Strategic Legal Technology

ILTA released this month its 2008 Law Department Survey. I find the results shocking. 

Click here fr the ILTA 2008 Law Department Survey. 45 law departments responded. More than 95% are companies with at least $1bil in annual revenue. ILTA law department members probably embrace tech more than average so there is probably “reporting bias” here that selects for law departments more advanced in tech use than a randomly selected sample.

And that is frightening. As I read the survey and wrote this post with selected findings, my ire increased and I could not help myself. I got catty, I think justifiably so. So, selected findings + catty comments:

• 66% of respondents have specialized legal IT staff. Comment: this is critical to ensure lawyer productivity because corporate IT staff are often clueless about lawyer needs.
• 82% have document management software. Comment: makes you wonder what the rest do.
• 57% have no document assembly software. Comment: if arguably tech-savvy departments don’t use D/A, that suggests a rather low total market penetration; no surprise I suppose.
• 16% have no matter management software. Of those that have, 5% report no use and 30% report use by power users only. Comment: let’s see… that means that in effect, 1/2 of law departments appear not to have effective matter management tools. The GCs at these companies need to re-allocate whine time about outside counsel. Invest that time instead on managing matters. Acting saves more than whining.
• 64% do not have a contract management system. Comment: Hello, is anyone home? My head smashes low hanging fruit as I step through the front door.
• 89% have no knowledge management (KM) tool and 73% have no KM initiative underway. 52% have no enterprise search tool. Comment: re-inventing the wheel is definitely a good use of corporate resources and certainly keeps shareholders happy.
• 41% do not use a ”litigation support” tool inhouse and 45% do not use an e-Discovery product or service. 68% have not “deployed tools with your organization (outside of legal) to prepare for discovery requests”. Comment: Have these folks read the 2006 amendments to the FRCP? Maybe I’m missing something, but it seems like a significant percent of big companies are totally unprepared for litigation.

I’d hate to see the results of a truly representative sample!

[For another take on inhouse tech, you can also read The Path to Tech Nirvana (Corporate Counsel, March 2009), a report on the annual Corporate Counsel Inhouse Tech Survey. It’s more anecdote than data as I read it and not very enlightening at that. Also, as I complained about prior Incisive / ALM surveys, the editors/reporters make year-over-year comparisons even though the respondent set appears markedly different. The comparisons may make good copy but are, in my view, meaningless.)

Another publication, another article about law departments getting tough on costs. It sure seems that general counsels are like people on a diet. 

From personal observation and articles about dieting, here’s what I conclude:

• People talk much more about dieting than actually doing it
• When they actually do it, the effort is often short-lived and cheating endemic
• While on a diet, weight loss is typically modest
• Weight lost is very often put back on because the dieting stops

Sounds just like law departments and outside counsel costs. Sharing the Pain (Corporate Counsel, March 2009) is yet another article about how GC will cut outside counsel cost. One GC is quoted:

“Maximizing efficiency and saving money is something many in-house departments have been trying to do for the last 20 years… But now the economic climate has added urgency to the goal.”

Need I say more? What do we have to show after 20 years? Yes, we are in a terrible crisis now. But the last two decades has seen its share of tough times. So I say, “show me the money.” Stop with screeds and start acting. And please, prove me wrong about GC, but with data please. My challenge to GC: save money this year and then share your savings with the legal press and how you did it. [And by the way, reducing legal fees by an amount proportionate to the drop in your company’s revenue does not count.]

Speaking of challenges…. The ACC Value Challenge, which is meant to increase the value outside counsel provides, among other tools, an economic model, a spreadsheet of law firm profitability. In my experience, customers don’t look at supplier profits; instead, they assess cost and value. (Do you personally care, for example, how much Apple makes on iPod, McDonald’s on a Big Mac, etc.?) If I were going to use one and only one spreadsheet with outside counsel, it would be a matter budget.

I recently received a new legal technology magazine in the mail. I was surprised because I had no prior notice of it. And I was disappointed.  

