provider to ask for price adjustments.
2) Make sure that exclusivity, pricing, and extraordinary event provisions tie in properly
3) Distinguish this right from rights to down- or up-size based on change in business.
   g. Staffing considerations
1) More important in LPO than other outsourcing agreements because of ethical considerations. Law firms must have controls to avoid aiding the unauthorized practice of law (UPL), to protect confidences, and to avoid conflicts.
2) Terms that can help with this include employee background and reference checks
3) Training and appropriate certifications should be contractually required
4) Make conflicts and ongoing obligation, down to individuals at outsourcer. Maintain right to re-check conflicts regularly.
5) Consider service levels re turnover, which is especially important where measuring outputs may be hard.
   h. Data protection and confidentiality
1) Rules vary by industry and geography. Contract should comply with rules of the most restrictive jurisdiction
2) Contract should allow amendment to reflect changes in rules. Specify who bears costs.
3) Be prepared for a breach - have terms that specify who is in charge of and how to mitigate the damage
   i. Proprietary rights
1) Specify who owns any IP created. Especially an issue in IT, but also applies to lawyer work product. Consider local and domestic law. Indian law, for example, requires that employees assign rights. Be sure contract requires provider to obtain these.
2) Licenses to technology used by supplier
   j. Pricing
1) This is a more a business than legal issue
2) Allow for increases or decreases in amount of services used
3) Who bears cost if extra hours are required - contract may specify premiums for off-hour work
4) Which locale’s COLA (cost of living adjustment) applies
5) Explicitly address currency exchange rate risks
6) Be aware of tax holidays that may expire or new taxes - who pays?
   k. Force majeure
1) Read the events and know the geography. Find out which force majeure events have occurred in the past.
2) Include provisions for prompt resumption and/or substitute service
3) Business continuity is ideal - but can you afford it?
   l. Term and termination
1) Length of term affects other provisions. For example, shorter term may mean fewer benchmarks.
2) In practice, agreements rarely terminate; more often they are renewed. Termination for problems is rare
3) Termination fees are about leverage in the event of problems. You may not get them, but they help in negotiations
4) Understand the implications of termination - how easy is it to get out, what is the wind-down process, what are the costs (stated and internal costs not part of contract) and who bears them
   m. 50 Ways to Leave Your Vendor
1) Cause, convenience
2) Termination assistance (specify length of time and scope), even if for convenience
3) Cooperation with successor
4) Employee re-hire rights
   n. Dispute resolution
1) It is fairly common to invoke dispute resolution process, largely because relationships ARE long term
2) Consider choice of law and venue (or arbitration)
   o. Limitation on liability
1) Providers attempt to disclaim liabilities and there are typically caps on liability
2) Customer may want caps and exceptions (e.g., for confidentiality breach or gross negligence)
3) Make sure performance credits are not viewed as liquidated damages. They are meant as disincentive for bad performance
4) Third party beneficiaries - understand potential rights of or benefits to clients
4. Avoiding pitfalls
a. Manage the agreement
b. Avoid honeymoon - watch from outset
c. Plan for the unexpected such as regulatory changes, scope adjustments.
d. Align expectations of both sides, including end users of customers
e. Know how to bring work back in house.

