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Each week, the Law.com Barometer newsletter, powered by the ALM Global Newsroom and Legalweek(year) 2021, brings you the trends, disruptions and shifts our reporters and editors are tracking through coverage spanning every beat and region across the ALM Global Newsroom. The micro-topic coverage will not only help you navigate the changing legal landscape, but also prepare you to discuss these shifts with thousands of legal leaders at our next virtual Legalweek(year) conference, happening on May 11. The upcoming sessions will cover a host of topics including legal automation, practice management, legal operations, e-discovery and data management and more. Click here to learn more and register for the most important virtual legal event of the year!
The Shift: Firms and Clients Aren't on the Same Page With Innovation
Despite the consternation about legal being slow to adopt technology, the past year has made it clear that law firms and corporate legal departments alike can be pretty agile and technologically-savvy when they need to be. They spun up remote workers in record time, adjusted to remote proceedings and meetings, and instituted new information and document policies, all without seeing colleagues and clients face-to-face. The innovation revolution is here.
So all is well, right? This trend has no reason not to continue, and the legal profession will keep pushing forward until it matches the innovative processes found in its clients and nonlegal peers. It's a nice thought, until you get to the sticky question: What does innovation actually mean?
In answering that question lies a gap. For law firms, innovation means servicing clients in a new and unique way, leading to new practice areas, legal business services units, and even tech products that help them stand out from their peers. But that may not be what corporate legal departments are looking for—they want cheaper and faster, at a maintained high quality, even if it's not necessarily a revolutionary idea or tool. Corporate legal departments want results, not differentiation.
It's these different interpretations that may prevent both sides from accomplishing the full scope of what they believe innovation to mean.
The Conversation
Corporate legal departments are increasingly focusing on innovation when evaluating and hiring outside counsel, but it continues to be innovation on their own terms. HUB International chief legal and compliance officer John Albright told Law.com that while he’s noticed an accelerated adoption and maturation of legal tech in firms, it doesn’t come across in pitches: “They can all talk about legal tech, a lot of the large firms have incubators and tech arms and some firms have their own ALSP [alternative legal service provider] arm they’re pitching, and I think that’s all relevant. But what I’m not seeing is fully integrated pitches that have the tech layered into the [service].”
Indeed, many firms have developed a wide array of technologies to bridge that gap, from research tools to contract analysis. But Zack Hutto, an advisory director at Gartner for in-house legal departments, said that he hasn't seen too many clients adopting those tools, outside of some individual use cases like due diligence.
His clients largely view digitizing workflows as their tech’s greatest opportunity, but he added it’s a task considered too tall for law firms. “There’s plenty of opportunities to explore these AI and analytical platforms,” he explained. “[But] the real burning need for most legal departments is much more foundational in nature. As a result, there’s some skepticism from in-house legal teams if they should place their critical data into some other organization’s solution.”
As corporate legal departments are increasingly beholden to larger business oversight, these innovation goals also may not stem from the legal department itself—a fundamental change from how firms have interacted with clients in the past. Liz Harding, a shareholder at Polsinelli, has noted an uptick in the number of CEOs or CFOs present when the firm goes to pitch new clients, some of whom “have dealt with the more traditional lawyer-client relationship in the past” and have found it to be neither cost-, nor time-effective.
As a result, there is a disconnect between the type of innovation firms are offering and what corporate clients are expecting. “You’re kind of battling up against preconceived ideas that lawyers are there for pure legal advice as opposed to these sort of more holistic, sort of project-based assignments,” she said.
The Significance
So how can law firms make the shift from embracing their own ideas of innovation to those of their clients? They may not like the answer—or it may not even be possible. Nicola Shaver, director of innovation and knowledge at Paul Hastings in New York, noted during an April Legalweek(year) session that there have been tremendous leaps in what artificial intelligence and machine learning tools can do. However, there has not been a fundamental business model change to accommodate artificial intelligence. The billable hour, she said, continues to be an impediment to innovation at law firms.
“We’ve all heard before: ‘What is the point in streamlining if it reduces the number of hours we’re able to bill?’” Shaver said. She added, “Bizarrely, the fact that large law is still highly successful is still an impediment. It is still difficult to tell people to change the way they’re doing things when it’s working at bringing in an enormous amount of revenue every year.”
But corporate legal departments will continue to change, with or without outside counsel's help. The result could mean, if law firms are not proactive, they could risk losing long-term business to those who embrace legal departments' idea of innovation—including alternative legal service providers. Brett Burney of Burney Consultants, who works with in-house departments on these sorts of innovation projects, doesn’t believe the perception that ALSPs are more efficient or process-oriented than law firms is misguided.
“I think it’s a reality that [ALSPs] are more efficient and they are more tech-friendly. And the reason I say that is because law firms could compete on efficiency, but that means drastic changes to the way that they do legal work, which really comes down to billable hours, right?” he said.
The Information
Want to know more? Here's what we've discovered in the ALM Global Newsroom: Clients Want Innovative Firms. So Why Aren’t They Hiring Them? Clients See ALSPs as More Efficient. Law Firms See a 'Frustrating' Perception Problem General Counsel Reveal What They Really Think of Firms' Legal Tech Products Law Firms, Clients Want to Automate Their Relationship, But Differ on Specifics Technology is Evolving, But Legal's Business Model Still a Barrier to Innovation Legal Vendors Boast Lawyer-Built Tech, but In-House Departments Want to See Receipts As Workload Burdens Increase, Corporate Insourcing May Be 'Already Broken' 4 Tech Questions Legal Departments Should Ask Outside Counsel on RFPs Do You Make the Cut? 4 Ways In-House Clients Are Comparing Their Outside Providers Corporate Legal Is Hungry for Tech Transformation—And Wants Firms to Help Lead ThemFor more information on the Legalweek(year) virtual experience, visit legalweekshow.com or follow @Legalweekshow and engage with #Legalweek21 and #Legalweekyear for updates. The Forecast
A trend in recent years has been towards corporate legal departments insourcing a lot of these technological transformations themselves, but that may already be reversing. An April survey from EY and Harvard Law School found that general counsel expect workloads to increase by 25% over the next three years, with only a 3% increase in headcount expected to occur within that same time.
As such, innovation that cuts costs will be necessary—but while automation may reduce the level of human attention required of a given task, it doesn’t eliminate the need for it entirely. This could pose something of a problem for the corporate legal departments and represents a natural place for outside law firms to step in. “Automation, innovation and technology are great. But they cannot solve every issue because at the end of the day, talented lawyers are still needed to do a large degree of the work,” said Matthew Weaver, executive director of Major, Lindsey & Africa’s interim legal talent practice.
That's not to say, though, that law firms are being left behind. There's still a place for them to get on board; it will just mean adjusting how they do business in a way that embraces those efficiencies. For example, Carmen Brun, head of Eversheds Sutherland’s alternative service provider division Konexo, said her company has gained consulting gigs on corporate processes challenged by the rise of remote working, including developing workflow-centric solutions like intake or self-service tools or partnering with clients to determine other viable opportunities for automation.
“We’re finding that with our clients it’s kind of back to the basics—to look at what technologies they have, to make sure that their team is fully aware of the tools and what the tools can do, and kind of ‘amping them up’ so to speak to make sure they are maximizing the use of these tools. I like to say they are squeezing everything out of them like a lemon,” Brun explained.
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