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JANUARY 2014 REPORT - Legal Department Technological Solutions - What To Consider and Where To Start?

‘One of the most challenging proposals to introduce - as Head of Legal - is technological changes to operating process of your team. Because as you know lawyers love changes to the way they work, and in particular spending importing time learning and using new software!’ Ann Page Co-Founder of General Counsel Research Club (GCRC); has over 25+ years experience as a senior in-house lawyer and is co-author of Managing External Legal Resources with Richard Tapp.

Additionally an interviewee Dennis Kennedy Vice President Counsel MasterCard Worldwide said ‘Because legal work is so collaborative, there’s a push to use new collaborative technologies, communication technologies and specialized practice technologies on an on going basis. We’ve still yet to get much past breaking the surface of analytical, automation and knowledge management tools.’

These and similar challenges have been raised by GCRC members (and my clients) on a consistent basis, which is why our GCRC interviews in 2013 were heavily focused on this area; and some have been quoted in this report.

This year we wanted to provide in-depth reports as well as further interviews in this rapidly moving environment so that you can make informed choices. Given the dearth of relevant information on this subject we have used our contacts, clients and members in the main to provide information to answer two key questions. So in our first 2014 report we are going to share what is currently available to and in use by legal departments. For the avoidance of doubt, this report does not cover use of mobile devices and the growth of apps.

Just a reminder as to what is driving this change - budget pressures, requirement for lawyers to be more business focused and even entrepreneurial in some cases, heightened individual performance expectations and heavier workloads have forced in-house legal departments to re-evaluate current operating processes. The need for faster and more efficient ways of working is absolutely fundamental to in-house lawyers in the 21st century.

Further improvement in business partnering and risk identification has resulted in more work for the legal team already facing the challenge of doing more with less. This will continue, despite the slow growth in the economic cycle.

As a result, legal departments look for technology solutions in the following five areas:

1. Information Governance Systems (‘which are designed to allow organisations to better control their information allowing faster access and a defensible position’ Mark Diamond CEO of Contoural Inc interviewed last year) such as:

a. Document Management: to store and organise electronic documents relating to legal matters, which can be accessed centrally. For example one of our interviewees Casey Flaherty, Corporate Counsel Kia Motors initiated the use of document assembly for their standard contracts and another client uses Google documents to collaborate within the legal team. 

b. Compliance Information retrieval systems such as E-discovery – discovery of electronically stored information (ESI) for litigation (civil or criminal) in the common law system. This system is much more than simply fulfilling a legal obligation. It ultimately forms the building blocks of a litigation or investigation’ John Bace on the advisory board at UIBC. E-discovery can also be extremely useful in global litigation matters. Further Charles Christian from the Legal IT Insider said in his interview he ‘is aware of more and more GC’s in continental Europe taking an interest in eDiscovery software because to do so makes more commercial sense than outsourcing this to external law firms’.

c. Information retrieval systems - These systems contain processes that allows access to particular information from a broad pool or mass of information. The most common example of an information retrieval system is a search engine whether that’s Google for the internet or Westlaw. Managing information is a huge challenge to all commercial organisations – and Mark Diamond found ‘that an individual employee can spend up to 7 hours per week locating particular emails’ and Marie-Charlotte Patterson Vice President at Hiperos said in her interview ‘ without appropriate technology, organisations run the risk of being data rich but intelligence poor’. So not only do legal departments have to have really good retrieval systems but so do their clients as well as a fundamental understanding what is needed to be kept and why.

d. Specific tracking systems. For example Contract Matters to organise contractual documents and relevant information. I recall listening to the GC from Cisco over 12 years ago about their pioneering work in contract management at the time. Self building these systems is still common for your organisation by some of my clients. It may include process maps.The Legal and Procurement teams at the Co-operative Bank set up one from scratch which also included policies and training for relevant managers. Compare this with the fact that some legal departments rely on the use of spreadsheets for tracking Litigation Matters of significant value for executive reporting to Audit Committees/Board, as indeed did I at that time. So tracking systems can be simple or sophisticated depending on your requirements, resources and appetite for building these.

2. Case/Matter Management: to organise matter - specific documents alongside commentary updates, budget and cost information. These case management systems can contain operational process maps or indeed information governance systems and/or e billing. The more complex the more expensive and harder to implement to realise the benefits. Some of my clients started with spread sheets to record information before moving to a specific system (as indeed I did), and some have stayed with the spreadsheets.

3. E-billing: to accept and processes electronic invoice data from law firms.

4. Project Management Software and processes to support the execution of new working processes and efficient use of the new technology or specific Legal Project Management for high value transactions such as Agilexa.

5. Panel Management Software which facilitates speedy resolution to time consuming manual tender process as well as providing technology interface between the department, internal clients and external law firms such as SMARTPANEL.

