E-Discovery Software

Last year, The Wall Street Journal reported on a BTI Consulting Group survey indicating that large companies intend to spend more than 7% of their litigation budget on e-discovery this year.

The ABA Journal cited the article, noting that:

"The right software can help reduce the number of documents needing attorney review, helping save money..."

For example, Morgan, Lewis & Bockius used “predictive coding” software made by Recommind Inc. to review millions of pages of documents in less than a month.

Cisco recently started utilizing the same software.

As Recommind explains, Predictive Coding is "a patent-pending technology and workflow which automatically analyzes, prioritizes and codes all documents in a collection as part of litigation or regulatory or internal investigations."

However, as the Recommind site also explains, predictive coding is not a replacement for attorneys.

It is simply a more efficient addition to the sorting component of the workflow and documentation process -- a process that still requires attorney review and analysis, which is itself an area abundant with potential added efficiencies and cost savings.

The Clients' Revolution, Part II

The Eversheds report we discussed last week is worth a continued look.

The British international law firm commissioned a study that included 130 General Counsel and 80 law firm partners, and one of their primary findings was this:

The legal sector is entering the modern world where, like every other industry other than health care and auto repair, the balance of power favors the client.

"76% of legal clients and 75% of partners say that the current balance of power in the client-lawyer relationship is now with clients. A majority of both groups believe the shift to a client-led market will be permanent."

"Many managing partners have recognised that they are becoming primarily service providers and that their previously dominant role at the centre of the client-lawyer relationship has irrevocably altered."

According to the report, this move into the "modern world" (one which other professions have been embracing -- or forced to embrace -- for years) has some overlapping and concurrent drivers.

• The recession has pushed technological innovation up the agenda.
  

When asked about their greatest challenge over the next ten years, partners rarely (< 10%) cited the effective use of technology in the Eversheds 21st century law firm report in 2008. The recession seems to have changed this: 48% of partners are now offering technological solutions
directly to their clients in order to streamline services and a significant number of managing partners said they were keeping up the investment in IT despite cost reduction pressures.

• Clients are actively outsourcing and using technology.
  

The greatest change over the past two years has been among clients whose appetite to outsource and use technology has increased. Just over a third (38%) of General Counsel were actively implementing or considering outsourcing low-level work to low cost jurisdictions and a further 29% were receptive to the idea of outsourcing provided they had suitable work. 58% of clients are implementing or considering technological solutions to standardise processes. However, their shift in attitude is not equaled by private practice: over half (56%) of clients reported that they had not received offers of alternative resourcing from their external advisers as a result of the recession.

• The recession is driving efficiency.

The drive to better and more efficiently resourced legal work has received a huge boost from the recession. 73% of clients said that they are implementing better and more efficient resourcing of legal work. A majority of law firm managing partners recognised that the need to be more efficient was key to being a sustainable business. Efficiency is the area in which they are driving the most change as a result of the recession.

Technology, outsourcing, and efficiency. It's becoming a familiar mantra.

The Clients' Revolution

Evershed's report on the post recession legal sector for 2010 confirms and expands upon the observation we posted two weeks ago: The recession itself was not the cause of current changes in the business of law as much as it was an accelerator.

The London-based international firm commissioned a study that included 130 General Counsel and 80 law firm partners, and one idea the study explores is:

"When the severity of the recession became apparent at the end of 2008, opinion was divided as to what this meant for the legal market. Would it bring about a new world order, or would the market revert to its pre-recession shape as soon as the cycle swung up again?"

Pursuing that question, the study asked if the participants thought the recession would have a lasting impact on the profession?

A resounding majority (78%) answered “Yes”.

But the study then puts the recession within the context of a greater, inevitable change for which the profession of law was due.

"However, the recession in itself was not thought to be the key driver of change. What it has done is accelerate other significant, long-term drivers of change. Some law firm managers believe that this change has been accelerated by as much as ten years."

Two of the primary drivers the report identifies are globalization and technology. To further underscore the profound effect of the influence of technology, though, it's arguable that the globalization of legal services would not be possible without the technology, making globalization more of a subset of the technology.

One of the key byproducts of these changes, according to the study, is that clients are now taking center stage. The three pillars of this change are seen in:

• Legal sector enters modern world -- 76% of legal clients and 75% of partners say that the current balance of power in the client-lawyer relationship is now with clients. A majority of both groups believe the shift to a client-led market will be permanent.

• Clients drive change in legal services -- Partners and clients said that the increasing power and importance of General Counsel was almost as important a driver of change as globalisation and the shift to the East.