The Next Generation of Outsourcing: Offshoring High-Value Legal Services To India. That’s the topic of a panel discussion at the ALM Outsourcing Conference 1115am session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Panelists
a. Moderator: David Perla, Co-Chief Executive Officer, Pangea3 LLC
b. Sandip K. Berri, Senior Vice President, General Counsel, Genpact
c. Janine M. Dascenzo, Managing Counsel, Legal Operations General Electric Company
d. Nancy Laben, Deputy General Counsel, Accenture
e. Ramona E. Romero, Esq., Managing Counsel, Operations and Partnering, DuPont Legal
2. Genpact
a. Was spun out from GE
b. Originally started as entity that set up the GE captive legal processing in India
c. Started with basic contracts, legislative monitoring, corporate housekeeping
d. We divided work into 3 buckets of varying levels of complexity, starting with least complex
e. Work was kept simple initially, in part because of politics
f. Customers now ask for legal outsourcing services
3. Accenture
a. Laben manages 350 lawyers around the world at Accenture
b. We initially looked for service providers. Found GE, but it was captive at the time
c. We set up our own captive center for contract review and management in Mauritius. 10 lawyers who are bilingual in English and French. They have moved up the value chain since we opened the center
d. We will repeat this model in Spanish in Buenos Aires. Also will open a center in the Philippines.
4. DuPont
a. Romero joined as a litigator. Has managed partner program for last couple of years.
b. Last year, entered into contract with Office Tiger for legal outsourcing
c. We have been outsourcing commodity legal work domestically for 10 years, with Kelly Law Registry and other providers
d. The only news for us is the offshore element
5. GE (General Electric)
a. Dascenzo joined GE a few years ago. Now is managing counsel of Global Legal Organization. 1300 lawyers worlwide; 800 in US
b. We are talked about as pioneer in legal outsourcing.
c. Early on, we outsourced via Genpact; now we have spun it out (but retain 30%)
d. We spend $3mil annually for routine legal work offshore - simple contracts, warranties, trademark management
e. Now looking at legislative monitoring, higher level corporate governance, routine compliance (anti-money laundering, prohibited person list management) via Genpact
f. WE have 65 captive lawyers (employees) who work on US patent applications. These are attorneys trained to US PTO standards and the work is supervised by properly licensed US lawyers
g. GE has not yet taken the next step to more complex legal work - others are ahead of us
6. What drives the move to consider moving legal work offshore. What work occurs offshore.
a. DuPont: cost is the biggest driver. Bulk of our spend is on litigation. We saved over $500k on $2.5mil spend in first year. These savings are measured against what cost in prior year.
i. Not all Office Tiger work has been conducted offshore. Export Control limits what can be sent offshore. Our goal is to drive as much work offshore as possible.
ii. All litigation support functions offshored also occur onshore. Export Control drives the decision. Office Tiger does conversion, objective coding, database development, initial subjective review, privilege and responsive review. This is all done under the supervision of the inhouse legal team. OT did work on a database - this work was instrumental in a damages case against one of our insurer (DuPont was plaintiff). OT worked under supervision of domestic expert.
iii. Data collection is performed internally with a custom built tool - outsourcing begins with conversion of data to other formats.
iv. In the DuPont Legal Model, working with Office Tiger follows the same pattern of other partners - a long term relation. DuPont network members refer work to one another, even where DuPont is not the client
v. Using teams in India and Philippines. I don’t see a difference in training required between onshore and offshore personnel
b. Accenture: our business changed. We had just done an IPO. On the road show (to investors), we heard that we needed consistent revenue. We grew outsourcing aspect of our business. The legal support required for outsourcing is greater. We had to expand our capabilities. We looked at increasing higher value work domestically. 85% of legal effort is negotiating outsourcing contracts. We save about $55k per person for each employee in Mauritius. Data collection is an internal function, not outsourced.
