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Client Intelligence > Insight report > Knowledge is power

INSIGHT: Technology

Knowledge is power - the future of legal tech

Effective use of technology and knowledge management tools are higher on a law firm manager’s agenda than ever before. Here we track the key developments that will shape the future of legal tech

For insight into how important the role of the IT specialist is to the modern law firm, just ask Balfour Beatty’s head of group legal Keely Hibbitt. The infrastructure giant made a significant splash in April, when it announced a radical overhaul of its panel arrangements, selecting Pinsent Masons as its sole adviser for all its ‘business as usual’ legal work.

The three-year contract, which will cover all repetitive and predictable legal work that the client faces on a daily basis, is a major coup for the law firm. But while the mandate reflects Pinsents’ ability to offer a single-supplier model effectively, it would have floundered were it not for the work of IT director Colin Smith and his team.

Hibbitt explains that a key component to the deal was the provision of an IT portal – similar to the interface used when making a purchase online – which allows Balfour Beatty to centralise each instruction online and fill out a number of key questions, making the in-house team go through a process that forces the client to think specifically about the dynamics of each matter. But more than that – by using one firm and one system to channel each instruction through – it allows Hibbitt to have access to a whole host of data that shows how often Balfour Beatty instructs Pinsents, which issues frequently arise, and why.

’The advantage of using one law firm for all business-as-usual work is that all the data is collated in one place and, because it is an automated system, everyone has to input the same information so the data is uniform,’ says Hibbitt. ‘We can use the data to work out why we use Pinsents in the first place and change our internal processes and procedures to try and avoid issues before they arise. The fundamentally most useful box on the eportal is “what’s the underlying cause of this matter?”. The in-house team can go on the system at any time and cut the data whichever way it is required, such as size of matters, how much work is coming from our HR teams, etc.’pq13

In a nutshell, this offering sums up how important the underlying IT infrastructure is in delivering effective legal service to clients. Historically, IT departments were about ‘keeping the lights on’ – housekeeping issues such as making sure that databases didn’t crash and that the printers worked. Nowadays, it’s about using technology to give your firm the cutting edge – it is an enabler of strategy, particularly if that strategy hinges on bolstering client service.

‘Our IT team is increasingly working directly with our clients,’ says Peter Morris, managing partner of Burges Salmon. ‘They helped one client build their IT strategy, provided technical consultancy to others, or simply put clients in touch with other people who could help them address specific needs. Like other business services teams who engage with clients directly, this helps to broaden the firm’s relationships with clients.’

The firms that have really been making strides on this have invested heavily in recruiting the right IT leaders, often looking outside the sector. Norton Rose Fulbright hired global chief information officer (CIO) Sheila Doyle in 2011, who has experience both as an IT director for Royal Mail and as the CIO at BP for ten years. Meanwhile, Burges Salmon and Addleshaw Goddard both went shopping in the banking sector two years ago for their respective heads of IT, Steve Whitwham and John Whitlow.

‘Firms sometimes meet with mixed results when their investment in tech is not matched by a corresponding investment in people and their willingness – and ability – to engage with the new possibilities,’ says Jonathan Watmough, managing partner of RPC.

‘Generally, from the market feedback I have picked up, I would question if firms are investing enough in what they pay their knowledge management (KM) leaders,’ says Derek Southall, partner and head of strategic development at Wragge & Co. ‘This role goes to the root of everything firms do – quality, efficiency, sales and risk. It is also a role that is increasingly client focused. You should be hiring leaders and visionaries who can really make things happen but won’t attract many people with these skills with the salaries and career progression currently being offered in the market. I am also not sure many firms have really realised the true potential of the role.’

A word on the vendors

Chief information officers (CIOs) and IT directors report that the supplier market has changed radically in recent years, and are fulsome in their praise for some of the products on offer and how they have become more tailored to suit their needs. A key driver for this has been law firm consolidation. Firms that have been through fundamental structural changes in the last five years (and there have been a lot of them) often have had to completely overhaul or rethink their IT strategies.

Consolidation is encouraging a best-of-breed approach – ie facilitating ‘soft’ integration running up to the merger and then full integration between the teams afterwards. Purchasers are also reporting that innovation is coming from smaller vendors with innovative products as well as from within the firms themselves.

