Strategic Legal Technology

Innovators at the Barricades by Bruce MacEwen at Adam Smith, Esq. argues that legal process outsourcing (LPO) is a disruptive force for law firms, citing Clayton Christensen’s The Innovator’s Dilemma. 

“Outsourcing is here to stay” writes MacEwen. He describes different flavors using a 2 x 2 grid: location on the x-axis with offshore or onshore ("foreign” or “domestic"); ownership on the y-axis with captive or 3rd-party ("owned” or “rented"). MacEwen notes that this model is “by no means exhaustive; it’s merely indicative and representative”. This is a good model for thinking about centralizing support services.

LPO will have a big impact: “Once clients begin to get accustomed to the notion of being able to unbundle, or unchunk, legal engagements - be they disputed matters or transactional ones - there’s potentially little end to it.” MacEwen argues that LPOs are likely to go upmarket, meaning they perform higher value work, which will threaten law firms - and also force them to innovate and move up the value chain.

Working for an LPO, my view is that there is a clear line between legal support and law practice. An LPO cannot practice law so I think there is a clear limit to how far “up the value chain” an LPO can go.

Turning the “LPO moving up the value chain” idea on its head may well be a more helpful way to think about the legal market. The very forces that enabled the birth of the LPO industry - globalization, technology, and shifts in buyer attitudes - continue to push legal work toward standardization and systemization (as Richard Susskind discusses in The End of Lawyers?). That means work once done only by associates can be performed by more efficient operating models offered by alternative sources such as LPOs, contract attorneys, virtual law firms, online legal resource providers, and still-to-be-invented providers.

So it is likely that repetitive tasks once the exclusive domain of partner-track associates will continue to be unbundled and move to more cost-effective approaches. Document review in litigation is the classic example. Even without LPOs, law firms’ ability to offer this service at associate billing rates is already threatened by corporate clients contracting directly with contract lawyer staffing agencies. An innovative law firm might even decide it makes sense to partner with an LPO to do the high volume, routine work.

Given this shift, MacEwen questions the fundamental premise of large firms, citing Ronald Coase’s Nobel Prize winning The Nature of the Firm. He suggests that LPO-enabled unbundling calls into the question the “why” of law firms: “Why create the management overhead, bureaucracy, and administrative friction entailed in any firm of scale? Why not just purchase whatever is needed, when it’s needed, on the open market?”

That is a good question indeed, but LPO is symptom, not cause. The cause is corporate client price sensitivity and quest for value. These have changed buyer (general counsel) behavior, which in turn has propelled growth of law firm alternatives. Smart large firms can still profit from their scale. For example, they can

• Coordinate across practices and geographies to serve global clients. Cross-selling is not only a profit lever, done correctly, it is a service enhancer.
• Assemble large teams of highly skilled and experienced lawyers to work on tough, big cases or deals.
• Serve as expert general contractors with project management skills to ensure the swift and cost-effective resolution of client matters. Many general counsels will happily delegate that function.

MacEwen raises provocative questions that large firms need to consider carefully. I have never been persuaded that “big is better”. Big is only better if size really confers benefit and the organization actively takes advantage of its scale. Big firms that adopt sound strategies and execute effectively will continue to thrive. Those operating on auto-pilot may indeed lack a good answer to the question MacEwen / Coase asks.

[Note: above is a modified version of my Integreon blog post, LPO as a Driver of Law Firm Innovation]

The College of Law Practice Management and The American University Washington College of Law are hosting “1, 2, 3, RESET! The 2010 Futures Conference and Symposium” on October 22-23 at AU in DC. I encourage anyone interested in the future of the legal market and law practice management to attend. (I am a COLPM Trustee.)  

This conference is for law firm leaders, managing partners, executive directors, c-suite law firm officers, consultants, law school deans and anyone else who plays a leading role in the business of practicing law. Click here to download the PDF program. Topics include The Impact on the Legal Business of Capital Markets’ Growing Interdependence, A Sea-Change in London (re equity investments and alternative business structures for law firms), and a wrap up session Now What? led by American Lawyer editor Aric Press. Other speakers include Peter Zeughauser, Simon Chester, Steve Matthews, Tim Corcoran, Marc Lauritsen, and Patrick Lamb.

I’ve attended many College meetings and they are outstanding. Unlike most conferences, vendor sponsorships play no role in the program or speaker selection. A committee of College Fellows works hard to identify topics and speakers based on the issues most likely to affect law practice management in the coming years. We are limiting the conference to 150 attendees so that we can ensure high quality discussion.

I hope to see you there.

About two weeks ago I got a new Dell notebook PC from my company. Ordering an extra battery for it on my own from Dell.com turned into a personal productivity nightmare. Dell’s famed model business model feels creaky, which may hold lessons for BigLaw. 

After getting my new PC, I went to Dell.com to order a docking station and battery. The docking station was easy to identify Not so the battery. I could not find the exact model of my PC, Latitude E4310, at dell.com. Hmm. I found batteries listed for Latitude E but the web descriptions did not include compatibility listings by PC model numbers. I lost quite a bit of time trying to figure out which battery was right yet ended up ordering an incompatible unit. As a veteran web shopper and ex-CIO, I found this rather frustrating.

Fixing this was a time sink, which I attribute to Dell’s, in my opinion, inadequate e-commerce capabilities. In getting the return merchandise authorization (RMA), the agent was unable to pull up my correct e-mail address, even though she had my order number. So I had to provide it orally. So much for back-end systems integration. The e-mail confirming my return lists the battery as ‘CUS BTRY 12C SONY’, which bears no resemblance to the ‘9-Cell/85 Watt-Hour Primary Battery for Dell Latitude E/Precision Mobile WorkStations M2400/ M4400’ that I ordered. This does not inspire confidence.