• Fee levels set for long-term decline -- The vast majority (90%) of General Counsel said they were under internal pressure from their Finance Directors or equivalent to provide better value, efficiency and cost reductions. 60% of General Counsel said they had already reduced their overall external legal spend.

It would appear that we're now gaining proper perspective from the fall of 2008 to start talking in terms of "effects" rather than just "causes".

The New Practicality

Since this blog's overarching interest is in the trends that are surfacing and shaping the business of law, on occasion it's helpful to step back and see how some of the individual topics we've been tracking are coalescing as a whole.

Law.com ran a piece the other day by Ari Kaplan which hits on two of the trends we've been watching, and the article not only confirms our observations, but it inspires a new term: The New Practicality.

The two tenets of the New Practicality are:

• The present state of staffing/hiring dynamics are impacting the majority of those entering the profession.

"There is a real awareness that the hiring landscape is forever altered, but it is too soon to determine what the contours of that new normal will be," says James Leipold, NALP's executive director. "Law schools face real challenges because the demand for new graduates is going to be compromised for a while," he adds.

"One sobering statistic about associate employment: In its annual study of associate attrition the NALP Foundation found that 32 percent of associate departures in 2009 were the result of firm downsizing -- compared with 0 percent in 2006."

No matter how you look at it, that is a significant number.

• There is an emerging demand for practical skills.

"The interest in practical skills, such as firm citizenship, professionalism, project management and client development, is being driven by a new culture of efficiency and higher expectations."

"... Chris Simmons, managing partner for the Washington Metro Region of PricewaterhouseCoopers aptly characterized those new duties: "What you think is the hard stuff (technical proficiency) is really the easy stuff, and what you think is the easy stuff (soft skills) is the hard stuff," he said. "Financial pressures in law firms are requiring individuals to prove their relevance," he added."

What is interesting is that the driving force behind the New Practicality is not just the economy; it's really the vertical access to information provided by the internet.

To the layperson, even twenty years ago, the practice of law was something that took place behind closed mahogany doors and drawn velvet curtains. Most people didn't have access to or the understanding of what lawyers were actually doing. Most clients only saw the final product.

The internet changed that by providing access to information that, to some degree, opened a window of transparency into the inner workings of law firms and legal departments.

While the economic turmoil of '08 caused clients to tighten financial demands on their attorneys, clients wouldn't have known to turn the screws if they hadn't become more savvy consumers via the changes brought on by the digital world of the internet.

Previous economic pinches didn't result in a New Practicality, because clients didn't realize there could be any other options.

Ethics Opinion on Cloud Computing

After a request from a member of their bar association, The North Carolina Bar studied the ethics of using cloud computing -- also known as Software-as-a-Service or SaaS -- in a law firm, and they've finished drafting a proposed Formal Ethics Opinion on the matter.

The American Bar Association's Legal Technology Resource Center describes SaaS computing as the following:

"SaaS is distinguished from traditional software in several ways. Rather than installing the software to your computer or the firm's server, SaaS is accessed via a web browser (like Explorer or Firefox) over the internet. Data is stored on the vendor's data center rather than the firm's computers."

The North Carolina Ethics Opinion clearly states the central question:

"SaaS for law firms may involve the storage of a law firm's data, including client files..., on remote servers rather than on the law firm's own computers and, therefore, outside the direct control of the firm's lawyers. Given the duty to safeguard confidential client information... may a law firm use SaaS?"

The Ethics Opinion concluded that SaaS computing is acceptable by lawyers and law firms, provided that:

1) "Steps are taken effectively to minimize the risk of inadvertent or unauthorized disclosure of confidential client information and to protect client property, including file information, from risk of loss...

Although a lawyer has a professional obligation to protect confidential information from unauthorized disclosure, the Ethics Committee has long held that this duty does not compel any particular mode of handling confidential information nor does it prohibit the employment of vendors whose services may involve the handling of documents or data containing client information. "

2) The law firm should be able to answer a number of questions, including:

• Who has access to the data besides the lawyer?

• Who owns the data -- the lawyer or the SaaS vendor?

• How does the SaaS vendor, or any third party hosting company, safeguard the physical and electronic security and confidentiality of stored data.

• Where is the data hosted? Is it in a country with less rigorous protections against unlawful search and seizure?

• If the SaaS vendor goes out of business, will the lawyer have access to the data and the software or source code?

• How often and on how many geographically distinct servers does the data get backed up?
  