I was going to remain silent about my reaction to NextGen_Law, published by the Daily Journal Corporation because I think the market has room for publications to compete with Law Technology News. But reading Bob Ambrogi’s A New Legal Technology Magazine emboldened me.

It’s fair to characterize Bob’s review as scathing and I share his concerns plus have my own. I too found the content tired. Moreover, it was not clear what size law firm the editors are targeting. Some content seemed geared for solos, some for large firms. I think that is hard to pull off as the requirements differ quite substantially. I personally found the lay-out and graphics off-putting.

I’m a big fan of LTN but also value multiple voices. For anyone looking for another perspective, I would stick with American Edition of Legal Technology Insider, which launched last summer.

Last November I wrote JD as Job Credential for non-Law Jobs: Mistaking Cause and Effect?. That post led to an interesting e-mail exchange with Doug Cornelius, a lawyer and blogger (KMSpace and, as of 2009, at Compliance Building). 

With Doug’s permission, I posted our exchange as an article at this site, The Value of a JD and Musings on the Structure of the Legal Market. In it, we bemoan how little practical law students learn and conclude that law schools may be even less prone to change than relations between general counsels and law firms.

Let’s think about the impact of the current economic crisis on law schools: Enrollment - bets on up or down? Endowments - way down. Prospects for grads to get jobs - way down. Approach to education - unchanged? How many law faculties have met to ask “what can we do in this tough economy to make our education more valuable and useful?” I suspect not many.

Law firm lay offs have cut wide and deep. At a legal knowledge management lunch today, we were wondering how law firm EDD staff have fared. Hours later, I had an answer - and it surprised me. 

I’ve gotten to know David Cowen of the Cowen Group and the blogger at Opportunity Knocks over the last year. He is a search and recruiting expert for litigation support, practice support and Electronic Data Discovery and someone who thinks deeply about this market. His blog post today (reproduced with permission) E-Discovery dodges the bullet…:

Of the 2100 layoffs since January 2009, less than 3% (60) have impacted E-Discovery and Litigation Support professionals. See Layoff Tracker for specific details.

Here’s a quick overview of how we see E-Discovery staffing in the first quarter…

#1 - Most AmLaw 200 firms are holding off on permanent staffing. This will increase the demand for contract employees and outside vendors for their E-Discovery work.

#2 - Corporate E-Discovery headcount remains flat as they continue to wrestle with budget cuts, layoffs and in-house E-Discovery planning. This should be good news for vendors and outside counsel.

#3 - Vendors are proactively and in some cases aggressively looking for talented sales and client services professionals. Good news for talented individuals that find themselves with a shaky firm.

The use of contract and temporary workers is typical during recessionary periods. If permanent staff cuts go deeper then contract staffing and outsourcing will continue to increase.

While this is not great news if you’ve been laid off it does offer firms the opportunity to hire experienced talent that is highly motivated and affordable.

I am surprised that even 3% of the lay offs are EDD staff. I know that litigation is down and the cuts are deep but I think it’s harder to find good EDD staff than lawyers. Firms are either

• short-sighted and will soon regret not having experienced EDD staff or
• are converting fixed costs to variable (meaning outsourcing EDD) or
• the litigation downturn is deeper and longer-lasting than many of us hope or expect.

Which is right?

[By the way, the Layoff Tracker David cites is a spectacular resource for those who want to follow the grim reaper.]

The legal press loves to pit US and UK firms against one another. This week, evidence of another dimension in that competition. 

Large UK law firms have embraced low cost, offshore operations more enthusiastically than US firms. View from the Top - David Childs, global managing partner of Clifford Chance (FT, 13 Feb 2009, free registration required) today is worth reading entirely; one Q&A pair caught my eye:

“Q: Is the recession giving you a boost by encouraging clients to move their work to a single, bigger law firm?

A: Not yet. What we are seeing, though, is clients wanting to discuss with us how they take cost out of their [internal] legal function, as well as how we can help them reduce the cost of what we do for them. So, for example, we have a centre in India that provides us with paralegal services as well as accounting and IT services and we’ve asked them to talk with some of our clients as to whether we can give them a paralegal service through London using paralegals in India.”

