"Budget is trickery...": Buying legal technology

At the second Apperio round-table breakfast in November I was joined by 15 corporate and private office General Counsel and representatives from leading law firms to discuss the rapidly evolving LegalTech landscape.

If one subject consistently stole the show, whether in-house or within law firms, it was the process of buying new technology. There is clearly no shortage of appetite for the application of tech to the legal function. If nothing else, digital disruption has been a staple of company strategy for two decades now – and many legal professionals will even have acted for some of these disruptive high-growth, tech firms. The idea that lawyers operate in an isolated, Luddite bubble is ludicrously stereotypical.

The consensus was more that the process of buying technology for legal departments is complex and challenging, or, in the words of one of our guests, “Budget is trickery!” Here are the three big things we learned about buying LegalTech:

Budgets are a mystery

Occasionally there’s a specific budget for LegalTech, more often there is not. The overwhelming challenge is that the in-house legal function is often viewed as an internal or back-office function, and therefore a cost to the business; a lower priority and a target for cost-cutting rather than investment that leads to future value.

The industry is not going to be able to persuade CFOs that back-office functions deserve a different approach; but we can persuade boards that the legal function adds strategic value and should be seen as a commercial contributor. Indeed, the new wave of data that companies like Apperio are giving to legal professionals is a great source of credible management information in this regard. One of our guests commented, “What are the metrics? If you can, for example, reduce the contract time, then you can justify the investment.”

Getting budget can therefore be a fight, but is not insurmountable: as of one of our guests put it, “Legal is a low priority. But if you make it a business problem, then you can ‘legalify’ it… Always ask how legal contributes to a business problem.” Or, in another’s succinct words, “Bring a business case.” Another Legal Ops guest said that her company overtly sought “pan-business value from tech”.

Advice is short

There is a raft of IT-focused analysts (Gartner, IDC etc.) offering broadly independent assessments of technology to enterprise clients. But the advisory ecosystem within the legal profession is remarkably sparse. As one of our guests said, “There’s little research into, or available sources for, what is solving specific business or legal problems. So there’s little honesty or transparency, not much in the way of clear provider strategies that anyone’s prepared to talk about, and no ratings system.”

Some of this may come down to the natural reticence of the profession towards sharing experiences; an issue which is slowly changing with the advent of organisations like LegalGeek and CLOC which are building informal connections across the industry (as one of our guests said, “Best practice is only going to come from networks of other law firms”). But this is also a genuinely immature segment of the market - despite the fact that some functions like time tracking, document management and contract management have been on the table for decades.

There’s also a problem with independence. Many law firms are following the model of their Professional Services counterparts and expanding their portfolios to include technology. So there are LegalTech offers on the table from law firms themselves. Indeed several (e.g. Allen & Overy’s ‘Fuse’ or Linklaters’ association with ‘FLIP’) have in-house accelerators or support tech incubators. One of our guests was also hugely sceptical about law firms dabbling in technology: “They’ve simply got different skillsets”, she said.

The problem with IT, is IT

A key issue was IT – whether the tech itself or the team supporting it. The issue in working with IT was not security: legal departments share a risk-averse nature with IT, so it’s unlikely that the IT team will worry about security while the legal department races gung-ho into a GDPR nightmare (“If it hasn’t got adequate security from the off, then forget it”).

Rather, the issues were, cost – as to be expected, and often more importantly, time. Scheduling under-resourced IT talent to devote developer time to a legal project is often impossible: either too far into the future to warrant effort, or constantly kicked into the long grass by other priorities. One contributor said, “If there’s any development time at all, it’s a problem. Just one day of development time can be a complete blocker.”

Again, if development resource is required, it will need a business case. It’s better to work with SaaS systems which can be deployed off-the-shelf. Another popular approach was a charm offensive: to “invite the IT guys in to see what the legal team does.” This relationship-building will pay dividends when tech is (inevitably) needed.

There are short- and long-term answers which can put the best technology within reach. The competitive imperative means that first-movers will be rewarded. One of our guests said, “Of course, all law firms want to be on panels, so that creates leverage for clients to mandate ideas, processes and ultimately technologies into legal firms.” The desire for new business will ultimately push the market forward.

In the meantime, there’s also the opportunity to bypass the technology budget completely. “It’s interesting when law firms resell products”, said one contributor, “because it’s subsumed into the legal services budget.”

Until technology is as naturalised into legal services as it is in other functions across the enterprise, though, the profession continues to be in a state of transition. Some organisations (client and firm side) are even coding widgets and tools themselves. Cloud security is not the issue: the prevalence and reliability of AWS and Azure have put paid to that problem. Rather, it’s about locking down costs, developing value fast, de-risking the process and removing complexity; all of which point to SaaS tools. As one of our guests said, “It’s iterative. I want to make the most of what I’ve got, apply simple tools and mitigate the risks of each evolution of technology.”