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Saturday, November 29, 2003

Deciding on an Extranet Strategy

Derek Smith and Peter J. Ozolin of Paul Hastings provide a good overview and analysis of law firm Extranets in Are Client Extranets Worth the Expense? published in the National Law Journal (December 1, 2003) and at law.com.

They explain that Extranets are not necessarily a client relationship builder. Before building (or buying) an Extranet, law firms need to define what their goals are and what the economics of establishing and maintaining the Extranet will be. The article also describes three kinds of Extranets - turnkey, litigation support and management, and customized - which can meet differing needs.

This is a useful article for law firms thinking about Extranets or for law departments that are considering asking their outside counsel to establish one.

Wednesday, November 26, 2003

Corporate Counsel Outsource Work, Bypassing Law Firms

Several of my prior posts discuss the potential to outsource legal work overseas. I was therefore interested to read Legal-Work Outsourcing Cuts Costs; DuPont's pitch to in-house counsel: Save millions by sending legal work to companies other than law firms from the New Jersey Law Journal, Nov. 17, 2003, as carried on law.com.

This article describes how DuPont and other law departments outsource elements of legal work to “someone other than attorneys at law firms.” DuPont has used a temp agency for witness interviews and document reviews; Cisco estimates it has saved millions by outsourcing discovery work; and Sun Microsystems uses lawyers who do not work at traditional law firms for some patent work. Companies report saving significant sums with this strategy.

The article quotes a partner at a large law firm who questions the quality of the outsourcing approach. To me, quality is an empirical question – it’s easy enough to monitor quality and even to compare the quality of law firm work to outsourced work in a controlled test.

The same partner worries about the “caliber of person.. you get willing to do that kind of work for their whole career.” I have read several articles in the business press that report that customer service reps in India do a better job than those in the US because for them, the service job is considered high end. Perhaps the same is true for some types of legal work. I personally worry about the opposite: for example, the attention span and focus of "high end" associates with Ivy League educations and very high expectations spending days or weeks on end reviewing often mind-numbing documents.

I find it encouraging that inhouse counsel are looking at alternatives to the traditional way of doing work. Not every outsourcing or alternative work arrangement will work, but it certainly makes sense to explore alternatives and test their cost and quality against traditional approaches. Many alternatives are facilitated by the appropriate use of technology to transfer work, monitor it, and compare results.

[Note: After posting this item, a somewhat different and more detailed version of this article appeared on law.com based on Model Behavior from The Recorder; this version has an explicit discussion about outsourcing legal work to India and to LRN.]

Saturday, November 22, 2003

Is Electronic Evidence Mandatory?

At some point, perhaps soon, it may be malpractice if litigators do not ask for and obtain digital data from opposing counsel. An article by Patrick F. Dorrian, Jurists Offer Perspective, TIps on Electronic Discovery in the November 2003 issue of Metropolitan Corporate Counsel examines this and other questions about electronic discovery.

Dorrian reports on a recent conference where Judge Loretta Preska spoke. She wrote the opinion in an influential case on discovery (Metropolitan Opera Ass'n v. Local 100, Hotel Employees and Rest. Employees Int'l Union, 212 F.R.D. 178 (SDNY 2003)). Dorrian writes:

"Responding to a question, Judge Preska explained that it is 'hard to say' whether an attorney's failure to seek electronic discovery in a case could support a finding of legal malpractice. 'The rules talk about the production of relevant information," she said, "so we seem to create the burden to seek e-data." While noting that the increased costs associated with electronic discovery 'have changed the game,' she added that she 'can't imagine how counsel who is responsible cannot seek relevant electronic information.'"

Twenty years ago, not all lawyers performed online legal research. Today, many lawyers and judges would consider that omission malpractice. If history and common sense is a guide, a similar rule is likely to apply to electronic evidence discovery.

Thursday, November 20, 2003

The Impact of Technology on How We Communicate

As technology has evolved over the last few decades, we have an increasing choice for how we communicate: writing a letter and having it delivered, leaving voice mail messages (intentionally, by calling at off hours), e-mailing a message, transmiting a fax, sending an instant message, or posting information to an extranet. The mode of communication is not just about how information is transmitted. The mode has many other implications. Two examples help illustrate this point.

First, consider e-mail. We take it for granted now of course. But around 1994 I co-wrote (and had published by American Lawyer Media) an article extolling the virtues of using e-mail to communicate. At that time, many lawyers objected to e-mail and thought it would never amount to anything. Granted, cross-organization e-mail required complicated "gateway" connections at the time (this was pre-Internet for general commercial purposes). Among the benefits I recall pointing out were:
- communicating asynchronously (meaning the recipient did not have to be "there" to receive the message),
- copying multiple parties,
- keeping a written record (a sword that clearly cuts two ways in litigation),
- attaching files, and
- crystallizing one's thoughts for the benefit of the recipient (in contrast, for example, to the rambling voice mail message).
I contrasted e-mail to voice mail, which offered some of these benefits, but burdened the recipient with often rambling thoughts and the need to take notes.