‘Providers I think have had their time where they’ve been able to ignore the specific needs of law firms,’ says Julie Berry, director of infrastructure and IT at RPC. ‘The penny has dropped that the sector is changing, the demands of the sector are changing and therefore the demands on them will change. But in many ways they are like our core systems – they are huge tankers and sometimes they can’t turn as quickly as they need to.’

There is also an interesting point emerging about the role of IT in improving productivity. Derek Southall, partner and head of strategic development at Wragge & Co, reports that the underlying systems available are fine but there are very few out-of-the-box solutions to improve what legal teams do in their practice areas. ‘Normally the systems need a lot of work and implementation (by both lawyers and IT teams) using time we don’t always have,’ he says. ‘The solutions could be more “implementation ready” – suppliers could do more with products to assist firms getting a more immediate and accessible return on their investments. The technology is still only 10% of the solution and so a lot of work has to go on around it. Often legal IT is just IT rather than the complete solution. When you fly to China you want to buy an airline ticket to get you there. What you don’t want is to be given instructions on how to build and fly a plane with a hanger full of parts. The same applies in legal IT. We need to be able to buy more “outputs” and practice area-focused products to help us improve how lawyers work, more quickly.’

Nonetheless, the unstructured nature of law firm knowledge in its initial electronic form (documents, e-mails) certainly serves as a barrier to its reuse. Law firm managers and in-house technology specialists suggest that the IT systems available to date, while competent, do not provide access to that knowledge in an easily pinpointed and timely fashion, and as such firms have had to manually collate, categorise and store that knowledge in a more structured form to help the firm make best reuse of it. The costs associated with this approach are significant, so law firms and their knowledge management functions must work with the vendors to help develop better tools for the job.

‘It will be interesting to see how we as a profession take advantage of the emerging “big data” concepts over the next few years which, despite the hype, offer the possibility of delivering continuous streams of knowledge throughout a law firm at an appropriate cost,’ says Osborne Clarke managing partner Simon Beswick.

On the move

But what has been driving this change in attitude from law firms and the rising prominence of KM professionals within those firms? Most technology experts in the field agree that the main driver behind the key developments in legal IT, both in the recent past and in the immediate future, has been mobility. From rolling out iPads to creating virtual desktops for partners, the demand from clients that their lawyers be ‘always on’ has driven how firms interact with their clients and the technology they use to deliver it. The ability to work from almost anywhere at any time and access all the information you require has changed the way lawyers work forever.

‘In legal technology the catalyst for much of the change has been the move to mobile devices,’ says Richard Hodkinson, chief technology officer at DWF. At a fundamental level, the market has moved on so quickly. Gone are the days where the mobile communication within a law firm centred around the use of BlackBerry. In this acronym-filled world, the evolution of ‘bring your own device’ (BYOD) and now even ‘choose your own device’ (CYOD) proliferates, especially now that many partners often own better kit than is on offer in-house.

‘This trend will continue and become more pervasive,’ says Peter Gibbons, director of IT at Withers. ‘It’s a huge challenge for firms to get this right – how do you lock down a device when you don’t own it and how do you balance this with individuals’ personal data? Mobile device management will become more complicated.

‘Also adding to this is the demise of the BlackBerry, as it was one device and was secured to the enterprise server – very easy for all-round management and security.’

‘The consumerisation of IT has significantly impacted law firms,’ says Osborne Clarke (OC) managing partner Simon Beswick. ‘The trend has allowed firms to provide their people with even more flexibility both around when and where they work as well as the device they use and their interface of choice. One of the benefits of this approach has been to increase our people’s level of engagement with IT ensuring a better return on investment from the technologies we have all invested in. This trend is not without its challenges, with IT security being an area of concern with a more complex set of IT arrangements, especially in light of the recent focus in this area resulting from regulatory changes and client demands. However, as ever, execution is key and if undertaken well, such challenges are far from insurmountable.’

As mobility of technology has increased so has the demand for intensified cybersecurity, the major bane of CIOs’ (and subsequently of chief executives, managing partners and chief operating officers’ (COOs)) lives. Government agencies MI5 and GCHQ wrote to FTSE 350 companies this summer, offering to do a ‘cyber governance health check’ but law firms, who are repositories of huge amounts of sensitive information, have been acknowledged as prime targets for cybersecurity threats and are expected to have similar levels of protection in place as their clients, particularly the banks.

