LegalJanuary 26, 2022

Why CLDs need to become more discerning purchasers of legal tech and where to start

This article was originally published by ILTA.

Last year, my company released LegalVIEW® Insights, Volume 2, a major piece of research sourced from our LegalVIEW Data Warehouse, the world’s largest body of legal performance data. One of the most interesting findings from that report was that outside legal spend has basically held flat in large corporate law departments (CLDs) from 2015 to 2020.

This is great news because it suggests that legal operations not only can succeed in its primary stated goal of controlling legal costs but has already demonstrated substantial success.

The cloud to the silver lining is that by demonstrating that cost control is possible, legal ops created an expectation of further savings. That expectation comes at a difficult time when ever-increasing legal needs are further intensifying what industry observer Richard Susskind famously called the “more for less” challenge. Indeed, 2021 data from EY indicates CLDs expect workloads to grow by 25 percent over the next three years, despite the fact that 76 percent say their work volumes are already challenging. Seventy-five percent of CLDs further indicated they do not expect budget increases to cover the additional workload.

CLDs are certainly right that they won’t have enough resources if they fall back on the traditional legal solution of throwing warm bodies at the problem. Whether insourced or outsourced, human resources are expensive and don’t scale. The law department of the future will not necessarily focus on growing internal or external teams but on scaling value out of existing resources.

GCs know this, which is why they plan to increase their tech budgets from 3.9 percent of departmental spend in 2020 to 12 percent in 2025. Suppliers got the memo and are responding with an exponentially-increasing number of offerings from an astounding 1,843 companies.

Trouble is, not all the CLDs with expanding technology budgets have expanded their technology literacy commensurately. Sixty percent don’t have a technology strategy, and 75 percent do not stay abreast of legal technology. A handful have technology experts embedded in legal ops, but most just ask their legal ops directors to do the best they can, juggling yet another ball. The situation could easily lead to law departments buying too much too fast, failing to dedicate adequate time and resources to implementation, failing to achieve adequate adoption, and failing to get the full value out of their products.

A more thoughtful, surgical approach is required. Here are some ideas about how to do better:

Create a technology advisory board. If your department hasn’t stayed abreast of technology, create a legal technology advisory board that meets once or twice a month, talks about your areas of immaturity, and gets to know the different categories of tech. Even if you have no current plans for additional tech purchases, you probably will soon, so don’t wait for the platform to start burning. Study the landscape now so that when the time comes, you’ll know where the immaturity is and the options for curing it.

Subtract the unimportant. You will not have the time and resources to fix every area of maturity all at once. In fact, you can probably afford to have no more than three broad initiatives going at once, maybe even fewer. To avoid overcommitting and the consequent underperformance, have your advisory board identify not only your areas of greatest weakness but also how important they are compared to other areas of weakness. This may lead the group to agree, for instance, that even though your accruals process is totally broken and your matter budgeting process is okay but could be better, you are going to make a strategic decision to ignore the accruals situation for now because it just isn’t as important. This is a tough step because nobody wants to be told that their problem is only a second- or third-tier priority, but if you don’t have that conversation, then people will come away with their own ideas. To ensure an actual meeting of the minds has occurred, you need to plot your conclusions out visually so everybody knows what they are agreeing to.

You are not buying software—you are buying a relationship with the company behind it. Make sure that a technology company is willing and able to stand behind its products. I once consulted for a law department that was dead set on buying an admittedly nice-looking piece of software from a very small software company that was more or less unknown. The company was such a question mark that my employer actually requested that I make a slide called “Plan B if Software Company X Goes Out of Business” in order to justify the decision to colleagues. I had my marching orders and made the slide, but in the back of my mind, I was thinking, “If you have to go through these mental gymnastics to justify a purchase, you are headed down a dangerous path.”

The world has changed a lot in the last two years, and nobody is blaming CLDs for not having their technology act together as much as they theoretically could. However, the pandemic put the writing on the wall that technology isn’t just the way forward but potentially the only way forward, and the performance of CLDs that ignore that message will certainly be noted. Judged just as harshly will be CLDs who, rather than taking advantage of technology, allow technology to take advantage of them, creating a tangled web of solutions that do not go together and that nobody uses. But with patience and careful study, both of those outcomes can be avoided.

Nathan Cemenska
Director of Legal Operations and Industry Insights

Nathan Cemenska, JD/MBA, is the Director of Legal Operations and Industry Insights at Wolters Kluwer's ELM Solutions.

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