Technology Butterfly

 

This article first appeared in Corporate Counsel and The American Lawyer's December issues under the title “Ten Years of LDO Tech.” The full version is reproduced below.

 

I first started thinking about law department technology back in the early 1990s, when I was on the team that launched Corporate Legal Times, the first independent magazine specifically for in-house counsel. Mostly, I was pleased to learn that law departments actually had their own technology and that our sales team was able to sell advertising to those companies in our early days.

A few years later, our CEO asked me to, in addition to running the business, join the sales team part-time, specifically to manage the “law department technology” category. Back then, it was mostly matter management, e-billing and entity management. Being in that role forced me to play expert on law department technology. And as the expert, I got asked one question more than any other: Who buys legal technology in a law department?

At the time, it was difficult to know. It could be anyone. Often it was the AGC who was most interested, or who perhaps had a background in technology. Many times it was a paralegal, and I knew at least one person who got the job because he knew how to unjam the photocopier.  Over time, however, I started noticing one thing: There wasn't often a law department operations professional in place. But when there was, he or she was the buyer.

In its earlier days, legal operations and law department technology were very much intertwined. In our first Annual Law Department Operations survey in 2008, 61 percent of our respondents cited “new technology initiative” as one of the top three reasons their position was created. And 91 percent were responsible for determining technology project priorities.

That was a decade ago. This year is the 10th anniversary of the Annual Law Department Operations Survey, and we celebrated with a 32-page report: “Decoding a Decade of Data to Map the LDO Journey.” The report, which can be downloaded for free, illustrates and analyzes key trend data from the 300 data points we've collected in each of the past 10 years.

We didn't start asking detailed questions about technology until a few years ago, but there is a widening gap between technology and technology effectiveness. Last year, an impressive 71 percent of our respondents said that they “have access to the right technology to do my job”—up from only 53 percent in 2014. It's clear that increasingly powerful LDOs have earned the right to buy the tools they need.

Technology effectiveness, however, has stagnated. When we ask how effective specific technology is, the average score is only 6.4 out of 10. And contract management, which many consider synonymous with legal ops, trails the pack at 5.4 out of 10.

What else has changed in the past 10 years?

One big change is the top challenges faced by LDOs. Despite the level to which operations and technology were intertwined a decade ago, most of the top challenges LDOs faced were not particularly tech-focused. They were related to proving the position's value. Here are the top six: identify opportunities for business improvement and cost savings; show value of the position to the corporation; obtain funding to do projects within the department; obtain funding for resources; gain attorney respect; and communicate successfully with the general counsel. (Note that we asked each participant to list their top three challenges.)

Most of those challenges could never be solved by technology. Today's LDOs no longer have to prove their value. Here are last year's top challenges: drive/implement change; contain costs; identify opportunities for business improvement and cost savings; manage outside counsel; obtain funding for resources; and deal with compliance issues.

These six challenges are the same types of challenges as those faced by managers in every department throughout the company, which means that they are more ripe to be solved with technology. Technology can often be the lever to drive change. When used properly it can be the panacea for runaway costs. New tools are emerging every day for managing spend and outside counsel. And new AI-based tools are making headway into helping companies manage their compliance problems.

The other big change is in the relationship between LDOs and outside counsel. In 2008, only 4 percent of LDOs selected outside counsel for individual matters. Today it is 28 percent—a 700 percent increase.

In 2008 only 16 percent of LDOs directly negotiated rates with outside counsel. Now it is 45 percent—almost a 300 percent increase.

LDOs are also much more likely to directly handle billing issues (52 percent vs. 40 percent a decade ago), negotiate discounts (41 percent vs. 20 percent), select outside counsel for a panel (24 percent vs. 8 percent) and negotiate alternative fee arrangements (39 percent vs. 16 percent).

We are seeing more professional buying and managing of outside counsel spend, but the underlying technology that supports that trend does not seem to be keeping up. Only 46 percent of our respondents believe that “e-billing and matter management providers are keeping up with our needs,” down from 53 percent a few years ago.

What are those needs? Legal spend tools can no longer limit themselves to improve process and outside counsel guideline compliance. They must provide insight that enables the law department to get more value from the money they spend. And these tools do exist, but as our results show, they must be more effective.

For LDOs to fulfill their difficult mission, they are going to have to get more from law department technology. Unless…

In most industries, technological innovation does not come from buyers; it comes from sellers. Amazon was not built by people looking to buy books. Passengers did not create the Uber app. No one sat around on his or her flip phone and said, “I wish I could use this thing to see what Kim Kardashian has to say.” Those innovations were conceived, designed and built by sellers. So the big question is whether the law firms can step up.

They seem to be inching in that direction. Almost half (53 percent) of our respondents now believe that law firms are leveraging technology to deliver legal services more effectively and with cost efficiency, which is four points higher than just a few years before. There is a real opportunity for law firms to build and use tools to fill the effectiveness gap of in-house technology and some forward-thinking law firms are starting to think about how.

 

Brad Blickstein is principal at the Blickstein Group and the publisher of the Annual Law Department Operations Survey. The 11th annual survey comes out on Dec. 18.