To compound frustration, I could not order the correct battery with the same person who takes care of returns. Transfer and hold. The sales person then tells me a part number to buy. I inspect it on the website but do not see a definitive listing that it is compatible. I ask for other choices. The second part number he gives me is not on the website at all. I ask about this and the agent tells me that not all batteries appear on the wesbsite. I find this baffling because I have no way to compare specs and prices.

So I ask to speak to a supervisor. After a long pause, I am connected with customer care. The agent immediately says “Our systems are down for updating, can you call back.” That is not what I call ‘customer care:’ I am amazed that Dell would take systems down at 9:30am Eastern. Further, one might expect customer care to offer to call back when the system is available.

At this point, I went to plan B: Twitter. My Tweet to @MichaelDell put me in touch with with someone in Dell Global Social Media. It turns out that since my company, a business customer ordered the computer, accessories for it are not listed at dell.com, which I was told was for consumers. That is not clear on the website. Moreover, I cannot be the only person with a company-provided computer who wants to order accessories and expense them.

Once I was in touch with a person, Dell did make the situation right and I got the battery I needed quickly. It is hard for me to understand though how or why anyone might consider Dell an e-commerce leader.

Dell was the PC king for years. They now lag HP and Acer in market share. Dell stock price is way down from its all-time high. A business model that worked magic for many years stopped working as well as it had. Beyond any IT and e-commerce lessons, law firms might take this as a cautionary tale about their own business models. How many ‘tried and true” law firm models will work in new economic circumstances. For an example of pressure on law firm models, see Adam Smith, Esq.’s post Innovators at the Barricades, in which he discusses the impact of legal outsourcing on BigLaw.

The Recorder 19 July 2010 article Is Adding a Second Tier for Law Firm Associates a Good Thing? asks a great question. The answer is “yes, but….”. 

The author, Justin T. Miller, J.D., LL.M., CFP®, is a regional director of the Legal Specialty Group at Union Bank’s The Private Bank. He writes

“Firms are finding that a two-tiered associate structure can be an efficient profit model in that the second tier of ‘non-partnership track associates’ are paid sometimes as much as 50 percent less than the first tier of “traditional associates,” but may be billed to clients with rates that are only 25 to 30 percent less than those of the traditional associates.”

Miller notes that multi-tier partnerships are common now but that tiered non-partner lawyers is a “recent development.” I agree. Though several BigLaw firms have staff attorney programs, these lawyers typically work only document review. Miller seems to envision a broader remit.

Such a move is consistent with Richard Susskind’s “unbundling” or “dis-aggretating” legal services (see The End of Lawyers? and the view I expressed in my post The Right Resources to Solve Legal Problems that in-house counsel must consciously decide what mix of human resources is most appropriate to work on a matter.

In concept, I think tiering associates is a great. To do it effectively, however, BigLaw needs a major “operating system” (OS) upgrade. That is, large firms would have to improve their management capabilities and approach. Here are some specifics to address:

CASTE MENTALITY. As Miller notes, “If implemented correctly, a non-partnership track associate should be considered a full-time member of the legal team.” The caste system still thrives in BigLaw and works against integrating professionals who lack the same pedigree as partners.

TALENT MANAGEMENT. Lawyer recruiting, assessment, and career management are all geared toward elite law school graduates. Who will recruit the new type of lawyer? What are the appropriate criteria for hiring? What is the career path for this new tier of lawyers? Firms would need to answer these and other questions.

PROCESS FOR DELEGATING WORK. Once on board, who allocates work to lower level lawyers and how? Partners and senior associates may (emphasize may) be good at assigning work to associates, but do they have skill, training, and know-how to delegate work “down the chain.” Doing so requires a deep understanding of the deliverables and what resources can most effectively produce them. For example, consider the common task of contract drafting. As Kingsley Martin notes in Contract Checklists-does sequence matter?, few lawyers approach contract review systematically. Without a process in place now, effective delegation is that much harder.

MANAGEMENT SYSTEMS AND GOVERNANCE. Large firms may carefully review substantive legal work but few have formal systems for consistently measuring its quality.The concept of metrics is, at best, new to large firms. So one element of a management system is developing new metrics. Another element is a way to coordinate multiple work streams, also known as project management. BigLaw is just beginning to digest and embrace project management.

So I think a successful non-partner track lawyer program will require a major OS upgrade. Firms that can upgrade their OS to manage a new lawyer tier effectively - and that includes marketing it to clients - stand to win the favor of their clients. And that should translate to market and wallet share, which is critical in the current environment.

American Lawyer magazine has just released its 2010 large law firm library survey. The results are interesting but not surprising. 

Law Librarian Survey 2010: More Bang, Less Bucks writes-up the results and has links to survey data (free registration required). Almost one-half of the 86 firms replying (45%) reported staff cutbacks. The article raises a good question - what next? Here’s the quote:

But in interviews with a dozen library chiefs, one big fear kept resurfacing: How long can they keep cost-cutting? “There was a lot of fat,” says one library chief. “But now you’ve gotten rid of the fat.”

In general, firms seem to recognize that they can no longer cut their way to profitability. Whether that recognition spares libraries future cuts, however, is not yet clear.

I enumerate below some of the results I find most interesting. Before doing so, however, I offer my usual caveat about ALM surveys. Year over year comparisons are most likely not reliable. Unless the same 86 firms replied in both 2009 and 2010, inter-temporal comparisons are risky at best. For example, in answer to “What other departments within your firm are you responsible for?” knowledge management rated 19% in 2009 and 40% in 2010. That is not consistent with anecdotal data I hear and I suspect a good part of the seeming shift reflects changes in the respondent mix year-over-year.