i. Training and turnover is a significant cost onshore, offshore, employees, or outsourced. We are looking at ways to outsource the training of legal personnel.
c. GE: we do not outsource work that would otherwise be done by law firms. It’s only work that would otherwise be done inhouse. $3mil savings is not that much relative to our $500mil outside counsel spend. The benefit is letting inhouse lawyers do higher value work. As we move more complex work to India - work that might now go to outside counsel - we will see a much bigger saving.
i. Long term relationships are critical. You must know who your team is. There is upfront investment in training. GE lawyers cannot just “dump” work offshore. Especially for repetitive work, absent turnover, it does become autopilot. In the context of a longer term relationships, it becomes easier to deal with doing a one-off transaction offshore.
d. Genpact: most of our employees work on a dedicated model. But in some work, non-dedicated works better. Where work may spike, to manage capacity, we look at non-dedicated personnel. Clients understand you cannot manage to demand without non-dedicated personnel.
7. What were critical success factors in making offshore? Where did offshore work and not? What drove success and failure?
a. Genpact: Success factors
i. Biggest factor is willingness of US process owners to invest in moving the work.
ii. Training is second.
iii. Ongoing communication - process owners need to be available and make offshore personnel part of the time
b. GE: Success factors
i. Upfront investment
ii. Supervision with clear lines of communication. You need a point person - onshore or offshore - whom you trust, who will make sure expectations are set and quality standards met
iii. Picking the right work to send offshore. Routine contracts have worked well; some areas of law don’t work so well offshore
c. Accenture: Success factors
i. Culture at Accenture is strong. Whether captive or 3rd party, you need to include in the culture
ii. Continuous and consistent demonstration of value, not just cost-savings. We regularly document the delivery of services more quickly (because of time zone offset). One reason we will set up in Buenos Aires and Philippines will allow around the clock operations AND two sets of eyes to review work.
d. DuPont: Success factors
i. Selecting the right partner (especially at DuPont with its partnering mode). We were looking for fit, use of Six Sigma, established expertise, range of services
ii. After narrowing candidates, we sent 3 employees to India to conduct due diligence. One of the 3 was a very senior litigator, another was our litigation support manager with strong skills, and I went as manager of partnering manager. When we came back, our team made the case for selection AND integration plan.
iii. Invest early to make sure relationship start well and things work. A lot of communication is essential early on.
8. Best Practices - what are the best practices in offshoring
a. Training sufficiently and early
b. Keeping the offshore team close through close communication - don’t ignore team once set up
c. Visit the offshore site regularly
d. Data security must be ensured
e. Commitment and persistence - need to overcome law department and outside counsel resistance without shoving process down their throats
f. Service providers must create good career paths for employees. It’s one thing to attract the best talent at outset; to keep them, you have to provide the right path
9. Choice of country
a. Accenture chose Mauritius for several reasons. Looked at 5 locations including one onshore (Cleveland). India, Canada, and one other on list. Mauritius and India were close on cost. Because one-half of our work is in Europe, we wanted similar time zone. Also, there was too much competition for talent in India at the time. Others are following us to Mauritius. WE get a lot of site visits. So we are working on keeping our employees there. Buenos Aires will give us Spanish; Philippines gives us time zone coverage for Asia and Australia
b. GE looked at quality first, though cost is always a factor. With India, there are many qualified and sharp lawyers who know common law. India was natural for us because of internal business unit (now Genpact) that did BPO in India.
c. Genpact: India attractive because of breadth of skill set beyond legal (e.g., finance, engineering, science). This is beyond common law training and English language. Indian rules keep law firms small and often family - owned. That means LPO opportunities are attractive for Indian lawyers.