It is not the purpose of this report to examine in detail these solutions nor what Richard Susskind describes as ‘disruptive’ technologies more a roundup of what is currently being used by legal departments to become more efficient; and to give Legal Managers a place to start when assessing their own needs.

Best practice for legal departmental heads is to engage outside diagnostic expertise to help inform their thinking about what they need as well as the best product on the market.

What to consider as a legal function prior investing in legal department technology?

Below are five factors that influence decision making in this area:

1. Size of Legal Department*: Third-party research has shown that use of legal department technologies varies by department size and is a major contributing factor as to technology solution adopted.

2. Size and type of the Legal Spend. This not only influences how you instruct or work in partnership with external legal organisations (either in the UK or in other jurisdictions), but how sophisticated your management of the information flow and how disciplined about billing you need to be. Best practice is to take control here even where there is no pressure from the business. In fact one Legal Director said that ‘The management of external legal resources is probably one of the most important perform’. (For more details about this important area see our book: Managing External Legal Resources.)

3. Culture of the Organisation. Each organisation has it’s own appetite for utilizing technology as well as dealing with change. For our members who work for traditional companies, proposing and initiating change can be lonely as both the company and the team can need a great deal of persuasion. Finding senior sponsors and ‘change champions’ is essential – please see my blog on Leading Change. Marie-Charlotte Patterson Vice President of Corporate Marketing at Hiperos said that ‘80% of chief Legal Officers have no formal support from IT’ – so one step might be is to make friends within that division/department). Another of our interviewees (Ron Friedmann of Fireman & Company) reported that Knowledge Management professionals are driving Legal Project Management in the US where as in the UK we have anecdotal evidence that this is not as widespread. What is the situation in your organisation? From our interviews it woudl seem to appear that there is more training for American lawyers and therefore they are more familiar with IT solutions for their departments.

4. Budgets and Business Case. Many in-house lawyers we speak to are concerned about costs, and yet have never produced a business case to demonstrate the value of the technological solution proposed. Indeed statistical cost information is often missing from their thinking and reporting. Before even starting the process, Legal Directors and Heads of Legal should have a process for collecting this valuable information. Please see my blog on Budgets for what is required as a starting base to engage the business on this important area.

5. Project Resources - The diagnostic investigation of solution(s) should be undertaken with project methodology as this produces a better result than an ad hoc approach by who ever appears to have free time or who allocated this task without choice on their part. It is also imperative to have a project plan to implement so that you can fully realise the benefit of any software purchased unless contained within the original plan mentioned above. Everyone underestimates the time and resources required for investigation and implementation. Further there might be a saving in legal staff resources where qualified project support can be used.

In my tenure at The Co-operative Bank, everyone was trained in project management methodology and so did not need a separate system for it’s own projects. We were however promised IT resources to produce and manage our software project plan - which it is fair to say was further down on their ‘to do’ list than on mine. Richard Tapp used his own resources and documented in our book that on reflection would have been more effective to have employed an outside resource for this.

The five most widely and currently used technological solutions by legal functions are:

Whilst there are many solutions on the market, most legal departments start examining the following to ascertain if there is a needs match:

1. Document management is the most widely used system by all legal departments and tends to be the first to be adopted. The adoption of document management systems vary so widely across the different sized departments, possibly attributed to the low investment threshold, the cost of which is covered as part of the legal function’s budget. Third party research has found that this does not requiring lengthy business cases, budget approvals or return on investment hypothesis. This is because a starting point may be the usage of well known low cost sharing systems such as Dropbox or Google documents. Once document management systems have been implemented, there is much more receptiveness to take on new technology, so this is often the entry point to access other software systems.

2. Matter management is found more common in medium and large sized legal functions. Smaller departments and sole legal counsel tend towards more manual systems (if recording at all), which increases the admin reporting requirements on an already stretched resource. At the Co-operative Bank, we timed recorded and this provided extremely valuable management information statistics for discussion with the business on resources required.

3. E-billing is widely used in large legal departments (in the US 30% in-house counsel use e-billing according to another interviewee Rob Thomas Vice President Strategic Development at Serengeti Law). Here in the UK the Banking Sector spearheaded the adoption of e-billing. There are many suppliers for large departments – Tymetrix and Serengeti are the two most widely known. Check to ensure that system that captures all the data in the bills, not just the image of the bill. Whichever system you purchase this is an historical tool not a forward planning approach one. These are processes that allows access to particular information from a broad pool or mass of information. The most common example of an information retrieval system is a search engine whether that’s Google for the internet or Westlaw. Although it can clearly give you lots of information which can be used for future strategic delivery of legal services. GCRC will investigate solutions aimed at Sole In-Houser’s and smaller departments and report in due course.