Second, a friend told me a story this week about PowerPoint. She was asked by colleagues to write a memo explaining a particular issue. As she started writing, she realized that the memo would end up being long and detailed. Moreover, she realized that no matter how she argued the points, some readers would not get it and others would disagree. And she found it was taking way too much time to write. So instead of going down that path, she decided to respond to the request by "writing" a PowerPoint presentation and e-mailing it. This allowed her to communicate the main points and to provide some context and support. She reasoned that this would suffice for most of her audience and for those who did not believe the points, they would not be convinced by a memo version and would call her anyway.

This anecdote crystallized the idea for me that communication is deeply affected not just by the transmission method (e.g., e-mail versus voice) but also by the presentation of content (e.g., written memo, e-mail text, PowerPoint, or Visio diagrams). For better or worse, many business people are now accustomed to PowerPoint presentations and find memos longer than one page tedious. Lawyers who want to provide outstanding service to clients should consider carefully both how they transmit and how they present information. While there is no right or wrong answer, different choices are appropriate for different circumstances. Lawyers should be attuned to the mode and presentation format by which their clients would like to receive different types of information.

Monday, November 17, 2003

Legal Technology's Shortcomings - or Not?

In my prior post I noted that in celebration of Law Technology News' 10th anniversary edition (October 2003), former managing editor Robert J. Ambrogi posed two questions to a dozen plus people, including me, who are deeply involved with legal technology. In The Future, The Past, Ambrogi asks one question about the future and one about the past. Excerpted here is the second question about the past and my answer. [Note that answers were intended be very short.]

What is legal technology's greatest shortcoming so far?

Ten years ago, technology was a limitation: hardware was expensive and software was underpowered. A look at corporate America is instructive. Many economists argue that the recent productivity surge is a direct result of corporations learning, over the course of a decade, how to deploy technology systems to full effect. During the many years it took to achieve gains, massive changes in how work is performed were required.

As for the legal market, technology has room to improve but is no longer the limit. There is no "magic technology bullet" that will make lawyers more productive and effective. Today, the shortcoming is in the ability of lawyers individually and firms/departments collectively to adopt new ways of working that take full advantage of technology.

Putative shortcomings in technology can no longer be an excuse for avoiding difficult process, culture and business changes that will be required to achieve lower cost and higher value legal service.

Saturday, November 15, 2003

Impact of Legal Technology in the Next Decade

In celebration of Law Technology News' 10th anniversary edition (October 2003), former managing editor Robert J. Ambrogi posed two questions to a dozen plus people, including me, who are deeply involved with legal technology. In The Future, The Past, Ambrogi asks one question about the future and one about the past. Excerpted here is the first question about the future and my answer. My next blog posting will answer the question about the past. [Note that answers were intended be very short.]

How will technology most significantly impact law practice over the next decade?

Large companies face tremendous risks for not complying with the law; at the same time, they are trying to reduce legal costs.

These pressures will lead them to begin using “embedded law systems.” Whether for preparing documents, managing contracts, administering benefits, tracking visa applications, or complying with regulations, the systems that run corporations will increasingly embed legal rules and reasoning.

This will reduce the demand for some routine types of law practice and create more competition for high-end work that cannot be automated. A key question is who will provide the content and expertise to drive the automated systems: law departments, law firms, publishers or new entrants in the legal market? The lawyers who work on these systems will need to develop new sets of skills, ones that facilitate translating legal expertise into systematic frameworks.

Thursday, November 13, 2003

More Lessons from Medicine

Last Monday (November 10, 2003), the Wall Street Journal, in Heart Studies Cite Treatment Gaps, reported that "[l]ess than one-third of Americans hospitalized for heart failure are discharged with four standard therapies that could help keep them out of the hospital and prolong their lives." A separate report found that "implementing a more-systematic approach to care - such as establishing a set of standing orders for heart-attack patients - can significantly improve a hospital's performance in providing basic medicine." A doctor in this second study said that having reminders and other aids that help doctors and nurses follow protocols is better then relying on habit or memory.

I have posted several items comparing medicine and law arguing that lawyers should emulate the movement in medicine to empirical studies of what works and adoption of best practices. I am fortunate in that I am not a big consumer of medical services. Were I to need more than occasional and very routine medical care, however, I would ask my medical providers if they (1) were current on the latest medical research, (2) followed a set of current and widely accepted treatment guidelines, and (3) had tangible manifestations of those guidelines such as checklists to ensure the guidelines were being followed.