So, for my interesting finding, I focus only on same year data:

• Of 35% of firms anticipating moving to to a single online legal research service, 70% lean toward Westlaw and 30% toward LexisNexis.
• 82% or respondents do NOT plan to subscribe to WestLawNext in 2010. [Updated 15 Jul 10 - I inverted the yes/no responses accidentally when I first posted]
• 72% firms answered yes to “Is your firm’s library function centralized?” Yet in answer to “How many of the firm’s offices have libraries and library staff?", 37% answered more than half. Either I’m missing something or respondents have a different idea of what ‘centralized’ means than I do.
• About 85% of firms have flat rate contracts with both Lexis and Westlaw. I’ve heard a lot of talk about moving to sole source but it sounds like few firms have pulled that trigger yet.
• The average firm spends about $3.7mil for online resources; the median about $3.0mil. (I added up results of 3 questions to get to these totals.)
• WestLaw takes in almost 70% more than LexisNexis. Respondents spent, on average, $1.7 million with WestLaw and $1.0 million with LexisNexis.

It’s been six months since I’ve done a Twitter roundup. I was reminded that I had not done one by a friend who said he misses them.  

I definitely blog less since I started Tweeting 18 months ago. Articles I read or ideas I have that, in the past, might have led to a blog post now end up as a Tweet. Also, before I started Tweeting, I used Roundup posts to cover several short items, none of which seemed worthy of a stand-alone blog post. Tweeter has also assumed that function.

While I welcome additional followers @ronfriedmann, I don’t expect all blog readers to get into Twitter. So I reproduce here highlights of recent Twitter posts (in this instance, over the last six weeks). I try to make my Tweets interesting; when I cite an article or another Tweet, I try to add a “NanOpEd", which is short for nano opinion editorial, that is, a very short comment. It’s been a fun challenge to add a thought having only 20 to 80 characters!

Are any law firm Tweets interesting? I follow a few - all boring. Is that b/c I don’t practice? Or explanation?

Would a futures market for future success of BigLaw help us understand current market direction?

BigLaw move to budgets, AFA, + greater transparency may foster explicit price competition? What of value and outcomes?

Business Week on superstar athletes (LeBron James) and lawyers (eg Fred Bartlit) http://bit.ly/aKVE5Y || when stars can’t get enuf comp

Dechert Trades Help Desk for Keno Kozie LTN http://bit.ly/9XNmX1 || More BigLaw help desk outsourcing. Troutman Sanders earlier in June

RT @pwoldow Calling all General Counsel - Legal Project Management Moves In-House http://bit.ly/am53OV || common sense at last?

NY State Bar Launches Task Force to Examine Changes in Legal Profession NLJ http://bit.ly/d4h059 || NYSBA release http://bit.ly/9A1p5K

Reading LawShucks: Eversheds Lays Off 60 in Outsourcing http://bit.ly/dkFRDN

RT @reesmorrison Codean software maps + links defined contract terms http://bit.ly/aFNmWg || pr rls http://bit.ly/aSn364 | Like DealProof?

RT @AmLawDaily: Risky Business: What Law Firms Can Learn From Airlines and Hospitals http://bit.ly/db31Vu || #KM Value after action reviews

http://www.fronterion.com launches http://lpoethics.com/ || Good compilation of US and UK ethics rules and docs re legal outsourcing (LPO)

ALTI reports NetDocuments now has multiple large law firm customers. Will DMS cloud take over from enterprise systems?

RT @PosseList: Contract lawyer sues NYC law firm for not paying overtime http://sn.im/z6qiz || exempt v non-exempt. hmmm

Large law firms will almost certainly not return pre-2008-crash economics. BigLaw will remain immensely profitable but firms will need to manage themselves more effectively. And this includes how they staff to support lawyers. 

The most recent evidence of the ‘new normal’ is the Altman Weil Law Firms in Transition study. This ‘Flash Survey’

“found a clear consensus emerging among US law firms regarding changes… Over 75% of firms… believe that more price competition, more non-hourly billing and the use of project management to improve efficiency of service delivery will be permanent changes in the legal landscape. The primary impact… will be a greater focus on efficiency and productivity driven by client demands for cost control.”

Nonetheless, the study found that firms expect to maintain profitability by controlling cost. Of course, lawyer compensation and partner profit are the biggest cost items. Though profit is not usually considered a cost, doing so is a useful construct. First, profit per equity partner is the economic cost required to attract and retain a key factor input (economist-speak for the services a partner provides). And second, by re-classifying partners from equity to non-equity status, firms control the cost of that key factor input. Altman Weil found that firms will make fewer partners and rely more on contract lawyers (presumably in lieu of hiring associates).

The legal press focuses on what happens with lawyers; I focus on staff. On the staff side, the study found that two-thirds of firms cut staff in 2009 and 20% expect to do so this year. Altman Weil also asked about outsourcing: “Did your firm do any of the following in 2009? Will you do so in 2010? Outsource non-lawyer functions. Offshore lawyer functions.”

For outsourcing staff, 15.7% of firms said yes for 2009 and 13.8% for 2010. These results seem low. Already in 2007, the International Legal Technology Association (ILTA) staff survey found “37% of Large firms and 19% of Very Large firms obtain [various IT] services outside of the firm”. Further, in my day job at Integreon, I see growing interest in staff outsourcing in 2010 among large US law firms. For offshoring staff functions, the survey found virtually no interest in 2009 or 2010.

Outsourcing is not just about lower cost labor. It’s also about improving process and more favorable economics. I explain this rationale in some detail in my paper Outsourcing as a Strategy to Manage Support Cost and Variable Demand. It was first published in fall 2009 as a chapter in Implementing a Successful Legal Outsourcing Engagement, an Ark Group study by Michael D. Bell of Fronterion, an LPO analyst firm.