N.B. Third party research has shown that the implementation of e-billing and matter management technologies tend to correlate to company revenues, suggesting that these tools become more necessary for departments as legal demands increase with the size and complexity of the business.

4. Project Management Software (PMS). Project Management Software (PMS). This is more related to the culture of the organisation and as to how project management methodology is used within that organisation itself.  It may be that there is a system used by all departments in place – then it is a case of how best to apply this to Legal. There are many PMS systems available – the one that is transitioning from the software industry into the legal field is Agilexa. Therefore the GCRC team is currently ‘road-testing’ this latest software on a number of their own projects.  Legal Project Management can also be used as a way to standardize running matters such as litigation, mergers and acquisitions in a way that is more systematic and more transparent showing which resource is doing what.  Significant benefits of this are to be able to really interrogate resource application by external law firms; and the cost benefit analysis of all the steps of the transaction in question
5. Panel Management software does not seem to be determined by the size of the department. It seems to be driven from the need of the organisation to have a handle on its outside advisers and costs. The business tends to drive the lawyers to look for a less manually administrative system, which will provide the cost and matter information from a number of different external legal suppliers. This information can then be used to inform on trends of matters, performance and costs.

The Financial Figures!

First of all it is very difficult to provide a comprehensive picture of the costs involved. Below are some indications around costs that we have found that can provide a starting guide for your investigation and discussions with suppliers.

American Third-party data has estimated the median first year cost of ownership for the following technologies which are normally purchased by medium to large legal departments:

1. Document Management Systems range from $12,500 to £349,998
2. Case/Matter Management System $59,995 - $599,998
3. E-Billing System $59,995 – S599, 998

Combining this with the notion that investment in matter management and e-billing correlates with the size of the business and legal function, we can conclude that investment in these resources is secondary to document management for the following reasons:

- The increased cost requires higher-level budget authorization and the involvement of multiple stakeholders.
- The increased level of cost scrutiny forces the legal function to seek return on investment.
- E-billing and matter management systems are able to generate reports in a flexible format that permits manipulation. This is rare in document management systems and is a mechanism by which the legal function justifies the investment by sharing data with other business units and providing visibility into the work legal does.

N.B. Around 12 years ago I bought a case management system for my department and the first year costs were £60,000. I do know of one department, which is working with an IT supplier to build and test one, and so the financial upfront fee is substantially lower – the time resources for this are extremely high. Frustration can also increase!

4. At the time of writing this report I have been unable to obtain any meaningful figures for project Management software, again GCRC will continue to investigate. External project managers day rates vary from £500-£3000 per day depending on whether this is administrative or industry expertise support. Consultants inform us that diagnostic surveys cost around £5000 depending on the assignment.

5. Panel Tendering and Management software. As an example fees for SMARTPANEL product are approximately - £5000 sole in-house £15000 small - £20000 medium - Large £30000 - depending on the number of panel firms for the Tendering Process. These fees normally include training, project support and coaching. There is ongoing licence fees depending on number of successful law firms accepted to the panel.

NB Do not forget ongoing licence/maintenance fee costs when budgeting for these products

To sum up we have given you an overview of five major technological solutions to inform your thinking about what your needs may or may not be served by these. The first steps on any change journey are:

- To undertake a diagnostic investigation of what is required by the business,
- What they are prepared to pay with the benefits they are likely to receive
- The appetite for change within your own team for smarter working by utilising the technological solutions proposed and the benefits for them.

It is therefore recommended that, where possible you engage an industry expert to assist not only in the diagnostic phase but also the project management stage.

Whether you proceed with or without external support there will be ‘winning and learning’ along the way. So don’t forget to celebrate the former and record the latter.

I would like to express my thanks and appreciation to the valuable contribution given to me in writing this Report by the GCRC team members. Future reports and blogs during the year will explore these and other technologies, and the challenges that they continue to pose.

Any members who would like to share their experience of using any of the technology solutions or indeed any not mentioned, please contact Ann Page ann@gcresearchclub.com on publication of any members stories in subsequent articles, then the member will receive a complimentary copy of Ann’s and Richard’s book – Managing External Legal Resources.

*Legal Departments are categorized as follows:
- Sole in-house lawyers (unless these are working for a software company, then the usage of technology solutions below is very small.
- Small (less than 5 lawyer)
- Medium (5 to 19 lawyer) and;
- Large (20+ lawyer) legal departments.

Appendix 1 – Further reading
1. Richard Susskind, Tomorrow’s Lawyers: An Introduction to your Future Oxford Press (2013)
2. Jordan Furlong, The Evolution of the Legal Services Market, five part series on Law21.
3. V. Mary Abraham, What Technologists Can Teach Lawyers on Legal Technology Today.
4. Donna Seyle, eLawyering in an Age of Accelerating Technology, ABA GP/Solo Report (January 2013)

Report disclaimer by SEQ Legal