Legal Technology and the Business of Law

by Matilde Serena

Price Pressure from clients and the digitization of legal data re-reshaping the market of corporate legal advice. To succeed in this new era by taking advantage, law firms shall understand new legal technology solutions and redefine their business model accordingly. For the purposes of this short essay, the notion of legal technology refers to (1) technologies enabling and facilitating the digitalization of legal data, (2) solutions improving the case-management and back-office work process, and (3) substantive law solutions to replace lawyers in executing legal tasks such as transactions and litigations.

Consequently, the following question arises: “How can big and small law firms truly benefit from technological legal developments?”. Arguably, law firms shall rethink two main elements of their business model, namely (1) their value proposition (service offering and revenue model) and (2) their operating model (cost structure and organizational structure). This would require the support of more legal technicians and project managers and considerably fewer junior lawyers and generalists. On the one hand, legal education should evolve to foster legal tech literacy; on the other hand, law firms shall offer practical training to help junior lawyers to familiarize themselves with legal tech solutions and case-management processes. This short essay will examine how big and small law firms deal with current trends in legal technology and present a practical example of successful implementation of legal technology in an international company to draw general conclusions.

On the one hand, big law firms are nowadays faced with strong competition by firms expanding their practice to legal areas e.g. big accounting firms and with increasing costs of implementing legal technology. Nevertheless, the main issue relates to the fact that big corporations (being their main client) expect from big law firms more and better services for less money, as they require from other suppliers. This necessarily requires a high degree of automation through tech-based tools. Furthermore, the market’s demand for transparency is constantly increasing: big corporations hiring big law firms to deal with their legal practices want to gain better insights on fees and collaboration between in-house staff and external lawyers. Therefore, to tackle these issues, big law firms will have to redefine their clients, their offer, how they get paid (value proposition) and how they provide services to their clients (operating model).

Firstly, as to the value proposition, a good strategy would be to change the revenue model from a billable hours’ model to fixed pricing. The rationale for such changes derives from the introduction of new offerings e.g. advanced legal analytics and decision-support solutions and the decomposition of legal work e.g. the introduction of the legal tech consultant figure. Arguably, this change will increase efficiency.

Secondly, as to the operative model, automating high-volume standardized tasks will allow in-house counsels of big law firms to focus on more complex transactions. This will entail the need for fewer junior lawyers and associates per partner. The vast majority of employees will be legal technicians and project managers.

On the other hand, small law firms are highly at risk of being unable to adjust to the new technological world of legal practice. The rationale for this is that small law firms traditionally tackle standard transactions, which could be easily replaced by technological tools e.g. contract lifecycle management software. Furthermore, most of the small law firms do not employ personell adequately trained to support the operations of such legal technologies. The optimal solution for such small law firms would be, therefore, to find their niche and use low-cost technology to differentiate themselves. Firstly, as to their value proposition, small law firms should deliver more specialized service offerings at a fixed price. Secondly, as to the operating model, small law firms shall invest in legal technology that allows for an increase in the workload without additional costs such as cloud computing services which can be used to increase document storage and service capacity.

Drawing on this analysis, it is interesting to examine a practical example of a successful implementation of legal technology in the legal department of an international company. The case at hand deals with the implementation of a specialized contract-management solution by ASM, a Dutch headquartered multinational corporation specializing in the design, manufacturing, sale and provisions of semiconductor devices.

ASM had major troubles keeping track of the non-disclosure agreements signed by employees, managers and third parties. According to Todd Westersund, ASM’s Senior Global Legal Counsel, this derived from the fact that the legal department was relatively small and lacked the capacity to deal with the multitude of legal persons interacting with ASM’s business. To solve this issue, ASM implemented Agiloft in 2019. This contract-management tool allowed ATM’s legal team to save resources, and it eliminated the need for full-time contract managers. Furthermore, the implementation of Agiloft allowed the company to save significant time and avoid the risk of exposure due to poorly maintained or lapsed contracts.

To conclude, both big and small law firms cannot remain indifferent to the developments of legal technology. Otherwise, they will succumb to the competition of other stakeholders in the market of the provision of legal services. To fully benefit from legal technology, law firms must reform their value proposition and their operating model. Arguably, automation of standardized tasks is proved to be beneficial (as shown by the ASM case study) in terms of decreasing costs and risks and increasing effectiveness in day-to-day operations. Furthermore, alongside these changes, law firms will have to interact with new professional figures such as legal technicians and program managers who will play a prominent role in granting the well-functioning of technological tools.

Sources:

Agiloft, ‘Automated Contract Selection Streamline Global CLM Solution: ASM International NV Case Study’ [2019] Agyloft, Inc. 2-3.

Contract lifecycle management software. Type 2 legal solution, with reference to the introduction of this short essay.