For a specific example of how outsourcing can control cost and improve law firm profit, see my Integreon blog post today, Middle Office Outsourcing Improves Law Firm Profit, which discusses an article in The Lawyer last Friday. That article explains that staff outsourcing helped UK firm Osborne Clarke improve profit in the face of flat revenue.

As a legal blogger, I fear living in an echo chamber. So it’s nice to find that some hot blawgosphere topics also engage the business world. I follow blogger commentary on Bloomberg Law as I suspect many do. So I offer here a different perspective on it, that of a financial analyst who tracks Thomson Reuters for a living. 

Paul Steep is an analyst at Scotia Capital. Reproduced here with permission is his June 29th analysis of Bloomberg law.

• “Our expectation is that Bloomberg’s revised legal offering will achieve a relatively small share of the legal information market over the next several years. We believe that the firm is continuing to work on developing and building out the product, which remains at an early stage in comparison to the entrenched offerings from Thomson Reuters and Reed Elsevier.
• Our expectation is that Bloomberg is focused on using a targeted strategy by leveraging its key assets in the initial iterations of the product to gain a foothold within the legal market. In evaluating the positioning of Bloomberg Law the firm appears focused on penetrating practice areas that best fit with the firm’s core assets (e.g., a sizable real-time news gathering force, and a large knowledge base of corporate information). As a result, we expect clients choosing to deploy Bloomberg Law will be in specific practice areas, most notably Intellectual Property, Insolvency, and Securities along with use for business development purposes within law firms.
• The firm has invested in developing a new web-based solution that offers clients the opportunity to access its legal research tools without incurring the expense of installing dedicated terminals. Bloomberg had previously tried to enter the Legal market with a product aimed at law firms, which was initially launched in 2004. The company faced issues in gaining adoption in the market primarily because it was only available through Bloomberg’s own terminals. A key difference in the current product iteration is the ability to have webbased access to the system, removing the requirement for a specialized terminal.
• In this iteration Bloomberg’s legal product appears to have improved its overall competitiveness with WestLaw and Lexis/Nexis. Bloomberg has made a significant investment in building links to relevant content (e.g., U.S. Federal and State legal information), aggregating legal opinions from a number of law firms, developing their own proprietary content in the form of legal digests in various topic areas. The firm has invested significant software development work in building a product that provides the key functions of a legal terminal (e.g., search, docketing, case citation, news). The company appears to be focused on building out the core data set across the product in order to meet law firms’ requirements.
• Our view is that Bloomberg represents a formidable competitor for the incumbent providers but WestLaw appears to remain in a dominant position given the strength of its data set and new product offering. We anticipate that Bloomberg is likely to gain traction in selected practice areas that build off the firm’s strengths in serving the financial community. Our plan is to closely monitor the adoption that Bloomberg Law is achieving over the next year as it continues to market its solution to law firms.”

Paul’s analysis is consistent with the anecdotal data I hear from my law librarian friends. Do not read too much into the fact that Reed Elsevier’s LexisNexis is mentioned only in passing. This is a financial analyst’s report focusing on the potential impact of a new entrant on a company he tracks; it is not intended to be a comprehensive analysis of the competition.

Comments on Bloomberg Law welcome.

What is the state of the practice support lawyer (professional support lawyer or PSL) among US large law firms? 

I have not heard PSLs discussed much lately. So at a recent knowledge management meeting, I asked each attendee to report his or her firm’s number of PSLs. We had 10 large, US-based law firms attending, with the number of lawyers ranging from about 200 to well-over 1000. Assume that this group is not representative; by definition, these firms self-selected for above average interest in KM.

The PSL numbers are low:

• Average: 1
• Range: 0 to 3
• Mode: 0 [5 firms]

However we slice it, the numbers are so low that normalizing for firm size does not even pay. And these reported numbers might even be bit of a stretch. Of the reported PSL, not all have that title or exact function. A few of these PSLs are staff attorneys who function as PSL. A few were simply characterized as “like PSL.”

Based on my KM experience over the last decade, these numbers were only a little bit lower than I expected. It’s not that the recession or Practical Law Company (PLC) did in PSLs, they never caught on in large numbers in the US or at that many large firms.

It will be interesting to see whether the alternative fee arrangements (AFA) become big enough to change the economics of employing PSL.

In In Law Schools, Grades Go Up, Just Like That, the New York Times reports today that some law schools have artificially boosted grades. It’s hard to know where to begin assessing what this means - and why it is awful. 

The article reports that

“In the last two years, at least 10 law schools have deliberately changed their grading systems to make them more lenient…. Law schools seem to view higher grades as one way to rescue their students from the tough economic climate — and perhaps more to the point, to protect their own reputations and rankings.”

What disturbs me most is the perhaps not so subliminal message that lawyers can fix problems simply by changing appearances without changing substance.

The schools argue that the grade adjustment is a competitive responsive. Inflating grades changes nothing except appearance. How about competing by changing the curriculum so that graduates are more valuable to employers?

With law schools saying, in essence, it’s OK to fake grades, surely it’s OK for lawyers to take other short cuts and ignore inconvenient facts or whole areas of knowledge.

With law schools ‘adjusting’ grades to make them look better, no wonder clients fear that alternative fees are just papering over old fashioned bill by the hour.

If it’s OK to paper over grades, then it’s OK to paper over ignorance of key aspect so law practice. (See, for example, Craig Ball’s excellent commentary on lawyers failing to understand digital data in Show No Fear - Lawyers need to — and can — learn the language of e-discovery, Law Technology News, 1 June 2010).

It’s OK for law schools to adjust grades to look better. After all, there’s no law against it. So it’s OK to advise clients to take imprudent and immoral course of action; after all, there’s no law against it.