With law departments increasingly cost conscious, firms that can offer lower cost options have a competitive advantage. Will US firms be at a disadvantage not having similar low cost options?

It’s hardly news that a US or UK law firm lays off lawyers and staff. Hogan & Hartson’s buyout of selected staff my eye. 

Hogan & Hartson offers buyouts to 240 staffers (National Law Journal, 10 Feb 2009) reports that the firm is offering buyouts to 240 legal secretaries and word processors. Managing partner J. Warren Gorrell “said that the buyout offer is not a sign of financial problems for the firm, nor is it an omen of future layoffs. Rather, the buyouts are a byproduct of overcapacity in the secretarial ranks and improving technology.” That said, he does acknowledge the downturn is a factor.

In The Crisis Goes to Waste as BigLaw Muddles Through I point out that across the board staff cuts make no sense. Hogan’s selective cut makes more sense.

I wonder, however, if the firm will re-allocate secretaries and word processors so that lawyers receive the right level of support. If a firm has to cut - and many do - it should take that opportunity also to re-think how it delivers support.

I fear that BigLaw is following in the path of the Detroit Big 3 car makers. Adjust here and there but no plan or vision to change fundamentals. If firms have plans around how lay-offs will lead to a better business model for the future, they are not sharing (or the press is not reporting).

Transactional lawyers spend huge amounts of time drafting and negotiating documents. Yet few have the tools to assess how their documents compare to similar ones drafted by other lawyers. That is changing. 

My former consulting client, Practice Technologies’s RealDealDocs makes it easy to find and compare public disclosure documents and like clauses.

An emerging product applies statistical metrics to compare like documents and help both lawyers and clients understand how to improve document drafting. More specifically, it facilitates building standard templates and knowing where to focus efforts on customizing. Kingsley Martin, known to many knowledge management professionals, has formed KIIAC LLC. His web site, which has the documents used for his initial analysis, is available at www.kiiac.com.

I have his permission to publish an e-mail message he sent to me. His note describes some interesting initial findings from his metrics-driven approach:

As part of our work to create document templates automatically, quantify differences among like documents, and develop very accurate searches for transactional documents, our research has discovered an interesting correlation: the more complex the transaction, the more likely the document consists of standard terms and conditions.

The table below shows a range of agreements and their consistency, measured by document structure commonality and clause language consistency. We base our analysis on 250-500 publicly available samples of each document type. We need to increase the sample set but the early trends of consistency from the document collection are emerging from our research:

Document Type	Consistency
Interest Rate Swap Agreement	97%
Merger Agreement	90%
Finance Agreement: (e.g. Term Loans, Credit Agreements etc.)	85%
Corporate Formation: (e.g. Articles of Incorporation, Bylaws)	85%
Employment, Consulting Agreements	65%
Purchase or Lease of Real Property	60%
Supply Agreements	55%

The statistical methods used to measure commonality are based on three main elements, simplified here for purposes of explanation.

• First, the presence of articles, clauses and sub-sections, namely the building blocks of a deal document. For example, the technology identifies whether each document has survival, amendment and waiver clauses, irrespective of where they may appear in a document. We also identify and count the number of deal-specific clauses that do not typically appear in a particular type of document. The ratio of standard to non-standard clauses gives us the clause commonality measure.
• Second, for clauses that have sub-sections, we measure the commonality of such sub-clauses. For example, in a merger agreement, what are the clauses in the representations and warranties article and how do they compare to the list clauses in this section from other documents? The ratio of common sub-clauses to non-standard clauses gives us sub-clause commonality measure.
• Third, the analysis measures the commonality of the words in each of the matching building blocks. The analysis identifies the common words for a particular clause, and then using this information computes the uncommon or deal specific terms. The ratio of common words to uncommon words in each matching clause gives us the measure of word commonality.

Using standard statistical techniques, we aggregate the commonality measures for each element to compute the overall document score.

We’ve performed the statistics. We are eager to hear from readers, especially practicing deal lawyers, why more sophisticated transactions tend to be more standard. Is it because sample documents for complex deals are more available online, thus causing a de facto trend to standards? On a related note, are the deal-specific terms the critical differentiator that marks the value of the document and the negotiating skill of the author?