Support Services Outsourcing: Understanding the Processes, Mehtodology and Lessons Learned. That’s the topic of a panel discussion at the ALM Outsourcing Conference 10am session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Panelists (full details here)
a. Moderator: Jim Lantonio (Visiting Professor, Stony Brook University; former Executive Director, Milbank Tweed)
b. Jason Brennan (VP, Legal Services, Office Tiger - OT)
c. Sal Curreri (COO, Mandel Katz - MK)
d. Patrick Fogarty (VP, Business Development, William Lea - WL)
2. Introduction by Lantonio
a. Outsourcing has been around for a long time
b. Already in the 1960s, Archer Services started with bicycle messengers. It eventually evolved into duplicating and other services and into bigger companies
c. Offshore outsourcing is just another phase in the gradual development of outsourcing
i. In the 1980s, law firms resisted outsourcing inhouse copy centers
ii. Lawyers worried about letting non-employees have access to confidential documents
iii. Today, this is a non-issue
iv. But now we have the same reaction to sending work to India
d. Market is at a turning point now
e. Wants perspective of suppliers (Office Tiger and William Lea) and of customer (Mandel Katz)
3. Williams Lea perspective (Patrick Fogarty)
a. Williams Lea in business since 1820; started as financial printer. Become full business process outsourcing company in 1980s
b. W-L is now a corporate solutions company - people and process enabled by technology
c. Services: office document services (eg, copying), IT (help desk, asset management), word processing and document production, litigation support (scanning, coding, e-discovery / EDD, data mining, forensics)
d. Lantonio asks about W-L onshore capabilities
e. Fogarty says many law firms resist going offshore
f. To respond to this, W-L acquired Orrick’s word processing operations in Wheeling, WV
g. This has been a terrific success - over 100 people in Wheeling. Serving 3 firms now; 3 are about to commit
h. W-L need to leverage labor arbitrage but keep jobs in US
i. The challenge is to demonstrate value of outsourcing to law firms. One or more years into the deal, you can begin to introduce the offshore element (though the interface is still with US personnel).
j. Domestic / onshore aspect works well and continues to grow
4. Office Tiger perspective (Jason Brennan)
a. Cultural differences among firms are significant with respect to preferences of onshore versus offshore
b. O-T was originally more offshore (India and Philippines). In response to customer demand, we now have onshore capability
c. Surprised at the number of firms that are not even interested in domestic option
5. How firms respond to letting go of work (Sal Curreri - MK)
a. One response to confidentiality issue: many internal word processors are actual freelancers. (One partner, when told that, said “I wish you hadn’t told me that.")
b. Biggest lesson in years of outsourcing experience: the law firm manager still owns the process, costs, and the results. Law firm manager must be engaged with the service and communicating changing needs to outsource provider.
6. How should we deal with objection of taking jobs away from Americans?
a. Brennan (OT): I don’t hear that argument very much anymore. I do hear concerns about what will happen to long-standing employees
b. Fogarty (WL): Agrees that law firms don’t focus on this consideration. With big financial concerns having their own operations in India, many objections have dropped. Concern is more about managing data security and controlling the spin of the outsourcing deal. Firms want to avoid any negative PR. As clients outsource, law firms have less basis to object
7. Quality issues - he found offshore quality was BETTER than domestic work. It took a while for lawyers to internalize this. Yet a perception continues that offshore quality is not as good. Some of this perception stems from call centers based in India and personal / consumer negative experiences with customer service based in India. How do legal process offshore companies (LPOs) deal with this issue?
a. WL: this perception is definitely an issue in LPO space. There are cultural differences. One step we take is having Brits or Americans running operations in India. WL also has domestic facilities that handle many customer facing interactions. One step to take is to have law firm customers visit domestic operations centers. Our clients have experienced increased quality and service. The outsource and offshore model allows law firms to provide the same level of service across far flung offices.
b. OT: Most of our engagements involve onsite personnel. Lawyers and staff typically interact with someone locally. You have to deal with this issue in the planning and negotiation stage. We have to coach law firms not to think about outsourcing people. The focus needs to be on tasks and where each task is most efficient to perform. Even when looking at the call center world, the airlines, Dell, and others have not retreated from India even with the widely publicized problems - they have modified how they operate.
8. There is a perception that outsource services are targeted at very large law firms. There are now more than 1 million lawyers in US. 60% are not in major metro areas or in big firms. Can LPO offer these 60% outsourced services?
a. WL: Law firm consolidation will not end, so firms will be bigger. We can also re-scale our services. Even some of our work for large firms starts with small jobs. We are learning to say no to some of these “opportunities.” We are likely to evolve our services to be able to offer them to smaller law firms.
b. OT: There always has to be some scale to make outsourcing pay off. Big firms initially came to us to save money or faster turnaround. I now see mid-size firms coming to use for resource availability. They don’t have the scale to have 24x7 service centers. Many firms still have silo support services - all services local in all offices. Some are now seeing that model makes no sense - they want to consolidate. Or they don’t offer these services in all offices and want to do so.
c. Audience member: a few mid-size firms are coming together - almost as a co-op - to have joint outsourcing services. Three firms of about 300 lawyers each are doing this. They are overcoming confidentiality issues and making the joint effort work.
i. OT and WL think this model is not common and will not work widely. Too much concern about confidentiality; scalability is harder across organization

