Trend tracker: The technology year in review

The legal-technology market continues to develop apace, with several key developments in 2005 suggesting interesting times ahead.

By Keiran Flatt, freelance journalist

A common complaint among consultants, legal-software vendors and law-firm IT directors is that legal technology has lost much of its spark. But the more pragmatic approach to IT, which has accompanied a general business trend towards a style of management more in tune with the tenets of ‘mainstream’ corporate governance, does not signal the end of innovation. Like a swan viewed from the riverbank, its progress might appear sedate but there is plenty going on out of sight, beneath the surface.

Matter-centric systems

The idea behind ‘matter-centric’ systems is an old but eminently sensible one: why not create an electronic file structure that mimics as closely as possible the trusty manila matter-folder, which has been the lynchpin of paper-based processes in law firms since time immemorial? What has changed is that firms are no longer just talking about it and buying the tools – they are getting on with the task of implementing it.

“Matter-centricity is no longer a myth,” says Justin North, a consultant with Baker Robbins and Company. “Everyone is implementing it. It has been technically possible for a long while but speed [of document transferrals] has always been an issue.

It needs to be implemented correctly; it needs to be designed for speed and performance. The quality of the end-user experience is crucial.” Allen & Overy is already there, having spent years developing its Omnia system, a combination of bespoke development and standard Hummingbird technology. It will be interesting to see whether, in the long term, Allen & Overy migrates back towards the standard Hummingbird offering as its matter-centric capabilities become more sophisticated, or maintains its bespoke development.

North warns that just implementing matter-centricity is not the be-all and end-all; the design has to be right. If, for example, it takes six seconds for a partner in Paris to view a document authored by someone in London, it is unacceptably slow. So far, very few firms have got it completely right, but North expects to see some highly successful implementations in the first quarter of next year. His warning also extends to the system vendors. “[They] need to be careful that they get matter-centricity 100 per cent right before they jump the gun and move on to integrating it with records management,” he says.

Enterprise search and the journey from DMS to ECM

According to North, 2006 will see a lot more interest in enterprise search systems. Recommind and Autonomy are likely to be among the key players, but they all have some work to do and the first product that can search live e-mails will have an advantage. Prospective buyers should also look for a system whose interface and behaviour is similar to Google and enables users to do ‘concept searches’. “A number of firms, including [US-based] Cravath and Morrison & Foerster, are moving ahead of the pack in relation to these technologies. As early adopters of the Recommind product they have development influence over the emerging product’s functionality,” he says.

Neil Cameron, founder-director of the eponymous consulting group, says firms would do well to focus on enterprise content management (ECM), which essentially means putting together the well-established and widely used document-management systems with the newer web-content management and enterprise-search technologies.

“Law firms should be treating all their data as one series of websites,” he says. “A partner’s CV should look different depending on who is viewing it.” When an energy company executive clicks on the CV, for example, the partner’s oil and gas expertise should be at the top. Cameron also suggests setting up a generic, secure website for clients. “I believe firms are missing a trick,” he says. “[This] could engender a sense of community and loyalty across their whole client base.”

It is not only the international behemoths of the legal world that have started deploying enterprise search technologies. Jan Durant, head of IT at Lewis Silkin, says that although search engines can only retrieve what is already in a law firm’s systems, most firms have already got large amounts of residual knowledge and information in their databases and the major challenge is getting it out again while at the same time searching across predefined websites. “This is why we were one of the first firms in the UK to pilot Recommind,” she says.

KM – new life emerging from a stagnant pond?

Enterprise search and ECM can be important building blocks for knowledge management (KM), but tangible advances in know-how systems are only beginning to re-emerge after a winter of discontent, when KM seemed as unfashionable as wearing socks with sandals. Cameron does not accept that KM development has stagnated, but he says many firms have an attitude that “this is ‘as good as it gets’, without expending so much time, expense and resources that it is not worth the bother”. Far fewer partners are willing to bet their career on KM. “The only way forward is to put in a board-level director of KM and to treat them exactly the same as a finance director,” he says. “But as far as I know, Clifford Chance is the only firm that has done this.”

