Part IV: Examining Legal Tech Adoption

In the first installment in this five-part series, I used social media and online questions to ask two questions:

  1. Former (practicing) attorneys now within the legal tech industry: What is the number one barrier to law firm adoption of your technology?
  2. Practicing attorney who is a legal tech adopter: What was the number one factor in your decision to adopt the technology?

The responses led me to a theory: In-house or general counsel are important customers, because they drive change within larger law firms faster than legal tech companies.

I wrote about in-house counsels’ needs in terms of efficiency and simplicity previously here. As a former practicing accountant, when I left the profession and went to run a business, I was extremely hard on our service providers, particularly scrutinizing the billings. As Adam LaFrance, co-founder of Canadian Knomos, explained to me, It is a number’s game: “Getting buy-in from a firm’s economic decisions makers (i.e., managing partners and law librarians) requires quantifying how the benefits of new technology (reduced search costs in terms of time, effort, and money) are greater than the costs of technical implementation and the user-adoption learning curve associated with new software.”

Jackie Hutter of The Hutter Group, an IP strategy legal consultant, provided one response to the above mentioned questions, describing what potentially holds law firms back: “A not insignificant part of the reason why I left the traditional practice of IP law, where I reached a very high level in the profession, is what I saw as the moribund nature of my colleagues in adopting new, more efficient ways to solve our clients’ problems. The billable hour restricts our incentives to make ourselves more efficient. Full stop. When you have an established law firm to run and employees to pay, legal technology that reduces the amount I can bill my clients might be seen as benefiting the client only, leaving me with an expensive human resource (junior attorney or paralegal) who I cannot pay. But now that I am someone who works mainly on a project-based fee structure on my own, I am fully incentivized to be as efficient as possible, so as to enable me to make the profit I estimate from each engagement. I will add that I am very comfortable with using legal technology to streamline my client service efforts, especially in areas where the front-end of the legal analysis requires routine analysis.”

I’ve heard other anecdotes that concur with Jackie’s response. Basically, as long as the firm has idle resources, it will not consider using technology to provide efficiencies to clients. Even in the face of metrics showing increased billings and/or cost savings, firms will not choose technology.

Julia Shapiro, CEO of Hire an Esquire, identifies “the decentralized partnership decision-making structure and related bureaucratic inertia of law firm partnerships as the primary barrier to adopting legal tech efficiencies.” Although her company now has a critical mass of AMLaw 200 clients after “years of building trust and learning exactly how to maneuver around these barriers,” Julia outlines the stark and positive difference with the in-house customer: “in contrast, our Fortune 500 legal departments have adopted at a much faster pace with streamlined procurement processes that not just reward but require efficiencies.”

Mitratech Product Manager (and JD) Tomas Medina provides some further information on the topic: “The number one barrier for legal departments [adopting tech] is lacking endorsement from a leader with the vision to realize that the deep visibility, efficiencies, and accountability our legal technology provides will truly create more value, not just for the legal department, but for the entire organization. In our experience, the critical success factor that is a constant when legal departments experience full adoption of our legal technology solutions is having executive sponsorship from a [general counsel] that has a vision for what he/she wants to achieve, defines the metrics that will measure the success of that vision, and puts in place a process that will ensure the team is aligned and accountable for achieving that vision.”

Shifting gears, I would like to talk about competitors. Generally, being alone as the only product or service is seen as a great advantage in the startup world.  However, it is debatable in the legal tech vertical.

Earlier this year, we held two Evolve Law events on both coasts. At both events, we asked in-house counsel for problems or pain points. From those sessions and the responses I collected for this series, it appears that it is easier to dislodge another competitive legal tech solution than create a brand new solution that has no competitors and, therefore, no early adopters. As Jonathan Perle, founder of Privileged Communications, explained: “I have a list of firms—all of whom have indicated that they like our concept—that have said straightforwardly ‘we will not be the first or second firm, but you should definitely call us when you have five or six other firms using your technology.’”

However, Knomos has a different view: “The number one barrier we face to law firm adoption is overcoming the ‘good is good enough’ status quo of existing legal research software solution.”  Perhaps that is because legal research is a more mature area of legal tech, comparable to e-discovery.

Eva Hibnick , a former practicing attorney and now one-400 co-founder, commented on the idea of switching costs, supporting the notion that lawyers may not wish to change either process or adopt technology: “The number one barrier to lawyers adopting new technologies is figuring out their incentive to do so. If they already have something in place, why would they change their current process? Increasing productivity and efficiency are not as pressing in the legal industry as it is in other industries. Also, legal tech startups need to think about switching costs, both in terms of training staff and the approval process. Most legal tech startups will target one person at a large firm hoping that that person will become a fan and push through change. However, because firms have so many shareholders, there is rarely ever one decision-maker. It could take months or even close to a year to get the right decision-makers to approve a firm wide change.”

Eva has an additional piece of advice that echoes some of the comments from the last installment in this series: “Start small. Find one thing that law firms already pay for and make it better, cheaper, and easier to use. Then, try and replace that one thing for one attorney in the firm. Proof of concept is your goal.”

Again, it all returns to the notion of change and willingness to shift and amend processes. Let’s hope we do not have many more quotes like this one from the former general counsel of one US corporation as reported in the September 2015 Legal IT Insider: “I waited seven years for two pieces of what I thought were pretty basic functionality. I retired and we still didn’t have it!”

As always, please reach out to me on social media @maryjuetten. In the final installment of this series, we’ll talk about change, diversity, and inclusion as well as alternative fee arrangements.

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