‘In the legal sector we set very high standards for security, similar to our client base,’ says Norton Rose Fulbright’s Doyle. ‘This is a growing area and we need to ensure that we continue to upgrade our security controls in line with the changing risk profile.’

Law firms do not want to be the weakest link in corporate and industrial espionage. But they do need to be realistic. This means deciding how secure they need to be and controlling the use of open portals to their systems, such as public file-sharing sites. The fact that this topic is so frequently in the news gives IT departments leverage when it comes to winning budgets for investment in security-related products. Clients are demanding a high level of compliance, even outside of banking.

‘It’s not a dealbreaker in the sense that we don’t know enough about it to say “your systems are not up to scratch”, but it’s part of the dialogue, especially now that GCHQ has identified the legal profession as a primary target for cybersecurity threats,’ says Balfour Beatty’s Hibbitt. ‘It’s moved massively up the agenda – if you’d asked me that question 12 months ago I would have had no comment.’

‘The big challenge at the minute is information security – cybercrime – and helping the business to understand the implications,’ says Ashurst IT director Bruna Pellicci. ‘The cybersecurity issue is big because it affects everything we are doing – information barriers, data tracking, keeping our clients data secure. We have to look carefully at how much we can do that’s cost effective.’

At DWF – a firm that Hodkinson is taking through a complete overhaul of its IT structure after five mergers in two years transformed the firm beyond recognition – the issue of information security is particularly dominant given the firm’s core client base of major insurance companies and the fact that reputations are easily destroyed for a firm in the ascendency.

In his previous incarnation on the board at Irwin Mitchell (IM), Hodkinson oversaw the implementation of ISO27001 – the international standard for information security management systems – and IM was the first law firm ever to achieve this. He says DWF will be doing the same: ‘We’re doing the same here as it’s instrumental in helping you win new business and keeping you on the panels of banks and large insurers. They require these standards. A grown up approach to information security is more a prerequisite than ever before to securing new business and retaining your existing clients.’

However, he adds: ‘I don‘t think every law firm is close to having the ability to keep up with the pace of change in information security management and cybercrime. The gap between where cybercrime is currently and where the sophistication of these crimes appear to be moving to is only going to get exponentially wider.’

Ahead in the cloud

One recurring cybersecurity issue is law firms’ use of cloud technology to house large volumes of sensitive data. Debate over the cloud is polarised – and as such the arguments around its usefulness are well rehearsed. But rather than a radical development, cloud technology is a mature market now. Security in the cloud is a double-edged sword as a virtual desktop makes a mobile device secure, but firms do have to think about where data is held and all the usual considerations around entrusting data and infrastructure to a third party.pq14

Paul Caris, CIO at Eversheds, considers cloud computing a challenge, changing the competitive landscape by giving market entrants and ambitious mid-market challengers immediate access to enterprise-class IT resources, removing the competitive edge from bigger firms that have invested heavily in infrastructure. ‘Cloud introduces agility and removes our competitive edge. We have to find other ways to compete,’ he says.

‘The cloud is an over-used description that has many meanings but we have seen huge investments in technology move from in-house IT rooms to hosted data centres with software as a service emerging as a potentially more efficient and cost-effective way to deploy IT. In essence, the IT world is changing its service delivery in a way that mirrors how law firms are adapting to client requirements,’ says Roger Parker, managing partner for Europe, the Middle East and Asia at Reed Smith.

The cloud also provides an opportunity for innovation within law firms and the work of Taylor Wessing (TW)’s UK CIO Stuart Walters in the firm’s New Street Solutions (NSS) venture is an example of this. In 2011, the year Walters joined the firm from Eversheds, the head of TW’s financial institutions and markets team Tim Stocks announced a new division within the firm that would ‘offer a pioneering technology-enabled combination of data mining, active contract management and due diligence services’ – effectively a form of legal process outsourcing. The technology behind NSS was powered by document and information management specialist Swiss Post Solutions using cloud-based technology. At the time, the offering was the first of its kind on the market and, in trials, the firm claimed it delivered efficiency savings of a minimum of 60% on the cost of core business and legal processes. So successful was the venture that in 2012 the firm demerged NSS into a separate entity to enable it to market to competitor law firms.

