Hello, and welcome back to The Law Firm Disrupted. I'm Law.com reporter Roy Strom and each week in this briefing I share my thoughts on the changing legal marketplace.

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Tales From a Document Automation Evangelist

A couple weeks ago I wrote about an associate helping his Canadian firm adopt the contract review platform Diligen.

I mentioned that I was interested in young lawyers who are driving changes at their firms. I continue to believe firms should encourage this sort of bottom-up change management approach.

In that vein, meet Yuriy Zaremba, a 27-year old who in October left the Ukrainian firm Avellum to work full-time as CEO of his document automation company AxDraft. Zaremba worked for about six years as an associate at Avellum, rated a Band 1 firm by Chambers and Partners for M&A and corporate work in Ukraine.

While putting together 100-plus page documents for corporate transactions, Zaremba grew tired of a process he said was often repetitive: Copying bits and pieces of language from documents he had created dozens of times before.

With help from his brother, Oleg, a software developer,Zaremba created a prototype that would automate documents for public-private partnerships in Ukraine.

The effort was initially for a scholarship that Zaremba ultimately missed out on. But he soon brought the idea to partners at Avellum, with the idea that his software could help them draft documents in a fraction of the time they normally require.

The partners bought into the idea, but Zaremba said there was a problem of getting lawyers at the firm to build the templates to automate documents.

“People don't want to invest time in making automated templates,” Zaremba said. “Even if this is a one-time investment and you'll be able to save time in the future easily and it will simplify your job tenfold. There is always billable work.”

Undeterred, Zaremba spent his own time to build a set of automated documents that lawyers at the firm eventually started to use regularly. In February 2017, he launched AxDraft as a standalone company selling document automation. Two partners at Avellum provided seed funding for the company in exchange for minority shares.

AxDraft has about 225 users, which are individuals within companies or law firms. Zaremba said the platform generates about 600 documents a month. One Ukrainian law department uses AxDraft to generate about 90 documents a week, he said.

After a year of selling his product, Zaremba has also learned more about the challenges to widespread adoption of document automation technology within law firms and legal departments.

One barrier is the common perception that a lawyers' work is too bespoke or unique to be automated. Zaremba said in a recent questionnaire he sent to potential clients, 45 percent of lawyers claimed their work was too unique to benefit from document automation.

“They often say their work is unique, but what they're actually saying is that there are many variables in what I do,” Zaremba said. “The question is not whether this can be automated, but how complex will the automation be?”

The billable hour, of course, remains an inhibitor at most firms.

“If you are paid by the hour, you have no interest whatsoever in implementing legal tech solutions,” Zaremba said.

One bright spot for Zaremba's purposes is that the Ukrainian legal market is moving more quickly than most away from the billable hour.

Zaremba said about 80 percent of Ukrainian companies' engagements with the top 30 firms in the country are now done on capped fees. Ukraine's top law firms bill an average of about $300 an hour, he said, compared to about $50 an hour for midsized firms. But the market for top-end work is shrinking due to less investment by foreign firms, which are typically more willing to pay by the hour, Zaremba said.

“The market is shrinking. We have political turmoil. We have this conflict on the east,” said Zaremba, noting the geopolitical tension with neighboring Russia that has led some foreign firms to close their offices in Kiev. “So there is a smaller number of foreign investors who are used to paying hourly rates. Ukrainian companies are not willing to do that. And they are making the market at the moment.”

Zaremba offers a 45-day free trial of AxDraft to law firms, where they are free to use the program to create templates for document automation. During that time, Zaremba said his biggest focus is finding a “primary champion” of the technology within a firm. He said firms with an average age of 35 and under are much more willing to adopt the technology than older firms.

“If I don't find that primary champion, they won't adopt the program,” he said.

In some ways, selling the idea to companies is easier. Routine contract drafting is one of the most obvious processes that would benefit from automation. And for a cost center, saving time is an endeavor with clear rewards. Even so, Zaremba prefers to pitch his company to a CFO or CEO, rather than strictly to general counsel.

“They understand that this is efficiency and this is lower costs,” Zaremba said. “If you show this just to lawyers of the legal team, they will probably get excited, but they'll never help you adopt it. Because on its face it contradicts their primary job and ability to be well-paid.”

This isn't to say that Zaremba is pessimistic about the future of document automation—something high on the list of technologies that could disrupt the current labor market for lawyers. He believes automation and other efficiency-focused legal technology tools will be adopted as clients continue to demand more efficiency from law firms.

Law firms will eventually see those tools as necessary to keep their profit margins.

“It will create a totally new ecosystem for legal services, which will be more accessible due to lower cost and higher competition in the market,” Zaremba said. “But it's going to be a long way to get to that point.”

This year, Zaremba is aiming to expand into other European countries, such as Cyprus, Latvia and Poland.

Roy's Reading Corner

On Scoping: Keith Lipman, CEO of legal software company Prosperoware, writes for The American Lawyer about what he calls a “scoping crisis” in law firms. He said most partners (98 to 99 percent) are not providing clients with detailed, hours-based budgets. They are guessing at prices of matters based on the cost of similar, previous projects. What's missing, he said, is “scope”—or a set definition of what is being paid for.

From Lipman: “Without scope, when partners price matters, they are giving educated guesses. Guessing is not a long-term strategy, it doesn't scale well, and when the guess goes wrong, it's rather difficult to justify the error—so we save face and the relationship by writing off the error. That is why we, the legal industry, are in a scoping crisis.

Learning to scope is a better strategy than guessing—in fact, it delivers the missing ingredient on clients' theory of no surprises, which is important for firms endeavoring to develop strong, long-term relationships.”

On Law Firm Hiring: Baker McKenzie announced its hire of a chief services officer to “co-lead” on innovation at the global legal giant. Ilnort Rueda comes from management consultancy A.T. Kearney Inc., and he will be responsible for “defining and leading the implementation of new services, business models, and revenue sources, and will oversee the continued development of the Firm's Global Practice Group strategies and services.”

Baker McKenzie global chair Paul Rawlinson said the firm's “innovation, project management, pricing and our approach to new services” is creating an annual revenue impact of more than $50 million.

Thanks again for reading The Law Firm Disrupted, and please continue to reach out with your thoughts/comments/critiques at [email protected].