If anyone has answers to Kingsley’s questions, you can e-mail him (kingsley dot martin at kiiac dot com) or leave a comment or contact me.

Is There a KM Role for Administrative Staff? That was the topic of a session I moderated today at a meeting of large law firm KM professionals. 

Staff roles in KM vary widely. At one firm, secretaries reguarly contribute to KM in both litigation and corporate practices. This “institutionalized” role is an exception, not the rule. A participant pointed out that years ago, secretaries typed everything a lawyer wrote and so really knew the lawyer’s work. I’m not suggesting returning to that model but if firms systematically defined the secretarial job, weaving in some KM would be easier.

Another firm invests to collect data during matter intake to support KM. I’ve long thought that if firms put in any extra effort for KM, it should be during the intake stage to capture industry, matter type, issues, and other “meta data” that can support not only KM but also marketing, finance, and business intelligence.

A participant reported asking support staff to volunteer to help with KM and had many takers. With rampant lay-offs, staff seem eager to add value. KM professionals who seek help may find more volunteers now than in the past.

I’ve attended Legal Tech since 1990. Legal Tech 2009 reminds me of Legal Tech 1990. 

Back then, vendors had a plethora of new software versions, almost all based on DOS (the PC operating system). The forwarding thinkers understood that Windows loomed and would likely take over the market.

Legal Tech 2009 has many evolutionary EDD technology and law developments. The distinct feel is incremental evolution, nothing dramatically new. So in this regard, it’s like 1990. Unlike 1990, however, a looming change is not so visible; I’m not sure there’s a “Windows equivalent” that will take the market by storm.

And perhaps that’s the way it should be. The current EDD 1.0 is simply Litigation Support 2.0. That is, in spite of the hoopla, e-discovery is not all that different than paper-based discovery - the volumes are higher and the technology more complex.

EDD 2.0, whatever it ends up being, likely will not be revolutionary. It will entail more sophisticated analytic software, better statistical modeling and QC, and more rigorous processes. A magic bullet would be great but we all need to prepare for a lot of hard work in the trenches to improve what we’ve got.

Top UK law firm Osborne Clarke has outsourced a significant portion of its support services ("Middle Office") to Integreon. 

The Osborne Clarke press release explains

“Osborne Clarke (OC) today announced a unique and innovative response to client demands for greater efficiency from the legal industry with a £50 million deal with Integreon to create the UK legal sector’s first onshore shared services centre. The seven year deal will see approximately 75 of OC’s business services employees transferred to Integreon.
Client demands led OC to look at the way law firms buy and use support services. Over the last 12 months, the firm has put its own working practices under the microscope as well as those of competitors. It concluded that the legal industry would move to focus on core legal services in future. Support services would be provided by a new generation of businesses focused on high end multiple service provision to the professional services community.”

I now work for Integreon and strive to maintain my objectivity. In May 2003, one of my first blog posts was Central Back Offices and Outsourcing. In it, I reported on Orrick building it shared services center in Wheeling, WV. I wrote

“It’s surprising that more firms are not moving in this direction. More and more law firms have multiple offices across many time zones, domestic and international. Housing a significant number of staff in downtown real estate is expensive. Moreover, the argument that staff need to have access to lawyers loses weight as the percent of lawyers located in the “home” office declines. And with the increasing use of e-mail, instant messaging, and video conferencing, the need for physical proximity diminishes.”

As I suggested a couple of weeks ago in The Crisis Goes to Waste as BigLaw Muddles Through, law firms can hardly argue that they have rationalized or optimized how they deliver support. Shared services certainly seems a big step in the right direction. Some other firms have created shared centers: White & Case, Baker McKenzie, Reed Smith, and Clifford Chance.

Is the shared services approach (outsourced or not) trickle now becoming a trend? I’ve long thought shared services makes economic, operational, and strategic sense for law firms. It will be interesting to see what impact the economic crisis has on how law firms provide critical support services.