What are current outsourcing trends and issues. That’s the topic that John K. Halvey of the Strategic Sourcing and Technology Group at Milbank Tweed addresses in this Outsourcing Conference 9am session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. What is the net effect of outsourcing generally?
a. McKinsey Global Institute reports a net positive effect. But Tom Daschle says exporting jobs hurts millions of Americans. Halvey does not see political resistance to offshoring legal work. But he anticipates more regulation of offshoring in the next administration.
2. Current snapshot
a. The IT outsourcing market continues to grow but is maturing
b. We are now in the 2nd phase of the business process outsourcing (BPO) is now well underway but also maturing.
c. The Global 1000 are moving to BPO - little cannot be outsourced
d. Legal Process Outsourcing (LPO) is in a nascent stage
e. The distinctions among different types of outsourcing, however, are blurring.
3. The LPO market
a. LPO market in India is worth $80mil according to Forrester
b. It could grow to $4bil by 2015 (Forrester)
c. Global Legal Professional (GLP) certification test is a likely future development
d. Bars have issued ethics opinions
e. Halvey, who practices outsourcing law, has heard for decades that this or that will never be outsourced and eventually it will. Two years, lawyers were very skeptical. He thinks it is clear that LPO will grow, even if Forrester is too optimistic
4. The Outsourced Economy (A Milbank Service Mark, SM)
a. The core of each business shrinks. That is, the set of activities that business is open to outsource, continues to grow.
b. Sees a development that companies will, in future, manage brands, not assets. Viewing world as brand management - goods or services - will allow outsourcing more and more functions. Companies will manage component manufacturers, where a component can be a service. The brand managers - the big companies - will be aggregators. For example, one of his large clients recently consolidated / aggregated all of its project management functions, then outsourced it. If companies can do, this, where is the limit?
5. Maturity of IT Outsourcing > Platform for BPO
a. With the outsourcing of so much technology, the global technology platform is fairly mature
b. The robust global infrastructure enables the global BPO market
6. Question: why haven’t law firms outsourced more of their IT
a. Halvey thinks it is because that have not yet achieved sufficient scale
b. For firms to remain cost competitive, they will have to scale further to take advantage of outsourcing cost reduction opportunities. (Note from Ron: I have written previously that the merger trend among the AmLaw 100 will encourage outsourcing.)
c. Halvey’s outsourcing deals often involve multiple data centers and 10s of thousands of PCs. Contrast this scale of typical law firm, even large ones
7. BPO Offerings
a. HR
b. Finance and Acccounting (F&A)
c. Procurement
d. Marketing and PR
e. Customer care
f. Real estate management
g. Project management
h. R&D (Research and Development)
i. LPO
8. Key questions for any contract, including legal outsourcing
a. What is it?
b. Who does it?
c. Who owns it?
d. Who pays for it?
e. What happens if it is not done?
f. These are questions in every contract, every outsourcing deal; answers will be harder in LPO deals than in other deals
i. The complexity will drive growth in outside advisors (consultants), due diligence, negotiating teams with more skills, more lawyers working on LPO deals.
ii. Halvey has seen “cobblers children have no shoes,” meaning law firms that have signed standard forms for outsourcing. He thinks this will change rapidly
9. Getting LPO Deals done (time kills deals)
a. Getting law firms and law departments to close a deal takes time. Time kills deals
b. Consultants and vendors will have to shepherd the process
c. All involved will have to understand the law firm culture - this may well be harder in LPO then other BPO markets
d. Seems necessary to have managers on the ground in India
e. The tendency of law firms and law departments is to bring together a large group of stake holders ("large tent"). To get a deal done, you need no more than 5 or 6 people in the room ("small tent").
f. Deals need a win-win set up. But early deals, to work, will probably require letting someone else win first.
g. We will see “ready, fire, aim” initially. Halvey not clear if firms will share information with each other about their LPO deals. Halvey does not think firms like his will outsource legal work and, if they do, they will not want to share.
10. The normal outsourcing deal is fairly collaborative.
a. Lawyers are MUCH less collaborative than IT or business people
b. Lawyers will have to overcome instinct to take deal and study it to death
c. Suppliers have to work hard to figure out how to engage firms collaboratively
d. When conceding: the when is more important than the what
e. Venue of actual deal making matters. Vendors should get their lawyer customers out of their offices. Lawyers should visit vendors anyway as due diligence.
f. Avoid huge conference rooms and too much food - don’t encourage endless discussions.
g. Law firms, unlike corporations, often lack someone to force a deal to close
h. Lawyers focus more on details than big picture - suppliers need to get them to focus on macro, big picture
i. Lawyers often make idle threats. Halvey seen much posturing around issues. Both sides need to learn use leverage appropriately
j. Some deals should NOT happen. Market is still at risk if a couple of transactions go badly.