So, how is this connected to law practice? The November 2003 issue of Corporate Legal Times reports in Budget Battles that law departments face increasing cost pressures. If I were a general counsel, I would want to make sure that my outside counsel had established best practice guidelines and followed them. To me, this would be as important as analyzing bills and getting discounts. First, it is still difficult to assess how much legal representation should cost. So I would want to know that my outside firms were practicing systematically. And second, I would assume that any firm that had systematically studied how it practices and rolled out those findings to its lawyers was, by definition, more effective and efficient than firms without similar programs.

The medical market has many third parties that study health care practices. Perhaps the time has come for the legal market to emulate this. A general counsel who spends a lot on outside counsel could consider paying an outside organization to audit how their firms perform. The cost of such an effort and the value of the results would be even better if multiple GC combined forces to buy such services. Such audits would focus on how the firms practice, not on the bills themselves. Without the intervention of third parties who employ disinterested and objective measures, it is not clear the lawyers will be subject to the same pressures as doctors.

Of course, any law firm that adopted an "evidence based" approach to best practices that withstands the scrutiny of objective audits would rely heavily on various strategic legal technologies.

Tuesday, November 11, 2003

GE Procures Legal Services via Online Service

Law.com reports in Now for Law Firms, Too: Competing for Business Online (New York Law Journal, November 10, 2003) that General Electric Commercial Finance is using the online procurement service Procuri to seek competitive bids for legal services.

The article quotes a couple of un-named partners of large law firms who complain about this approach. One says that cost and value are not equivalent and that auctions don't value unique skills. Another suggests that the auction will drive away qualified lawyers who can get better pricing elsewhere; this same partner also suggests that the involvement of non-lawyers in the selection process is a bad idea. If I were GE, I would find such remarks insulting for they suggest that a sophisticated purchaser is unable to assess qualifications and pricing. It is also insulting to non-lawyers (let the record show that I am a lawyer) for it suggests that they cannot make intelligent purchasing decisions.

Any time a market becomes more competitive, it is disruptive for existing players. And it is no fun to have whole business systems changed. But that does not mean new ways are less effective. Perhaps the lawyers quoted in the article had visited the Procuri web site and were unhappy to see the services Procuri lists, which includes mail and delivery, waste disposal, lawn care, and security guards. Clearly the process for retaining lawyers is more involved than for these other services, but that does not mean it cannot be routinized and scrutinized systematically and qualifications weighed against price and other factors.

And speaking of other factors, from the strategic legal technology perspective, I would be very curious to learn whether GE considers the use of technology by a law firm when selecting counsel via Procuri. To some degree, the use of technology should be built into the price. But realistically, in complex matters, seeing the direct link between appropriate use of technology and pricing is hard. If I were making the purchasing decision, I would want to know not only what technology a prospective firm uses, but how the lawyers on the team serving me actually use the technology to provide effective and efficient service.

Sunday, November 09, 2003

Portals and KM

Law firms that are considering purchasing a portal product should read the November 3, 2003 issue of eWeek magazine for its review of the leading portal products (ATG, BEA WebLogic, Computer Associates CleverPath, IBM WebSphere, Microsoft SharePoint, Plumtree, Sybase Enterprise Portal, and Vignette). This issue updates a prior review and focuses mainly on WebSphere and SharePoint (reviewing both favorably). Not reviewed in this issue but of interest in the legal market is the "vertical market" portal product, LawPort by SV Technology.

Any firm that is thinking about a portal should make sure also to consider its knowledge management strategy and how the portal fits with it (or how KM fits with the portal). Portals are excellent enabling technologies and can serve as a platform for KM, but standing alone, do not constitute KM products. Portals present simple interfaces to numerous systems and allow integrating content from multiple sources.

But these features alone do not enable KM. Firms still need a way to capture useful documents and provide contextual information about them. Separate processes and/or software may also be required for expertise location. The firms that have attained success with portals typically have invested significant time and resources to customize the software, integrate disparate systems, and collect and catalog content.

While this may be obvious, I have been struck by anecdotes over the last couple of years of law firms that have portals and still struggle with content management and KM issues. The bad news is that KM requires more than just portals. The good news is that a portal can be a very important part of a KM strategy.

Thursday, November 06, 2003

Potential Competition for Google

The November 10, 2003 issue of Business Week has a short report about a company called Dipsie. Dipsie is a new search engine scheduled to go live in 2004.

My understanding of both the Dipsie web site and the BW article is that Dipsie will search not just static web pages, but those generated dynamically in real time, searching three times as many pages as does Google. It's not clear to me exactly how this will work since many pages are generated from database back-ends based on specific user inputs. BW also reports that Dipsie will use semantic analysis, "sensing content and context" and thus distinguish word meanings such as equity stock versus inventory stock.