Or perhaps by “adjusting” slightly what words really mean, it’s OK for lawyers to advise that acts long-considered torture are really, after all, not torture.

The public view of lawyers is already bad. The practitioner’s view of the academy is already bad. Gimmicks like adjusting grades can only contribute to cynicism.

Recent articles provide a good snapshot of law firm office design; sadly, working virtually does not appear to be on the agenda. 

Changing Space - Law firms (slowly) respond to egalitarian trends in office design (ABA Journal, June 2010) reports on BigLaw office design trends. A few firms are changing traditional design elements: Seyfarth Shaw in Atlanta has lawyer offices all the same size; Orrick in NYC has put associate offices in the interior; and Morgan Lewis in DC used the great top floor views not for partner offices but for a common dining area. These example notwithstanding and

“despite the trend toward more open, collaborative and flexible spaces, law firms have been slow to adopt practices common among their corporate clients and other professional services firms: one-size or universal offices, open floor plans, and ‘hoteling’ arrangements where professionals reserve offices when they need them.

Rethinking the Law Firm Workplace (American Lawyer, May 2010) reports that firms “want a lighter and brighter space that is progressive and sophisticated. They want more collaborative work settings where attorneys and support staff can mingle and share ideas openly and casually… The most important concept in creating a more effective workplace lies in designing space that fosters collaboration. For many firms, the opportunity to share information at unexpected locations in the office has proven invaluable.” I suppose this is some progress.

Contrast these two articles, however, to an Information Week blog post , Radical IBM: 200,000 Home-Office Workers (1 June 2010), which reports on an IBM employee who regularly works virtually (remotely) from the Canary Islands. IBM is moving from a culture of presence to one of performance. Since teams are formed by professionals located in multiple locations, it turns out not to matter that much where any given employee is.

I frequently hear lawyers and law firm managers assert that working virtually would interfere with collaboration. As I suggested in my January 2004 Law Practice Management article, The Future Law Office: Going Virtual, virtual work does not have to mean never coming to the office. Firms can take steps to encourage in-person collaboration when and as needed.

If being in the office is so critical, how do skeptics of working virtually explain that, according to a Gensler architect cited in the ABA Journal article, “as many as 25 percent of their attorneys are working away from the office at a given time"?

Could it be that lawyer and law firm managers are simply ignoring reality? Tradition dies hard but ignoring the truth has consequences. When I look at the average AmLaw lawyer overhead of around $200,000 per lawyer, I can’t but help think that’s buying lots of extra space. And whether lawyers bill by the hour or using alternate fees, wouldn’t many rather save commute times on some days and work from home?

Many law firms profess to be green - but how many take into consideration that a culture that requires physical presence in the office spews unnecessary carbon? Working virtually - either from home or suburban satellite offices - would save many a trip by car. Furthermore, maintaining individual lawyer offices means that much more space to heat, cool, or light.

So, what am I missing? Why aren’t firms moving to reduce occupancy and free-up lawyer time by supporting virtual work?

Last week I read with interest Jordan Furlong’s blog post The evolution of outsourcing. He notes that though LPO is “in its relative infancy, legal process outsourcing has already had a huge impact on the legal services marketplace”.  

Jordan focuses on two effects outsourcing has on the legal market:

“The first affects LPOs themselves: they now need to move their value proposition beyond cost savings in a market they helped to make more sophisticated. The second affects everyone: the legal profession’s response to LPO is having an unexpected effect on how legal work is distributed and how legal resources are allocated.”

Working for an LPO provider, I agree that that simply offering lower labor cost is not enough. I see my company and other established LPOs working hard to improve processes, introduce technology, increase efficiency, reduce cost, and achieve better outcomes for the lawyers whom they support. Personally, “I’ve put my money where my mouth is” twice. First, I joined an LPO three years ago. And second, I recently made a switch inside my company and now focus “legal operations consulting” to help do exactly that.

Jordan was perhaps even more prophetic than he realized when he wrote that “a surprising number of law firms are adopting — and adapting — the outsourcing model themselves.” Last Thursday, Legal Week published Taylor Wessing set to create arm in Cambridge for standardised work.

The article reports that the Anglo-German law firm will set up “an affiliated corporate services business to offer clients standardised work.” Their goal is to offer lower-cost options for routine work such as corporate due diligence. Eventually “it is likely that the firm will offer the service to third parties, including other law firms.” The firm may also partner with an IT outfit to streamline work.

“Adopting the outsourcing model” as Jordan suggests is exactly right. From the limited information I have, it sounds like the firm’s Cambridge unit will be a captive LPO.

I think this development is good news for the legal market. It further validates that law firms must respond to corporate pressure for (1) options, (2) lower cost, and (3) process improvements. Given that I’ve been writing about process improvement for a long time at this blog, I am glad to see more action toward that goal. Of course, I also see it as an explicit endorsement of the LPO approach.

Until recently, the corporate law market was served almost exclusively by in-house lawyers and large law firms. Today, however, clients can choose from among boutiques, regional law firms, LPOs, and now, law firms as LPOs. This choice and competition foster innovation and drive costs down - good news for clients. Firms like Taylor Wessing that innovate benefit. And LPOs benefit because in a diverse world of providers, I see LPOs as having the skills, experience, know-how, technology, and global platform to win a good share of the work to support lawyers.

I published a variant of this post last week at the Integreon blog, LPO Now Driving Law Firms?

What will it mean in the future to be a lawyer? 