Some lawyers seem to view offshoring legal work as exotic. In fact, it’s not that different than delegating work internally. 

As a panelist for The World Is Flat: What You Need To Know About Effectively Outsourcing Legal Services (ALM - Law Journal Newsletter web audio conference on May 16, 2007) my presentation, Legal Outsourcing - Overview, Opportunities, Issues, suggested that outsourcing and offshoring is just another step on the delegation path. Lawyers have long delegated administrative functions to staff and to outside vendors. They regularly delegate substantive legal work to other lawyers, paralegals, and other professionals. Sometimes they delegate to lawyers in distant offices whom they’ve never met.

And sometimes the delegation of substantive work becomes outsourcing, for example, coding documents and legal research. Analytically, the idea of sending work offshore is not so different than delegating. Professor Stephen Gillers of NYU Law, a co-panelist and recognized ethics expert, explained that with appropriate supervision and disclosure, outsourcing and offshoring are ethically permissible.

The third panelist was Ram Vasudevan, President, SQ Global Solutions, a company that provides offshore legal services. He explained the hybrid model - onshore and offshore lawyers - his company uses and the steps they follow to insure compliance with ethics requirements.

Law firms and law department can earn recognition for their innovations. 

The College of Law Practice Management (I’m a trustee) sponsors the InnovAction Award to identify and honor innovation in law practice management. The application deadline is June 1st.

In this Roundup: legal wikis gaining traction, more on individual lawyer versus law firm institutional branding of blogs, and a fascinating analysis of how crowds influence individual preferences. 

Wikis
Wikis are an easy way to collaborate via the web. Bob Ambrogi blogs that the 7th Circuit has started a public wiki focused on procedure and practice. For more on legal wikis, see his article Legal Wikis Are Bound to Wow You (Law Tech News, May 2007). Courts rarely lead in technology so perhaps this will pave the way for practitioners. How long before a large law firm “own” a legal niche by hosting the definitive substantive wiki?

Individual v Institutional Branding in Blogging
Following up on a presentation I gave on blogging, I recently raised the potential tension between individual and institutional interests in branding. Two other bloggers picked up on this discussion and offer good analyses. See Steve Matthews’ post (Vancouver Law Librarian Blog) Associate Blogs & Law Firm Interests and Kevin O’Keefe’ (LexBlog) Branding of large law firm blogs : Law firm vs. individual lawyer and Branding of law firm blogs continued. (If a firm did start a wiki, presumably it would be firm branded).

Cool Stuff
Is Justin Timberlake a Product of Cumulative Advantage? (NY Times Magazine, 4/15/07) is a fascinating analysis of how popular culture choices are deeply influenced by the early/initial choices some people make. The so-called “butterfly effect” of chaos theory is part of the explanation. A short and highly worthwhile article.
Now ponder the implications of this for law practice…. “Standard” clauses in transactions evolve over time. Is it possible that new ones that become standard are merely an “accident” of being noticed and used initially by a couple of firms and then other firms noticing the initial re-use? And is that the same as a considered, collective judgement that the clause is a “best practice?”