As a Legal Process Outsourcing company with years of experience in data security on third party servers, the North Carolina Bar Association's opinion seems entirely pragmatic.

"...the Ethics Committee concludes that a law firm may use SaaS if reasonable care is taken effectively to minimize the risks to the confidentiality and to the security of client information and client files. However, the law firm is not required to guarantee that the system will be invulnerable to unauthorized access."

Project Management for Attorneys

Following up on last week's post discussing LegalBizDev's survey of AmLaw200 decision makers, Legal Technology News highlights a crucial component in the evolution of alternative billing:

Project Management in the legal profession.

No one would argue that attorneys currently manage projects every single day. But that's not the same as Project Management. Anyone who's dealt with any sort of construction, from home remodeling on up will agree with the following from the LTN article:

"According to the chairman of a firm with more than 800 lawyers, "... in the world of construction, architects, engineers, and contractors have been working on a fixed-price basis ... for a long time ... There is a body of learning ... about how to estimate, how to contract, how to define scope, how to manage changes, allocate risk, how to manage fee disputes, delays, [and] changes in scope [that could] be adapted to the legal profession."

That's Project Management.

One reason it's important to single out Project Management as crucial to the success of alternative billing is because it is a key skill set in which most attorneys have not been trained.

In fact, not only have they not been trained in it, many lawyers have been encouraged to do just the opposite.

"As a CFO of a firm with more than 1,500 lawyers explained, most lawyers have worked their entire careers under the billable hour model, in which "the more hours that got charged, the more money [they] made. And so they've never really had to manage [budgets]."

Crafting accurate estimates, clearly defining changes in scope, and providing timely discussions about change-orders are the keys to success with "fixed price" billing.

Which raises the very interesting idea of a legal career track specifically for Legal Project Managers, such as the initiative being undertaken by Orrick, Herrington & Sutcliffe.

And, short of a fully committed in-house project manager, it would seem to make sense for attorneys to be trained in the fundamentals that many other industries exercise when it comes to bidding and executing fixed-rate services.

Survery predicts increased hiring. Or does it?

Many in the blogosphere have latched onto a survey released last week by Robert Half Legal stating that 26% of attorneys polled indicated that their firms expect to increase legal professional headcount in the coming year.

While we hate to rain on anyone's parade, a closer look at the numbers doesn't support a whole lot of optimism.

First, let's look at the flip-side of the survey. While 26% said their firms expected to increase staffing, 67% anticipated no change. In other words, more than two thirds of respondents said headcount would remain flat.

That means the profession as a whole is looking at another year with two thirds of employers contributing to the current backlog of unemployed lawyers and new associates.

In fact, the press release touting the study discusses the difficulty firms currently face when they actually do post job openings, because they are overwhelmed with candidates.

"But locating the best candidates may be difficult, the survey results suggest. Forty-one percent of respondents said that it is challenging to find skilled legal professionals in the United States, despite high unemployment rates. Volkert noted that a single legal posting can generate several hundred resumes. "The sheer volume of applicants often makes the process more complicated for hiring managers," he said. "As a result, some firms and departments are relying more heavily on their professional networks, internal referrals and specialized recruiters to identify the best candidates for open roles."

But the real reasons to temper optimism are the results of the same survey from previous years.

It's neither surprising nor encouraging that in better financial times more than half of attorneys surveyed in 2004, 2005, 2006, 2007, and early 2008 expected increased hiring.

What is discouraging, though, is last year's survey. Dated March 26, 2009 -- well into the recession and a mere six weeks after Black Thursday, when law firms across the country began slashing jobs -- the survey found that 25% surveyed anticipated hiring in 2009.

"MENLO PARK, CA -- Despite a down economy and layoffs in the legal field, one-quarter (25 percent) of lawyers interviewed recently said their organizations would be adding personnel in the next 12 months."

Essentially the same number that reported in the affirmative this year.

Unfortunately, we know how last year turned out.

Microsoft Expands Legal Process Outsourcing Initiatives

Legal process outsourcing is one of the more flexible, adaptable trends in the business of law, as it can be applied to tasks as small as individual contract review or as large in scope as all-encompassing departmental or litigation support.

Well, this one is large.

Microsoft recently announced that they are outsourcing multi-jurisdictional legal support work, including legal research.

Why is this significant? Because this is an expansion of Microsoft's earlier test programs with LPO, which means they found the experience efficient, productive, safe, and valuable.

And that is a serious endorsement from one of the most dominant companies on the planet.