For an excellent, sweeping view of the future, read Richard Susskind’s The End of Lawyers?. On his website, Susskind asks “what elements of their current workload could be undertaken more quickly, more cheaply, more efficiently, or to a higher quality using different and new methods of working.” He answers

“that the market is unlikely to tolerate expensive lawyers for tasks that can be better discharged with support of modern systems and techniques [and that] the legal profession will be driven by two forces in the coming decade: by a market pull towards the commoditisation of legal services, and by the pervasive development and uptake of new and disruptive legal technologies.”

Two recent E-discovery (EDD) items instantiate the issues that Susskind discusses. My colleague Babs Deacon wrote a great Integreon blog post, Early Case Assessment - The Emperor Has No Clothes. She explains that early case assessment (ECA) is a process, not a software application, and a process that takes significant skill and thought. She notes

“If litigators are beginning to agree that e-discovery is really just part of discovery, then all litigators will have to have some level of comfort with e-discovery management — from Information Management at the far left of the EDRM framework through Presentation. No litigator, or even an attorney in another practice area, should be truly free from the responsibility of attaining basic competence in this area.”

She notes that comparatively few lawyers have the requisite skill. This means that lawyers (A) should learn more and (B) rely on professionals who know ECA. She continues “don’t sideline ESI attorneys as ‘nerds’ and push them off of the partner track — a fear I’ve heard articulated more than once from junior associates.” I too have heard this and seen how lawyers who branch out from skills beyond the most basic, core, traditional law practice are penalized, not praised.

Well-known EDD commentator Craig Ball comments similarly in Show No Fear - Lawyers need to — and can — learn the language of e-discovery (Law Tech News, 1 June 2010). Ball asks “How many times have you heard a lawyer tell a court that he or she doesn’t ‘understand computer stuff’?”. He acknowledges the challenge of learning how to understand digital data relative to paper but argues lawyers must do so.

I agree with Babs and Ball that lawyers should learn EDD. A handful of AmLaw 100 firms also agree, the ones that have e-discovery practice areas. Lawyers in these practices do understand the law as well as the bits and bytes.

The challenge with lawyers learning more about EDD, however, as I see it goes to skills, training, and perhaps most importantly, mindset. Lawyers learning EDD is not the only solution to the problem fortunately. As Susskind and other commentators point out, we are in age of unbundling and disaggregating legal services. Just because lawyers have been the putative masters of discovery in the past does not mean that must be true in the future.

Perhaps there is a better solution than lawyers learning EDD, especially if the following points are true:

• The mindset of those attracted to law school does not favor the skills and ability to handle EDD; these skills include technology, process, and quantitative analysis.
• Law schools have little interest interest in teaching EDD. Granted, there are signs of change but progress in the first decade of EDD has been glacial.
• BigLaw does not have the cultural or organizational mechanisms to evaluate much less truly value skill sets not taught in law school, at least as attended by the partners who now matter. If law firms continue to focus on rainmaking on the one hand and reading cases and writing briefs or transaction documents on the other hand, wither EDD?

Richard Susskind emphasizes the question mark in the title of his book; he recognizes lawyer will have a continuing role. The future role of lawyers, however, depends on what lawyers and the institutions training and supporting them choose to do today. In my view, individually and institutionally, with respect to EDD, they have until very recently put their heads in the sand. That may be fine; it just may mean the future scope of what lawyers do is that much further narrowed to its original, pre-20th century (much less 21st) conception.

What can lawyers learn by mapping the legal profession? 

A recent article and book got me thinking about maps, what they mean, and what they tell us about ourselves. That led to mulling what a ‘map of the legal profession’ would tell us.

More Manhattan in New Subway Map in the New York Times (29 May 2010) explains planned changes to the NYC subway map. You might think that mapping the subway is easy; after all, it’s not like the city’s landscape or subway routes have changed much recently.

But that’s not the point because map making reflects as much about what we think, which does change over time, as it does about the “underlying reality.” The 1970s subway map was graphically iconic but challenging to use for navigation. The current version is better at relating subway lines to streets. The big change in map style in 1979 was driven by a change in thinking, not by any actual changes in the subway system have been minor. (The planned changes will allow Manhattan to occupy more space on the map and reduce type size of bus information, all designed to make the map a better navigation aid.)

Earlier this year I read In Search of Jefferson’s Moose: Notes on the State of Cyberspace by David Post, a professor of law at Temple University. One of the themes he explores is how maps help us understand new frontiers, whether it is the New World or Cyberspace, and how they influence how we think about the place.

So I started thinking about what a map of the legal market would look like. Map making is not one of my skills so I did not even consider sketching something. I did think about tables we regularly see, from the AmLaw rankings to a variety of league tables. These text-based, tabular listings have their place but do not offer any of the richness of graphic maps. The discussion of looking at a range of metrics beyond profits per equity partner is encouraging but only a beginning.

How would a map maker deal with the many facets of the legal profession to reduce them to a 2-D representation? Maps are important both for what they include and exclude. Would the map show only law firms? Law firms and law departments? Consumers? Dollar flows? Volumes of cases? Legal risks? Government players? Legislation? Landmark court decisions? What are the key attributes that make the legal profession what it is?

We also need to consider how would lawyers react to a map. Consider the Steven Wright quote: “I have a map of the United States…actual size. It says, ‘Scale: 1 mile = 1 mile.’ I spent last summer folding it… ” Maybe Wright is a lawyer at heart - someone who loves precision so much that no detail dare be omitted. The beauty of mapping is that it does require trade-offs; it forces you to focus, to abstract, to consider what is most important, and to omit.

As the legal profession undergoes tremendous changes, it would be great to have a map that represents it. And to see how that map changes over time. What should be on that map? And for my legal IT friends, if there were a map of just your firm, what would it take to put legal tech on the proverbial map?

The Wall Street Journal, in collaboration with MIT Sloan, published on Monday an article that pretty much slams chief information officers. 