I have long argued that deploying armies of domestic contract lawyers to review documents in e-discovery is not a sustainable practice. 

Search Software Gets Boost From New Rules in the Wall Street Journal (5/16/07) explains that the December 2006 amendments to the Federal Rules of Civil Procedure are driving new corporate spending on e-discovery software and services.

The article quotes a Gartner Group analyst: “Electronic-discovery software eliminates the need to have lawyers conduct extensive data reviews.” Really? Can we send home the thousands of contract lawyers reviewing documents at this very moment? I think not. Perhaps this quote was taken out of context, but even with foreseeable software advances, lawyers will still spend much time reviewing documents. (I’ll avoid semantics over what “extensive” means.)

In my opinion, the WSJ is the best newspaper in the US. So it disturbs me to read an article about a market I know well and see what I consider significant inaccuracies. We have to evaluate information on web sites and blogs carefully; it turns out the same is true for mainstream media (MSM).

Offshoring legal work is hot a topic judging by the number of conferences and the growing list of companies in India that provide offshore legal support. 

Conferences: Tomorow (May 15, 2007) I am a panelist in The World Is Flat: What You Need To Know About Effectively Outsourcing Legal Services (ALM, Law Journal Newsletter web audio conference, $). Next week ALM hosts Legal Industry Outsourcing Forum For Both Work Product And Support Services, an all day conference in NYC.

Updated List of Outsourced Legal Services: Joy London and I have updated our directory of Outsourced Legal Services. We now list 77 providers, up 20 from the prior update in January, more than a 30% increase over just a few months (new entries are not necessarily new companies). Thanks to the blog Legal Process Outsourcing for identifying some of the vendors now on the list.

Thoughts: Law firm interest in outsourcing appears strong and entrepreneurs in India appear optimistic based on the growing list. But I’ve not seen solid data on just how much and what type of work is being offshored. Considering that Clifford Chance and Baker McKenzie have offshore operation centers, however, I think the upward trend is solid and likely to continue. And as US BigLaw continues to grow and merge, firms will find managing operations the traditional way challenging - offshoring will likely increase its appeal.

Should law firms blog? That’s the question I addressed on May 2nd at the ALA’s 36th Annual Educational Conference and Exposition in Las Vegas. 

In Blogging: Why the Fuss?, I explored whether blogging is a good marketing vehicle for law firms. (I also covered blogging basics, software options, and explained RSS.)

Being a blogger, I may be biased but my presentation is not conclusory. I offered a framework for marketers to compare options: a grid with “channels” as columns and “channel considerations” as rows. Channels include synchronous ones such as seminars and one-on-one meetings plus asynchronous ones such as updates, articles, books, and web sites. Considerations include cost, frequency, reach, and re-use value. I used stars (more=better) to rate options. Reasonable people can disagree about the ratings. The point is to assess systematically blogging in comparison to alternatives.

The BigLaw examples included were drawn from the Large US Law Firm Branded Blogs and RSS Feeds that Joy London and I maintain.

I touched on the issue of the potential tension between firms as institutions and individual lawyers. Firms should want their lawyers blogging on a firm-branded blog. Individual lawyers, however, realizing the possibility of future lateral moves, may prefer their own names as the brand. Since lateral moves became common only 15 years ago, this tension is relatively new. I suppose it applies to any publishing channel but my gut is that it’s worse for blogs. Anyone aware of any good material to help understand the dynamic of building firm brand equity verus individual lawyer name-recognition equity?

During the dot-com boom, several start-ups offered business to consumer (B2C) legal web sites. Offerings varied but all failed. Now, we are seeing a re-birth, backed by heavy hitters. 

Avvo is a new start-up founded by executives with experience at successful web businesses. Today, Avvo announces that “that former LexisNexis CEO Lou Andreozzi has joined Avvo’s board of directors. In addition, Stanford Law Professor Deborah Rhode and former president of the American Bar Association and law firm veteran Robert Hirshon have joined the company’s legal advisory board.”

