Law firms focus on digital skills to ease legal pressures
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Far from the jury boxes and witness stands, the mundane but vital administrative tasks that law firms must grapple with have become one of the hottest areas in legal tech.
Like the corporations they represent, lawyers have been forced to embrace new technologies to survive. And artificial intelligence and machine learning tools are becoming ever more of a necessity for law firms, which traditionally have been slow to invest in tech upgrades.
This tech transition has become a boon for some early movers, such as CS Disco, a Texas-based technology provider for law firms. Disco listed in July, becoming one of a few standalone lawtech public companies. Founded in 2013 by a computer scientist-turned lawyer, the company says it wagered there had to be a better way to automate much of the work that goes into legal document review.
Disco sells electronic discovery, document review and case building services to Simpson Thacher, Wilson Sonsini and other law firms hungry for more efficiency in discovery tasks.
Like others, it is using its artificial intelligence platform to advance the ediscovery market, which, say analysts at brokerage Needham & Co, is stuck in a “technological Stone Age”.
Spending on cloud-based ediscovery and document review is only about $500m today. But, in an August report, Needham predicted it will grow much more. Overall, the ediscovery software and services market is worth $14.7bn this year, and estimated to reach $16.7bn by 2024, according to IDC, a data provider.
The growing number of US states that have adopted consumer protection regulations plays to the company’s strengths, says Kevin Smith, chief product officer at Disco. Law firms are likely to invest further in tools to ensure compliance with future regulations, he adds.
“This does put pressure on legacy legal technology to ensure that privacy and security can be maintained across the disparate systems,” says Smith, who has seen a rise in customers looking for services where sensitive data can be securely managed.
Three states — California, Colorado and Virginia — have already adopted a data privacy law similar to Europe’s 2018 General Data Protection Regulation (GDPR), and six other states are considering privacy legislation, according to the International Association of Privacy Professionals, a non-profit group.
Competition in ediscovery is heating up. On November 23, Virginia-based KLDiscovery filed for an initial public offering.
Law firms are also developing technologies in-house. Baker McKenzie has created a machine learning practice and partnered with SparkBeyond, a New York-based AI provider, to assist legal judgment.
The partnership aims to help the firm identify potential clients, and also support legal work by identifying M&A activity, for example, says Ben Allgrove, a partner at Baker McKenzie.
“We are not building a technology practice,” he says. The machine learning practice helps lawyers with a range of problems such as big investigations, M&A transactions and intellectual property strategy, he explains.
GDPR in the EU has been an increasing driver of the evolving use of technology in law firms. With GDPR fines for violations potentially as high as 4 per cent of a business’s annual revenues, or €20m, whichever is higher, Shearman & Sterling realised it should overhaul its data security, privacy and governance programmes.
But the move also created a business opportunity, says Meredith Williams-Range at Shearman & Sterling. The analytics help the firm better time rulings from judges and predict when corporate deals might be getting ripe, she says.
“Internally, the data helps us price and staff matters effectively,” she adds. “We are getting more competitive with our pricing by analysing the effectiveness of certain tactics, helping us avoid billing unnecessary hours.”
In 2020, White & Case established a global business intelligence unit of 25 people. This includes an app for partners so they can see billing and origination credit details alongside pricing. Using data analytics has cut down the time and costs of working with external consultants on business challenges, the firm says.
“It has taken a massive amount of information and created knowledge [from it],” David Thatch, a partner at White & Case, says of the business intelligence unit.
In addition to helping with client problems, these insights have helped the firm with mentoring. The data identifies where partners can manage their time better to mentor younger associates, Thatch says.
“One of the best things about the practice of law is it is an apprenticeship model,” he adds. “I am thinking about using the data to teach me about that human contact.”
Case studies
Data analytics and New solutions. All case studies researched, compiled and ranked by RSGI. ‘Winner’ indicates the organisation won an FT Innovative Lawyers 2021 award
Data analytics
WINNER: Shearman & Sterling
As part of a five-year data strategy, the firm has undertaken a comprehensive review and restructuring of its data collection, governance and analytics. In 2020, a team of 40 legal professionals from different parts of the firm was created to manage data analytics.