Why CIOs Are Last Among Equals is by three IT academics and practitioners (see bios below). While CIOs are increasingly important to companies, the authors cite research that executive peers view CIOs as limited. “Based on our research, it’s clear that most CIOs don’t have the broad business understanding, strategic vision and interpersonal skills that it takes to run a company or at least play a bigger role in running one.”

The article then enumerates, in gory detail, “The Skills They Lack”. Citing their own research, the authors explain CIO lack of leadership, strategic thinking, synthesis skills, communications skills, influence skills, and relationship skills. Sound bleak? Don’t worry - the authors say these skills can be learned in class and at work.

So readers, are law firm CIOs in a different class? I personally know many who do not fit this mold the authors describe. Further, my sense is that the strength of law firm CIOs has gone up considerably in the last decade, both through ‘organic growth’ (that is, job experience) and ‘acquisition’ (that is, hiring from outside the legal market).

Having defended the camp, I now feel entitled to share that I do think in some firms the Chief Knowledge Office (CKO) has an explicit or implicit part-time job to make up for the skill gaps the authors enumerate.

Comments welcome, as always. (Speaking of comments, there are three very good ones attached to my prior post on project management.)

End Note - Authors of Article: Mr. DeLisi is the academic dean of the Information Technology Leadership Program at Santa Clara University in Santa Clara, Calif. Dr. Moberg is the Wilkinson professor of management and ethics at Santa Clara University. Dr. Danielson is the vice provost for information services and chief information officer at Santa Clara.

Legal project management (LPM) seems to be making major inroads into the profession. 

Back in April, the legal press carried two reports of interest. First, McCarthys’ project management plan in Financial Post (14 April 2010) reports that Canadian firm “McCarthy Tetrault is launching a technology solution it hopes will eventually help the firm better understand the costs of a merger or big piece of litigation. It’s a project-management system the firm spent more than 18 months developing in-house.” The firm describes its commitment and approach to project management at its website. And second, Tracking Numbers Key to Duane Morris’ Project Management in The Legal Intelligencer (21 April 2010) explains how project management supports the firm doing alternative fee arrangements.

This week I found that Altman Weil released a report on LPM, Legal Project Management: A Trend at the Tipping Point by Pamela H. Woldow and Douglas B. Richardson. The authors suggest that LPM a is trend, meaning here to stay, rather than just a fad. They relate the rise of LPM to other legal market trends, all of which stem from the shift in power from suppliers (law firms) to buyers (general counsel).

Today, via Twitter, I found that McDermott Will & Emery is using a Deal Dashboard to project manage transactions. The only information I could find about this at the firm’s website is a PDF at http://www.mwe.com/info/dealsdashboard.pdf. It is well worth reading. The screen shot make the system look quite easy and helpful (and leave me intrigued to know the platform on which it is built and the data sources that feed it). Further, the short text descriptions are, in my opinion, unusually well-written for a law firm, focusing on simple and understandable benefits.

Elsewhere, the references I found include a blog post by Jim Hasset, Legal Project Management ( Part 8 ) - McDermott’s Deal Dashboard, and one by Paul Easton, Law Firm PM Watch: McDermott Will & Emery’s Deal Dashboard.

Speaking of blogs, the two legal project management blogs I read are Easton’s Legal Project Management and Steven Levy’s Lexician.

Project management requires examining and managing processes, a task I have long argued is key. The legal profession has come a long way. Around 1993 another non-practicing lawyer and I tried to convince a litigator to use project management. Except we knew, at that time, we could not utter those words to a lawyer. So we explained in a somewhat round about but nonetheless clear way how we wanted him to consider using a very experienced legal assistant to help run a big matter. When he said “oh, you mean, it would be like having an extra very good secretary” my colleague and I exchanged a look that I still remember. We knew without saying anything that this was a lawyer who would never get it. Fortunately, at least some lawyers get it today.

As I noted in my prior post, the new normal for BigLaw looks bad. Hiring armies of associates and raising rates, once the magic elixir, is now the poison hemlock. Firms need to differentiate and provide more value. And that means - gasp - innovation. If you have already innovated, help your firm win new business with recognition for your achievement. 

The College of Law Practice Management (I am a trustee) sponsors the InnovAction Award. InnovAction honors innovation in law practice management. Law firms, law departments, and other legal service providers (but not vendors) can apply. Innovation can range from creative office design, to technology, to a marketing campaign. For the first time, this year applicants can win Honorable Mention.

If you have innovated and need more reason to consider applying - see Jordan Furlong’s great post about innovation and the award, Why the 2010 InnovAction Awards matter.

Review the InnovAction web site and consider submitting an application. For more information:

• Prior InnovAction winners.
• About the College.
• How to Enter for 2010 and download InnovAction Entry form.

The College of Law Practice Management is accepting entries for the 2010 InnovAction Awards through June 1st at www.innovactionaward.com. Rules and application forms are at http://www.innovationaward.com; the Hall of Fame display of previous winners is at http://www.innovactionaward.com/halloffame.php.

If you are fortunate enough to have created a competitive edge, let the world know. But do it by June 1st.

More evidence has come in that the new normal for large law firms looks bad: the Hildebrandt Baker Robbins Peer Monitor Economic Index (PMI).  

This index is a function of demand (billable hours), productivity (hours per lawyer), rates, direct expenses, and overhead expenses. The 2010 Q1 PMI, released last week, is at the same level as 2009 Q4; three index components were down, two were up. But the up components are not good news. Rates were up but reflect only a change in mix, meaning lawyers with higher rates did a bigger percent of the work. Productivity was also up but reflects fewer lawyers doing what work is available; Hildebrandt reports that, on average, for each 10 departing lawyers firms are replacing, only 8. Hildebrandt concludes,

“It is increasingly apparent that the fundamental economics of legal practice are undergoing a significant and permanent shift…. With slow revenue growth, firms will continue to focus on cost‐cutting to bolster profitability, and consequently aggressive cost controls are now the norm, no longer simply a short‐term response to weak demand and pricing….. The strategic emphasis is shifting toward a different imperative: the need for greater efficiency in the delivery of legal services.”

