Legal in-house technology will challenge existing legal service models

by Simon Drane

Strategist, innovator and advisor in LegalTech. 

Last week I attended the Alternative In-House technology summit, an excellent event for the legal in-house community, and it struck me that the combined buying power of those in the room (many from very large corporations such as Vodafone, BT, Accenture, Sky, Societie Generale, Barclays, Standard Chartered, Experian, Novartis, Prudential, National Grid, to name a few), combined with how technology is being considered, has the potential to dramatically transform legal service provision. It was interesting though to contrast this with the stage that many are at in the innovation journey which is quite embryonic, combined with their core challenge which is overwhelmingly to show value to their wider corporate business with limited resources. Interestingly, many are arguably not yet pushing their panel firms enough to support these challenges, perhaps to provide more “productised” legal services.

Some of the legaltech emerging on pricing and service analysis for in-house will perhaps in future drive a far greater economic dimension to the legal services model.

There was much to unpack from two days of excellent discussions and I can’t do it justice in one article, so will instead follow up with some more detail in what in my mind were the three main categories of focus around current in-house tech innovation (I’ll also try and reference some of the excellent speakers in follow-up pieces). In my view there is a form of supply chain review operating here which more effectively connects the real consumer to the providers. In order to get to the challenges for the legal in-house teams and then the knock-on challenges to law firms you need to go to the start of the chain first.

1 – Business consumption of in-house legal services is evolving – the core challenge arguably starts here and the clear theme was around the way in which core corporate business functions do, or perhaps do not, effectively interface into legal. There is clearly a shift towards things such as a single “front door” to the legal team, ensuring more accurate and efficient engagement; self-serve document automation of areas like NDAs; and better linkage to tools like SalesForce, combined with the use of electronic integrated signatures, resulting in more effective contracting. This feels the most embryonic stage and also key to really unlocking customer pain points, and identifying solutions. Technology has a key role to play here but so does really understanding the people dynamics and how to deliver change (which was also a key theme at the summit). At the heart of this all was a lot of excellent examples where in-house legal teams are engaging more with their business customers to reengineer how they best meet business needs. More on this to follow…

2 – Legal operations in running an in-house function is evolving – the volume of work undertaken by the legal team has grown significantly while in many cases costs have often reduced. There was discussion around the use of a range of technologies that both improve the business of law (matter management, document management etc) and the practice of law (document automation, process automation etc). There was much debate around the growth of the legal operations function, with increased focus on management information, analytics and clear KPIs for the teams. Another key area of focus that was discussed in depth was contract management and the whole contacting lifecycle – I will explore this further as it is a topic in its own right – suffice to say that there is currently a void in any form of consistency in what people are doing here, or even of being able to allocate the various vendors to the different stage of the lifecycle. This feels like the most evolved stage of the supply chain but also perhaps the one with the biggest prizes yet to come around areas like proper end-to-end contract management. More on this to follow…

3 – Buying in and managing of external services from law firms is evolving – there was discussion around panel management as you would expect, and a real focus around what people are doing with e-billing and spend management software. The idea of having a central instruction portal seemed to emerge as a common theme. Some of the technology shown from the vendors has yet to really be widely adopted and talked about, but real time tracking of legal spend from law firms, for example, is not just of interest to the GC, but is pretty interesting to the CFO I would think, helping to better understand and predict costs in an area where they would have struggled in the past. More on this to follow…

In each of these areas technology is being deployed to different degrees depending on where the most pressure is coming from for in-house teams. There are a number of high level challenges in addressing these areas:

1. There are varying degrees of connectivity of in-house teams to the wider corporate business. There were some great examples of where this has changed and the legal team better understood the business needs, while the business better understood how it could help itself. The common theme was the need for more dialogue with its own internal customers;

2. Pretty consistent was the challenge of getting focus from corporate IT teams to help with legaltech (even when the core business was a tech business). Most have adopted an approach of going direct to legaltech vendors away from their own tech teams. Imagine the combined spend with core vendors like Microsoft these corporate businesses have and the impact they could have if they leveraged their corporate CIO relationships effectively to fix their legal challenges (no small task I agree…);

3. Even if they can get the budget for legaltech the challenge can be who to spend it with and there was a lot of debate on the proliferation of vendors. Even the vendors I spoke to often said they found it hard to keep track of who did what now. For law firms with dedicated legal IT teams this is far easier to navigate than for in-house teams (although arguably even they are starting to struggle now with the legaltech startup mania!);

4. There was a consistent theme of reducing budgets but increasing expectations on legal teams, which drives a very real need to automate. Interesting the difference in the drive for automation here is that it is to cope with overwhelming demand whereas in law firms it is to drive efficiency and therefore margin. Arguably in-house could overtake law firms on core automation given the stronger pressure and that would create an interesting dynamic. There was already an example of an in-house team asking a panel firm for automation help, but the panel firm not having the skills to assist. For now though overall in-house teams are at a far earlier stage than law firms and this felt like an area most were exploring to some degree;

5. There was a clear feeling of needing to show the value of the legal team but often lacking the resources needed. Even the largest organisations have small teams compared to law firms. Interestingly though, there was very little talked about on how they could ask law firms to help more.

I will build out on this in some future articles around the three supply chain stages, sharing some of the discussions from the excellent sessions, and welcome any comments in the meantime.

What was really clear is that when you combine the possibilities of legaltech across the supply chain stages with the economic buying power that the in-house group has, it can only lead to a real shift in the legal services space.

If the ultimate customer of all this is mostly a business person in a corporate and they are after quicker, more predictable, better outcomes, then arguably whoever helps them get to this will be the ultimate winner. You can also start to see why there is an emerging conversation around shifts to outcome pricing in this light.

As an aside, I hear a lot of law firms talking about AI whereas I hardly heard AI as a term at all at this conference (which was quite nice!). Rather, it was about their customers’ needs and the need for real efficiency through optimising the workflow. The best comment of the two days was: “Are we seriously expecting widespread adoption of AI tools right now when many lawyers can’t even use Skype?”

From listening to the debate I wonder how many law firms are engaging enough with their customers on their real needs (which are driven in turn by their business customers), or perhaps they are but it becomes challenging given their current partnership-structured, services-based business models. It appears their in-house customers may be moving faster to more productised, self-serve, data-driven, outcome-based models. Discuss…

This article was originally published on February 18, 2019.

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