GCRC Startups and Innovation – In-house lawyers driving change in the legal industry

Over the last couple of weeks, I’ve been writing articles based on the findings of our series of interviews with some of the big new names in the legal tech start-up world. Now, though, it’s time to relate this research to the bulk of our readers – in-house lawyers.

Within the series, I often asked the participants in the series about the importance of in-house lawyers in terms of leading change in the legal industry. From what most interviewees said to me, it seems that in-house lawyers are very important indeed.

Priya Iyer, from Anaqua, for example, told us that in-house lawyers’ increasing demands of law firms providing external counsel is an important driver of change in how law firms go about serving their clients.

“If a large law firm is unable to provide it they are going to smaller law firms to get the efficiency and predictability,” she told us. “Some clients are not patient enough for the large firms to take their time to decide whether they will make the change and upgrade technology. After losing two or three clients due to this we immediately get a call from the large law firm saying, ‘I’m losing my business, people are leaving me, good people are leaving me and we now recognise that we need to step up to the next level of technology as well’. There are forward thinking large law firms as well that have set the bar for others.”

Noah Waisberg, from Diligence Engine, also confirmed that in-house lawyers are both ‘direct and indirect drivers’ of the greater uptake of technology in the industry:

“Let’s start with indirect. In-house lawyers set the tone for law firms and one thing that we find when we go into law firms is that a lot of them realise that the clients would like more efficiently-created work product. They’re not coming out with that out of thin air, they’re coming out with that because of in-house lawyers. When we speak with in house lawyers, especially in medium-large corporates in competitive areas, we find that they are highly focused on costs and showing their superiors that they are doing something about costs. And then conveying this cost pressure to their outside counsel is important.”

And for how in-house lawyers are direct influencers, he told us the following:

“We have seen in-house lawyers be great direct drivers of efficiency technology as well. A number of serious laws firms have used our contract review software because their clients told them to. Sometimes firms go to clients suggesting they use our technology, but in a lot of the cases it goes the other way, with clients telling firms “we think this is something that can make an impact on costs we’d like you to try” – that’s more of the direct driver.”

Noah added that the pressure for in-house lawyers to cut costs is a significant factor in all this change:

“Many in-house lawyers are under pressure to reduce costs, so cost reduction is often a factor. That said, I think there is a push for greater efficiency. Nearly all in-house lawyers have practiced in large firms. They know there’s a lot of room for efficiency improvements in how these firms create work product. For example, most in-house M&A lawyers previously practiced in M&A at a law firm, and they’ve done the kind of due diligence contract review that our system can help with. They know that the traditional way of doing contract review is inefficient, highly time consuming and very prone to human error. And they often quickly grasp how our system can save them money as well as potentially get them better work product.”

Warren Smith of Access Solicitor, however, noted that it is the overall interests of the company, and the type of company you’re working for, that is the bigger factor for lawyers wanting to drive technology changes.

“New technology didn’t have a major impact on how I worked as a lawyer. It is more about how technology was impacting the media business. You need to think ahead, to what new platforms or revenue models there might be, and find a way for agreements to encompass that. You needed to be a bit of a crystal ball gazer. For example, no one would have predicted the impact that Google has had on media companies. Go back 5 or 7 years and Google was at best a marketing platform. Now it wants to be a fully integrated channel and extension of your TV show, and that creates conflicts for broadcasters because they want to control and manage that space too. These are all commercial issues, but unless you understand them, you can’t do your job properly.”

One of the key areas GCs are seeing significant change in is procurement. Nathan Wenzel from Simple Legal believes in-house lawyers are more likely to press for fixed fee arrangements and value-add instead of hourly billing arrangements than ever before.

“A big part of the relationship with your law firm is trust,” he told us. “It’s no surprise that relationships and past experience drive law firm selection. Law firm performance isn’t binary like your cell phone service where you either have a connection or you don’t. Commoditizing law firms and legal services would be a mistake. There is certainly room to improve the model. Hourly billing is certainly not the best way to measure value. It also isn’t the best way to create trust. Fixed fee agreements should be part of almost every companies billing guidelines. We encourage our customers to setup a fixed fee agreement with their law firms to cover any general phone calls and correspondence. That accomplishes two things: 1) it takes the fear out of the ticking clock every time you’re on a conference call with a partner, two associates, and a legal assistant, and 2) it encourages the law firm to handle the questions in the most efficient way possible.”

Indeed, Warren Smith told us that there is currently discontent with the panel review as a system; innovative solutions to improving how procedures like this are carried out will be the more successful products in the market with in-house lawyers.

“At Access Solicitor, we’re trying to provide a significant amount of information about all the lawyers on our database and keep that constantly up to date,” he told us. “We want people, GCs and consumers alike, to be able to see clearly who is going to be a good fit for the specific job they have and also how well they are likely to do it. The cost will be comparable to a panel – Access Solicitor’s in-built transparency means there’s a natural competitiveness, however we also enable a better match between job and lawyer than just a panel which is relying on a handful of people who have been selected as preferred specialists for a certain category of work over the medium term. Lawyers move between firms and your specialist panel may have all moved in six months time. Access Solicitor just gives a lot more flexibility.”

“Generally people don’t get criticized for doing things the way they have always been done, however the greatest improvements come about when people do things differently,” he added. “Lawyers by their nature don’t often take chances, so it’s no real surprise that the old ways continue.”

Finally, Daniel Lewis of Ravel Law agreed with Noah and Warren in stating that in-house lawyers, in looking to move away from traditional means towards more efficient means of doing their job, will be drivers for the move away from hourly billing in the industry.

“We had heard the old stereotype of how it’s hard to sell to lawyers based on efficiency, since they work on a billable hour,” he told us. “But if that was ever true, I don’t think it’s the reality of today. I think lawyers are focused on doing their best work as efficiently as possible. Fee structures do change the incentives and change how firms think about work, but I don’t think it’s required that flat fee arrangements be in place for lawyers to be interested in technology. Firms value tools that enable them to more confidently enter flat fee arrangements knowing that they have technology in place to do great work with known costs.”

About William Barns-Graham

William is the content manager and head of communications at GC Research Club. He is a professional journalist, researcher and strategist. He has worked at GC Research Club since February 2013 and has rapidly become a distinguished voice in the in-house legal blogging community, writing on Lexis Nexis and interviewing leading legal thinkers and writers, in house lawyers and CEOs within the legal tech world. He has also coordinated the GCRC Sports Panel series.
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