Microsoft dipped a toe in the LPO water five years ago when they began outsourcing associate-level IP and patent renewal work to qualified, international attorneys.

If they dipped a toe in the water five years ago, they're wading in now. Because this new agreement is branching out to general legal support work, operating separately from the IP and patent work.

According to Legal Week, "News of the outsourcing comes after Microsoft cut its legal budget by 15% over the last two years, leading to a 5% reduction in headcount. Before the cuts, Microsoft's legal department had an annual budget of $900m (£570m) and 1,050 staff, including 450 lawyers."

Microsoft's arrangement with Indian firm CPA is similar to the legal process outsourcing utilized by mining company Rio Tinto, which involves a team of 18 lawyers handling tasks such as contract review, drafting and legal research.

And this seems to be the sweet spot of legal outsourcing -- utilizing lower-cost yet fully trained international attorneys to complete the more redundant associate-level work, from one-off projects to scalable endeavors featuring teams of attorneys.

Associate Hiring Part II

Following right on the heels of last week's post is a timely first-person account of a recent law school graduate who was not offered a position.

With the backlog of legal hiring, it's not a surprise that the ranks of the no-offers are swelling.

But when those left frustrated and unemployed are coming out of Harvard Law, it puts the difficult situation in a different, more desperate light.

The author offers advice to other Harvard Law no-offers, while confirming the underlying fundamentals that are squeezing all recent grads, summer associates, and laid-off associates:

"1. It’s not our fault. The economy changed unexpectedly, and things are tough all over.

2. In fact, as Harvard graduates, we have more opportunities. Most people encountering employment challenges in this economy are in worse positions than we are.

3. The loss of Biglaw opportunities means we may find something else from which we derive immense satisfaction, and which we may never have otherwise pursued.

4. People with offers but no start dates are in a poor position as well. Even those with deferrals of specified duration face the possibility of an unexpected deferral extension, or even an outright retraction of their offer. In fact, with things as bad as they are, there’s really no guarantee that even those who manage to start work won’t find themselves laid off somewhat soon. Biglaw right now simply doesn’t offer the degree of security it used to offer. Everybody is in the same boat."

It seems safe to assume that five years ago the author of this article would have been offered exactly the job he/she trained for and expected.

Instead, he/she is both a participant in -- and a victim of -- the log jam of future lawyers feeling the reverberations from the Fall of 2008.

To Tweet Or Not To Tweet

Any conversation about marketing legal services these days is bound to include a discussion about social media. For some professions and industries, Twitter and Facebook are a slam dunk.

For others, including attorneys, it's not quite as simple.

There are those who maintain that anybody not utilizing Twitter and Facebook are completely out of step. But Eric Turkewitz has an interesting blog post about the less discussed but equally relevant downside of social media as a professional marketing tool.

The first potential pitfall pertains to overly enthusiastic posting. Anyone who has been waiting on a colleague or vendor for work to be delivered, only to see semi-hourly tweets or FB posts, knows the resentment that can build.

The lesson here is to make your posts occasional and relevant.

The other potential downside to social media posts is the appearance of sloppy work. The nature of the legal profession requires reason, accuracy, thoughtfulness, and thoroughness. So a type-o riddled, grammatically butchered post is going to immediately defeat its purpose.

Now, many may think that the risk of undercutting your credibility with poorly written posts might be short lived. But, interestingly, they might be wrong.

Anecdotal evidence seems to suggest that the algorithms used in Google's searches disproportionately weight Twitter and Facebook accounts to appear on the first page of search results. According to Eric Turkewitz's personal research:

"I wondered, if a potential new client was given my name by another, and that person Googled me, what would they see?

Well, the first page of my results shows three separate social media sites: Twitter, Facebook and LinkedIn. They show up there despite the fact that I've not exactly been the biggest user of those sites over the last year.

So this is what the potential new client will see, even if you have an active presence on the web. Since I've written over 800 posts in this space since I started in November 2006, and received thousands of inbound links, I probably fit the definition of active presence. And yet, those three sites still manage to crowd out links from so many others."

Of course, this is all fluid, given google's very recent announcement of "social search", which may ultimately be a competitor of facebook, as well as their new agreement with twitter to bring real-time tweets to search results.

Regardless, the lesson for attorneys considering -- or already exercising -- a Facebook or Twitter presence is this: Your social media contributions may carry disproportionate weight within search engine results.

Potential clients may form opinions and make decisions based on those search results.

If you are an attorney using social media, do a general google search on yourself and monitor the page ranking of your social media accounts.

And then tweet accordingly.