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You probably dont think of your lawyer in his three-piece suit and Harvard tie chasing technology contracts. Think again.
Attorneys arent going to be the ones installing extranets, document management systems or dragging coaxial cable—but their IT staffers already are doing exactly that. Your law firm may be well on its way to becoming either your next competitor—or your partner.
Of course, not all law firms are pushing technology services aggressively. Only about 2 percent of the top law firms are setting up separate IT service divisions or child companies, estimates Jay Nogle, director of legal systems for Greenberg Traurig (GT), an early player in this arena. But that lowball estimate is a bit misleading, because hundreds of law firms will “dabble” in IT consulting work in order to cement their existing business relationships.
That movement offers both challenges and opportunities for pure technology players. Partner with the right law firm and you could step into a new vertical market. Ignore the lawyers and you wont be able to keep tabs on potential allies—and emerging rivals.
Extranets are by far the most popular legal technology service, according to Neil Aresty, a principal consultant at Legal Computer Solutions, an established legal boutique.
“Almost all big law firms are scrambling to figure out how to build extranets or outsource their extranet needs,” says Aresty.
For a law firm, an extranet always comes with a back-end database management system. Whether its a simple collection of legal documents in a database or an elaborate knowledge-management system, the fundamental idea is always the same: to give both the firm and client quick access to a case or legal matters paperwork.
Most current extranets in this market foster a one-on-one relationship between a law firm and a single client, but thats changing. ComplianceNet, a product of Latham & Watkins (L&W), one of the nations largest firms, has shown that a well-designed, database-driven extranet allows clients to handle dull-as-dirt Medicare and Medicaid compliance filings largely on their own. The result? Clients are happier and the attorneys are making their intellectual capital work for them 24 hours a day seven days a week.
Taking the legal extranet concept in another direction, GTs Environmental Law Net (www.environmentallawnet.com) provides interactive legal and regulatory advice. It also offers resources for corporate counsel or anyone who needs to stay on top of environmental legal issues. GT and other firms, like L&W and Akin Gump, a major national firm with a strong technology practice, soon will be turning out other such industry law and regulation, one-stop legal extranets.
Deeper Into the Extranet
Deeper Into the Extranet Meanwhile, law firms are adding groupware functionality to their extranets with Microsoft Exchange, Lotus Notes, and their own home brewed programs.
Increasingly, law firms are taking extranet building into their own hands. While they often build on collaborative work/extranet programs—such as Nikus Niku for Legal and IntraLinks DealSpace—customization is done in-house. Law firms typically also add on other functionality like e-mail and calendaring. Its the classic integrator model youre used to, aimed directly at the legal vertical.
Law firms also are constructing Web sites, developing knowledge-management systems, building wireless networks and setting up videoconferencing systems. In short, a few firms are actually becoming full-fledged technology service providers.
Theyll need your help, though. Asserts Nogle: “Law firm verticals are staying out of this space. Most of them feel they dont have the expertise in law and practice mechanics. Still, we would certainly want to partner with portal sites and xSPs. Theyre great fits.” Others that can benefit from working with the technology-generation law firms are security, Exchange and Notes/Domino specialists.
Meanwhile, some law firms finally are making progress on the paperless office, asserts John Tredennick, a partner at Holland & Hart, and CEO of CaseShare Systems.
Before you say, “Not that again!” hear Tredennick out. While paper will never completely disappear, Adobes Portable Document Format standard is helping law firms and their clients cut down their paper use. And that could lead to higher profits for law firms, where up to 20 percent of a firms billings can involve paper costs, says Tredennick.
Technology-savvy companies are keeping close tabs on those legal trends. Businesses like Cisco Systems and UPS, for instance, now demand that when law firms enter a beauty contest—a competition to win corporate legal work—they must present technology plans and qualifications along with their legal strategies, says Monica Bay, editor in chief of Law Technology News (www.lawtechnews.com).
Corporate clients are driving firms to abandon their paperbound ways of doing business. Todays corporate counsel want legal services at Internet speed and law firms must deliver it to stay competitive
“Law is going through a seismic change in how were approaching the whole concept of how to practice law,” says Bay. “The billable hour will be dead in five years” and any law firm that doesnt get it will be “roadkill in 10 years.”
Shes not the only one predicting change. “The pendulum is swinging to firms that are looking to nontraditional businesses,” adds Hassel Parker, president and CEO of the Womble Carlyle Sandridge & Rice technology spin-off, FirmLogic.
Objection Sustained
Objection Sustained Those are very controversial positions. It smacks of building multi-disciplinary practices (MDP) to compete more effectively with Big Five accounting firms and consulting firms. Others think that lawyers should stick to doing what they do best: practicing law.
Accounting firms that have consulting branches, however, dont have the type of professional restrictions that make MDPs troublesome to the legal community.
Indeed, accounting firm lawyers may soon be allowed to practice law in the U.S. If that day comes, accounting firms, with their far-greater resources, will compete head-on with traditional legal firms. Thats no small matter. In Europe, where accounting firms are allowed to practice law, Arthur Andersen is the continents biggest “law” firm.