Some lawyers want to use Google for searching their own work product. While it's not a bad Boolean search engine, the feature that makes Google so useful - link analysis - is of no value for internal use in a law firm. To the extent that Dipsie offers new or improved semantic analysis, it may be of interest to law firms. Of course, the search engine space is crowded and the company may not even target selling its software for internal use. But it will be interesting to see if a start-up can compete against Google. And for lawyers and law firm staff who rely on the Web to uncover interesting facts, a tool that indexes more pages than Google could be very useful.

Wednesday, November 05, 2003

Sending the Wrong Signals to Clients with Technology

In Big Employer Is Watching yesterday (11/5/03, p. B1), the Wall Street Journal reports that many employers are using technology to monitor employee attendance. Employees at some organizations must use a web-based system to indicate their presence at their desk. Increasingly, employers use such systems to monitor salaried employees, not just those paid hourly. The article reports many employers have seen productivity increases, though it also talks about the issues such systems raise.

Featured in the article is New York law firm Akin & Smith LLC, where "paralegals, receptionists and clerks clock in by placing a finger on a sensor kept at a secretary's desk." Quoting the managing partner, the article reports "It keeps everyone honest."

I could editorialize on many aspects of the use of this system. I'll limit my comments to the observation of how I, as a client of this firm, might react to the use of this technology by time-keeping paralegals. From a client's perspective, this firm's use of the technology sends a bad signal. It says, in effect, we are really worried about the accuracy or honesty of our staff. In fact, we want to make sure we are getting our money's worth out of these people, so we are monitoring them. As a client, I'd have to think, what does that mean about how paralegals are billing me for their time? If the firm is so worried about what the paralegals are doing, shouldn't I worry about how they bill me for their time? I would want to ask the client why they don't use an equivalent system to make sure the paralegals are billing me accurately.

More generally, how a firm uses technology can send clients positive or negative signals about a firm. Clients who see their lawyers with wireless e-mail devices (such as a Blackberry) are getting a message that their lawyers are accessible. Walking into a lawyers office and not seeing a PC or seeing a stack of printed e-mails sends a signal that the lawyer is way behind the time (though, based on the market imperfections discussed in my prior post, that may not matter all that much).

The message for law firms is that one consideration in deploying any new technology is the signal it sends to clients - good or bad.

Sunday, November 02, 2003

Imperfections in the Market for Legal Services?

In my prior posting, I discussed some interesting comments I heard at a Legal Tech keynote conference. I also had an interesting private conversation with a general counsel of a mid-sized company.

This GC said that the company's outside counsel provided good legal advice but did not always offer the best service. For example, the outside lawyers rarely, if ever, provide budgets and even partners doing a lot of work for the company often bill their time to the wrong matter. I replied, "you're the customer - why not just switch outside counsel?" The answer was that one had to pick one's fights and that where the legal advice was good and the outside counsel understood the business, it was not worth the struggle.

It seems to me that this illustrates a larger problem - a possible market imperfection. In essence, the "switching costs" are high and so the customer will and can tolerate a certain amount of "bad service" if the overall “bundle of service” meets important needs. Putting on my hat as an economist (granted, the hat is a bit old - from my college days), this reminds me of "monopolistic competition." In monopolistic competition, many suppliers exist but they are somewhat differentiated and can therefore charge "monopoly prices" or, in this instance, provide less than optimal service. While there are many law firms from which to choose, once a relationship is established and a lawyer understands his or her client's business, then that relationship and knowledge differentiates the firm from competitors who are potential substitutes.

If this analysis is correct, what are the implications for lawyers and clients? For law firms, it's a “good news bad news” story for investing in legal technology. The bad news is that clients tolerate less than ideal service from established relationships. Firms that under-invest in technology are not necessarily penalized by the market. So firms that do invest may conclude they are not getting a good return. The good news, however, is that strategically deploying technology can help. First, it can provide better service than the client might otherwise receive and therefore further "lock in" clients by making the switching costs even higher. And second, in those situations where, for whatever reason clients are willing to incur switching costs, strategic legal technology investments that visibly provide better service can increase the odds of winning new business.

For clients, it means that when they select a new lawyer, they should be sure to examine carefully all aspects of the services provided. Most of the time, a GC will be able to find two or more lawyers or firms with the requisite skills. It makes sense for the GC to screen carefully for other service elements since once the relationship is established, the switching cost is high. I would, of course, advise GCs to look particularly carefully at the level of tech investment a firm makes and how the lawyers who will service the corporation actually use that technology.

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