The need for ‘aggressive cost control’ and ‘greater efficiency’ should drive more firms to study carefully WilmerHale’s recently announced cost-saving and efficiency initiative. WilmerHale announced at the end of April that it will soon move about 200 staff positions to a low cost operations center near Dayton.

In my Integreon blog post on this move, WilmerHale Reduces its Middle Office Costs, I argue that “centralizing support in a low cost location is a a key part of the answer” to how firms will control cost. The question seems less if large firms should centralize and more how to do so. And how to improve workflows and processes.

While the WilmerHale move is primarily about staff support, it also encompasses a more cost-effective approach to high volume, routine legal support. WilmerHale moving support staff to Ohio in the Washington Post (3 May 2010) reports that the “business center will develop the resources to provide on-site document review as well. ”

I am surprised that WilmerHale’s announcement has garnered seemingly little attention from legal media or bloggers. My Google search yesterday on “WilmerHale dayton ‘business services’ ” yielded only 37 hits, few of which comment on the firm’s move. That’s not much discussion about what strikes me as a momentous decision. If Hildebrandt is right about the new normal, it seems more firms should be considering this type of move.

How many more quarters of bad index readings will it take before we see more bold announcements?

One of the most interesting ongoing electronic discovery questions is the role and importance of search tools in document review. I recently spoke with Jonathan Nystrom and Dick Oehrle of Cataphora about this and related issues. 

Cataphora develops powerful language analysis software. Its pattern recognition engine is designed to detect deviations from the norm, which makes it useful in investigations and compliance. The company is also an established EDD provider. I first saw Cataphora technology in 2003 and was impressed from the first time.

We agreed that while the choice of tool is important, the bigger considerations for effective e-discovery are (1) the fit of the tool to the document set and (2) the overall process a litigation team follows, which includes the training and skill of the people using the tool.

We left unresolved the tension between standardizing on a platform (the goal of many law firms and departments) and choosing the best tool for the matter. Optimizing tool choice by the case is a challenge: unless an organization has an entire process and infrastructure built around the tool, it unlikely to be the “best choice” for that case. So, as a practical matter, it seems likely that all but the largest legal organizations and EDD vendors will standardize around one tool. Or, if they need a specific tool for a specific matter, find a vendor that has optimized around it.

As for tool selection itself, we agreed that the answer to the question of “best tool” is empirical, not theoretical. Comparing tools on the basis of features has limited value because (1) different features work better for some collections than for others and (2) most lawyers simply cannot evaluate competing algorithms (much less how those algorithms are instantiated in a specific application).

Empirical testing requires sampling and statistics. We bemoaned the fact that most lawyers are not comfortable with either. I speculated that aversion to sampling and stats is more than just a lack of training or even familiarity. Rather, I suggested that sampling – and probability more generally – is fundamentally an anathema to most lawyers.

Lawyers dislike uncertainty; they hate being wrong. In their eyes, sampling can never be certain - it is thus suspect. This honestly held but mistaken believe leads to skewed (I am being charitable) outcomes. For example, we agreed lawyers’ faith in manually reviewing documents is misplaced. Those of us with experience in the trenches know humans make many mistakes. And sampling tests would undoubtedly prove that. Whoops, lawyers don’t do sampling, so they continue to have faith in human accuracy. The challenge is that e-discovery is largely science and math and some art; but it definitely is not religion. So blind faith is necessarily misplaced.

My conversation with Cataphora management was stimulating; they clearly have a sophisticated view of the market and the tools. And I was intrigued to learn that this summer, the company will release a consumer tool that will tell Outlook users what Outlook says about you. For those who are open-minded, those data could well give rise to another instance of having to question honestly held views. So, with apologies to the Talking Heads, “Goes to show what a little DATA can do”.

Mary Abraham’s recent blog post Librarians vs Knowledge Managers? created a bit of controversy over the role of both. At the risk of adding fuel to the fire… 

In her post, Mary reports and comments on librarian Morgan Wilson’s post reflection on KM and libraries in law firms. He suggested that it’s not good when libraries report to KM. Mary assesses this suggestion and concludes “perhaps the battles (real or perceived) between librarians and knowledge managers are really the death throes of an obsolete system”.

Nina Platt commented at length in Musings on the Librarian’s Role in Knowledge Management in Law Firms. Mary in turn wrote Catalog Content Not People, in which she gracefully synthesizes and reconciles potentially opposing perspectives on the role of KM “versus” library.

My own observation is that KM began some time ago to morph into a broader practice consulting role in many firms, which I first suggested almost five years ago in KM Morphing? (I returned to this theme in many subsequent posts). That trend continues. Today, many KM professionals focus on alternative fee arrangements, e-discovery, project management, process mapping, and business analysis.

To the extent that there is any tension between KM and library - and I’m not persuaded there is - I think it will diminish over time. So I agree with Mary’s “death throes” comment, though I mean that in a positive not negative way. My guess is that in a decade, BigLaw will have more clearly defined business process experts and analysts and a range of practice support professionals. Some of the them will do KM and library work; some will be KM professionals or librarians. But I’m with Mary in her view that we need “assign the right people to the task based on their talent, experience, temperament and inclination.”

That said, one of the themes in the referenced posts is the caste system. It is alive and well, which is truly unfortunate. My hope is that one of the silver linings of the economic challenges law firms face today is that the pressure will help break down the caste mentality. Hope springs eternal.