Naturally, some law firms want to turn the tables and are rushing into the technology-services market.
Still, not all practices will flock in that direction. “I think it is fair to say that many firms are feeling the need to get technologically savvy,” says Aresty. “Yet, we still see more lip service given to the idea as opposed to delivering the monetary resources [read: partners profits] in order to implement an intelligent and strategic technology plan.”
Break It Up
Break It Up Some law firms have taken the next logical step. Theyve created their own ancillary technology consultant businesses. That, as FirmLogics Parker points out, still increases the owning firms revenue stream while enabling the attorneys to focus on law.
Two of the most successful of those are Holland & Harts CaseShare Systems and Womble Carlyle Sandridge & Rices FirmLogic. Unlike the internal legal IT services efforts, those companies are out to turn a profit on their own and not just provide better service for their parent firms existing clients. Indeed, both companies seek out and sign customers that have nothing to do with their parents. And FirmLogic even provides specialized legal IT services such as case management to other law firms.
CaseShares core specialty is the document-driven extranet. Tredennick says those are used to build dynamic workflow systems. While legal work is CaseShares mainstay, the company also serves Sears and other corporate customers.
FirmLogic, which also has its roots firmly planted in the law, offers a broad array of legal and nonlegal technology services. While litigation support via a hosted Web site is at the core of its business, FirmLogic delivers other services that emphasize getting technology to adapt to the way a lawyer—or another client—work, rather than the inverse.
Go Vertical
Go Vertical Whichever way the law firms go, theyll need support from integrators and resellers.From servers to office software to vertical legal software, firms regularly seek outside help for their in-house needs. Some of those needs can be quite specialized. Legal Computer Solutions, for example, puts all its efforts behind LextraNet, a Web-hosted, litigation support and case management system.
Internally, law firms are moving from older server operating systems, often NetWare or Unix, to NT. Only the most IT-adept firms, like Kirkpatrick & Lockhart and Greenberg Traurig, are making the jump to Windows 2000 Advanced Server. While internal IT often shoulders most of the upgrade burden at larger firms that employ 150 lawyers or more, smaller firms look to integrators for all of their upgrade help.
According to the 2000 AmLaw Tech Survey, the countrys 100 biggest firms spend an average of $17,913 per lawyer on technology annually.
Once a law firm makes a technology choice, the firm tends to stick with it for the long haul. In 2000, slightly more than 20 percent of the top 100 law firms were still using Corels WordPerfect. While almost all of them are moving to Microsoft Word, its not because they want to. “Lawyers were perfectly happy with WordPerfect,” says Hassel Parker, president and CEO of FirmLogic. “They left it to go to Word, not because Word was superior, but because their clients had moved to Word and wanted their firms on a common platform.”
Law firms tend to look for solutions that have been long proven in the marketplace. On law firm desktops in 2000, for example, youd find 48 percent using Windows 95, 34 percent using NT, but only 12 percent on Windows 98 and a mere 6.4 percent running Windows 2000 Professional.
Still, some law firms are willing to adopt leading-edge technology if it gives them a business edge. One area where restraint is thrown out the window involves wireless e-mail devices and PDAs. Lawyers love gadgets. The RIM Blackberry handheld e-mail device is wildly popular. Indeed, large firms in 2000 were buying more Blackberries for their attorneys than they were Palm Pilots, according to law firms that we interviewed for this article. Windows CE devices lag far behind.
Custom Code
Custom Code Specialized software, however, is where integrators can count on making money. All law firms want time and billing, time-entry and document-management software. In each of those categories, there are several clear market leaders.
In time and billing, the big players are Elite Information Systems Elite and CMS Open. For time entry, Sage, Advanced Productivity Software and Elite are what legal CIOs want. When it comes to document management, Hummingbird and iManage are the programs of choice.
Law firms also want specialized contact management programs. Here, the market leader is Interface Softwares InterAction followed by Cole Valley Softwares MarketEase. We say “want” because the firms are finding contact management software difficult to roll out. The technology is straightforward, but its hard to keep lawyers from thinking of their personal Rolodexes as private information caches rather than an institutional resource.
Voice recognition, although a hands-down favorite with older lawyers, is present in less than half of the top firms. Even the firms that use voice recognition tend to do so on very few desktops. Anecdotal evidence suggests that voice recognition is declining in popularity as lawyers become more comfortable with typing their own documents and realize that even the best voice recognition systems are no replacement for a good secretary.
Read the Fine Print
Read the Fine Print Drawing up and maintaining service contracts with a law firm can be difficult. Like many other vertical markets, law firm CIOs typically change jobs every 18 months. For a long-term contract, you must be certain that both the CIO and the management group are in agreement. If you have to choose between the two, the safe bet is to meet the law firm partners requests. Partners tend to stick around longer than their CIO counterparts. And in the law firm caste system, partners always trump CIOs when contract plays are finally made.
Choose your allies wisely.