They are now creating new applications and dashboards that link data from across the firm and external sources to generate new insights. The analyses are helping the firm to predict litigation outcomes, the likelihood of a deal happening and partner financial performance.
Baker McKenzie
As part of a three-year partnership with SparkBeyond, an artificial intelligence company, the firm’s newly created BakerML team of legal, data and machine learning experts are experimenting with how the firm can use machine learning to improve its business. Successful pilot projects have included a model to predict future client demand for M&A legal services, and analyses to predict which client relationships are likely to grow.
Ballard Spahr
Ballard360, the firm’s in-house data analytics platform, draws on information from different internal systems to build a rich picture of the firm’s clients. This includes information on hours worked and billed, relationships and connections between members of the firm and its clients, and other company data. Analysis of this data is helping the firm become more strategic in its approach to developing new business and managing existing client relationships.
Hogan Lovells
The firm recruited legal, technology and data experts to build its Advanced Client Data Solutions team. It aims to produce data analysis that can compete with the kind offered by big consulting firms, but with greater speed and agility. For example, the team created a way to analyse millions of transactions to help one client manage a complex litigation.
McGuireWoods
A new data analytics tool and dashboard for big litigation matters allows the firm to track lawyers’ hours and budgets to manage cases undertaken with alternative or fixed fee arrangements. The firm also created a deal pricing matrix that draws on data from private equity and M&A deals it has completed to better predict fees on new deals.
Troutman Pepper Hamilton Sanders
A new data strategy, governance model, analytics and dashboards are used to drive decision-making at the firm. For example, the firm automates tracking and reporting of diversity information to support decisions on hiring, promotions, training and staffing matters. Data analytics are also used to generate and share new insights with clients.
White & Case
A global business intelligence group of 25 people was created to co-ordinate the firm’s use of business data. Financial, marketing and timekeeping data, for example, are combined and analysed to provide new business insights.
These include reporting on client relationships and future work opportunities, and an app to give partners a live analysis of their practice and their financial performance for the firm.
New solutions
WINNER: Dentons
The law firm launched multidisciplinary advisory firm Dentons Global Advisors in 2021. Working together, Dentons can now offer integrated legal and strategic business advice to clients. DGA is set up as an independent company in which Dentons owns a minority stake. The independent model allowed it to use private equity financing to grow and helps it attract top talent. It acquired the business consultancy Albright Stonebridge Group, founded by former US secretary of state Madeleine Albright and public affairs consultancy Interel, alongside other high profile individual hires. It now has more than 225 professionals working in seven countries.
Borden Ladner Gervais
BLG Beyond is a group created by the firm to deliver non-traditional legal services using better processes, technologies and a mix of legal and other professional expertise. Services include managing real estate lease portfolios, ediscovery, intellectual property strategy and consulting. The team of 40-plus full-time professionals work alongside the firm’s lawyers, allowing BLG to expand its range of services and deepen relationships with clients.
Fragomen, Del Rey, Bernsen & Loewy
The law firm set up Fragomen Technologies as a subsidiary business to invest in new tech that can complement and even transform the global immigration work in which the firm specialises. It acquired tech companies SimpleCitizen and Nomadic and is working with governments, corporate clients and individuals to streamline immigration processes and generate new data analytics and reporting.
King & Spalding
The firm’s healthcare and life sciences team launched a new membership model to sell client services more cost-effectively. Different companies join a working group to see shared information on legislative and regulatory changes, for example, and access advice at a fixed quarterly fee. The working groups focus on topics such as data privacy or marketing and disclosure compliance. The largest working group has 75 client members.
Morgan, Lewis & Bockius
The firm expanded its Covid-19 task force model to cover topics such as the incoming Biden administration, corporate sustainability, climate change and ESG, and racial justice. The task forces form around a single issue to pool resources and share knowledge quickly. They include lawyers and members of business teams such as IT, finance and marketing. It has enabled the firm to respond to clients faster and develop new tech products, and has given junior lawyers a way to develop expertise and reputation fast.
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