‘The bigger question for me is what IT departments are doing to encourage fee-earners to use IT to challenge the way work is traditionally carried out?’ asks Stocks. ‘The New Street Solutions experience at TW is an obvious example. Are IT departments playing a leading role in encouraging fee-earners and departments to look outside the box? This could lead to convergence between the roles of IT personnel and fee-earners with the two groups working alongside each other and both being profit (or greater margin) centres.’

It is this drive for innovation to produce new revenue streams and enhance existing ones that examples such as Pinsents’ work with Balfour Beatty and the NSS example above that are at the epicentre of where IT efforts should be focused right now, driven by inspirational and influential CIOs and IT directors with the ear of senior law firm managers. IT spend is for most firms the third biggest cost after salaries and premises – typically around 5% of revenue. ‘It’s not the size of your spend it’s what you do with it,’ says RPC’s director of infrastructure and IT Julie Berry. ‘Some firms would get 5% value. We get 20% value from 5% spend.’

Future proof

Big data has been a technology buzzword for a couple of years, but law firms are generally behind other industries in exploiting this, partly because of confidentiality and compliance issues around the client data they hold. However, they are now much more aware of the value of data and how leveraging it can boost client relationships and service as well as having a direct impact on the bottom line. Big data analytics can also be used to provide a competitive edge – for first movers at least.

Firms are increasingly catching onto the value of business intelligence (BI) software, with dashboard technology bringing together client data into a single view. This includes previous instructions and which partners handled them, specific business and sector knowledge, billing records and even information such as which events a particular client may have attended and which updates they subscribe to.pq15

Law firms are beginning to apply big data techniques combined with artificial intelligence – combining intelligent systems, managed review techniques and advanced machine-learning science. Key applications include highly-profitable contract analytics, case management, e-discovery, due diligence, monitoring social media, transaction forensics, fraud-spotting and investigations and can be used on these products to significantly reduce project costs become more efficient with every use.

‘Many of the larger City law firms have quite sophisticated systems in place to capture and disseminate data and knowledge but it is also the case that many others still limit their view of knowledge management to precedent management,’ says Bristows partner Pat Treacy. ‘The area of enterprise search has grown significantly over the past five years but many firms still do not have a handle on the vast amount of unstructured data/knowledge they are sitting on. Business intelligence software is growing in law firms but we still lag behind other industries in this area.’

DWF is one firm actively exploring this. Hodkinson says the next project for the firm to think about is the Big Data agenda or sophisticated tools around artificial intelligence so to have cases that can be run using systems and data that are self-learning. The firm is about to launch ‘a proof of concept’ with ‘a household name company’ that will run for six to nine months to see whether its big data can help drive cases through its systems on a learning basis (ie the more cases put through the system, the better the decisions are).

‘It’s about changing the commercial dynamics of running high volumes of similar types of cases’ he says. ‘It’s unlikely this approach to volume transactions will affect the major corporate firms, it’s going to be those with commoditised businesses that are going to make a play for this area of the market.’

OC’s Beswick says over the past five years it would be hard to deny the increasing impact of automation tools in law firms, such as those associated with workflow, document automation, case management or business process automation. With margins under continuous pressure, he feels the benefits associated with increased service quality and reduced costs through improved efficiency are obvious.

‘However, a clear assessment of where to deploy such technologies within the business has to be made to ensure the balance between process volumes, repeatability, cultural acceptance etc, means that a benefit will actually be realised,’ he adds. ‘So while these technologies have had a significant impact, there is much more value to be had. The real key to realising that value though remains cultural.’

Despite the fact that IT and knowledge management has matured immeasurably within law firms, CIO and IT directors are united in their belief that there will not be one single IT product or piece of technology that will revolutionise a law firm and give it a dramatic competitive edge. Success will hinge on the vision of individuals to use the technology in the most imaginative way.

‘It’s about the application, rather than the technology itself,’ says Doyle. ‘I don’t think it will be down to any one technology. It is more likely to be the way firms apply or use a combination of cloud, social, mobile and big data to support new business models or to transform the existing business models.

‘We need to work with executives to change the business models so firms can move forward into modern day developments within IT.’

‘Is there one technology that can revolutionise a law firm?’ asks Ashurst’s Pellicci. ‘Business intelligence and document automation. It’s all about working as effectively as possible and looking at what we can automate that we haven’t automated already.’

Getting smarter and knowing the numbers – the keys to success at every level of a law firm, not just IT. LB