The home page says “We are currently in ’stealth’ mode, so we cannot say too much. However, we can say that we are dedicated to helping consumers better navigate the highly confusing legal industry, and we are building something that no one else has built before.” So I don’t know what service(s) will be offered.

I suspect that adding experienced legal management and ethics talent to the advisory board is an effort to avoid the fate that befell dot-com predecessors. It will be interesting to see what services Avvo offers consumers (interactive advice, connecting prospects to lawyers, other) and how it navigates the tricky ethical issues.

In this Roundup: EDD takes time, a custom Google search for knowledge management web sites, and offshoring contract drafting. 

E-Discovery
Conrad Jacoby explains in E-Discovery Update: Recognizing Hidden Logistical Bottlenecks in E-Discovery (LLRX.com, April 24, 2007) why the mechanics of copying in EDD can be time-consuming. The bottom line: given the volumes of data involved and the maximum throughput of even high-end hardware, litigants need to leave time to move and copy data. This reminds me of when parties argued over how long it would take to copy a couple hundred boxes of paper - I guess some things never change!

Knowledge Management
Uncommon Knowledge by Lucas McDonnell lists 46 useful KM web sites. Search just these web sites via Doug Cornelius’ Google Custom Search available here at Prism Legal.

Offshoring
Kenneth Adams of Adams Drafting wrote a good article on offshoring contract work: CONTRACT DRAFTING:Sending Contracts Offshore in GC New York (4/19/07, free registration required). He answers the question “When, if ever, does it make sense to have your contract-related legal services performed overseas?” The article features Oracle Corp as an example, discusses captives versus vendors, and looks at Pangea3 and UnitedLex as examples of vendors.

Thomson (owner of West Publishing) is an important information and software supplier for BigLaw (and SmalLaw). CIOs, librarians, and other firm managers should keep track of Thomson’s bid for Reuters. 

Forbes report of the Thomson bid for Reuters is here. Reuters itself reports that Thomson “would face an arduous investigation by U.S. antitrust authorities if it makes a bid to acquire news and financial data provider Reuters.” The Financial Post of Canada reports that Thomson “is more interested in Reuters’ financial data than its news feed.”

My guess is that long term, this would have positive impact for law firms. It will be interesting to watch this unfold.

Thanks to Simon Chester’s post at slaw for alerting me to this.

Another bar authority has analyzed offshore work and concluded that, subject to certain caveats, offshoring is permissible. 

In October, I reported on a NYC Bar Association ethics opinion on offshoring. Now, the San Diego County Bar Association has issued Ethics Opinon 2007-1, which analyzes in details a factual scenario of a California lawyer who outsources significant substantive aspects of legal analysis to lawyers in India. It’s a long opinion that answers three questions. In my reading (and - remember - I don’t practice law), subject to some reasonable caveats, offshoring is permissible.

Thanks to Mark Ross of Lawscribe for pointing out this opinion. He has also written a good analysis of it at his blog, Legal Process Outsourcing.

See also Guidelines for Outsourcing Grow (National Law Journal, 5/3/07) for a short article on this and related offshoring ethics opinions.

What’s the best way to review documents in discovery? I’ve suggested that an army of US-based contract lawyers is not the answer, that using offshore lawyers or software is a better approach. Nicolas Economou, CEO of H5, offers useful insights in response to a prior post about software v. lawyers and empirical testing.  

In The Gold Standard for E-Discovery Document Review (3/18/07), I referred to H5’s document review process as concept search. Economou sent a helpful clarification about the appropriate role of concept search in document review and the H5 approach. He explains below that achieving the best results requires a combination of technology and human effort - lawyers and other domain experts.

Disclosure and Caveat: I met Economou several years ago and, from time to time, have talked to him about the possibility of consulting work. Vendors Speak postings are neither a product endorsement nor an independent vetting of the author’s facts or analysis.

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