North, meanwhile, thinks it likely that in 2006, Thomson will find a few buyers for its West KM product, which has taken off in the US but has yet to gain serious traction in the UK market. “Does KM work? That depends on how you define KM,” he says. “In a lot of ways it is already delivering value to a lot of firms.” Precedent-logging, expertise location, clause banks (which enable lawyers to look for the context in which specific clauses have been used), and enterprise-search systems are among the success stories. Among the most interesting recent developments, he says, are Ashurst’s deployment of Solcara and Freshfields’s launch of a major new KM system, Athena, which is one of the most sophisticated and ambitious of its kind to date.

Looking further ahead, some firms are looking at two internet-based developments that might evolve into useful tools for KM – weblogs, or ‘blogs’, and wikis, which enable groups of like-minded individuals to share knowledge and expertise in a dynamic, online repository structured along the lines of an encyclopedia.

“The wiki concept is interesting but I cannot see it taking off in a big way in the next two years,” North says. “On the other hand, blogs have taken off very rapidly.” There are some extremely prolific public blogs on the web, such as Allen & Overy lawyer Joy London’s Excited Utterances, which engender a sense of community among their readers. North is interested in the concept of clients-only blogging, which he thinks may end up replacing law firms’ traditional newsletters and legal updates.

CRM

While KM technologies may only just be emerging from the doldrums, development of client-relationship-management (CRM) systems is building up a significant head of steam.

Berwin Leighton Paisner recently re-implemented its InterAction system and has since seen massive improvements in quality of information and usage – a project that may well be copied across the industry. “As a discipline, CRM has seen some renewed vigour,” North says. “Business-development people and partners are beginning to realise that it is important. But a lot of firms have got a serious legacy headache. Nobody is completely happy with what they have got; with CRM it is very rare to find happy users.” Still, he is reasonably optimistic. “Fingers crossed, in 2006 we will see a push on the design front and then maybe it will start to influence attorneys’ behaviour.”

So why hasn’t CRM taken off in the past? “The people implementing the software do not realise that it needs to be built into existing processes and practices,” he says. “It is like trying to get kids to eat something they don’t like. You have to hide it inside something that they do like.” This bodes well for Microsoft, which ‘hides’ its CRM product in the ever-popular Outlook e-mail browser.

Instant messaging

Rapid uptake of instant-messaging (IM) applications among consumers – and its widespread use for frivolous purposes in the workplace – have led to some firms giving serious consideration to using the medium for business, with more than a few legal-software developers jumping on the bandwagon. But many IT directors remain unconvinced. “It might be of some use internally,” says Lewis Silkin’s Jan Durant. “But I cannot see it taking off externally – we trialled the BlackBerry mobile instant-messenger application and while it was fun to have, we came to the conclusion that for us, it would just be a toy.” Naturally, if a client wanted to use IM the firm would have to consider accommodating them and putting adequate security in place, she says. But any small benefits of deploying IM internally or externally would be outweighed by the complexity of feeding it into the firm’s Cryoserver archiving system and Hummingbird document-management system – and, in any case, there is no clear consensus yet on data-retention policies for IM.

ERP – the multimillion-dollar question

Installing enterprise-resource-planning (ERP) software is undoubtedly one of the most expensive projects a law firm could choose. But Cameron, who knows his onions in the field, says the legal market’s interest is on the rise. “I have been called twice in the past two weeks by clients who want to talk about ERP,” he says. “There is a trend towards ERP but only for firms that are big enough.” And in the UK, less than ten firms have the size and international reach to need it, he says.

One of the drivers that is attracting the largest firms to ERP is a perceived need for HR software applications. So why not buy specialist HR software, which is likely, in the short term at least, to be cheaper and less complex to implement than an ERP system? Cameron says the HR software market has been “blown about” over the past few years and selecting a package is far from easy. Plus, at a time when integration between key software applications is of prime concern for law firms of all sizes, ERP offers a single, integrated solution to support every aspect of a law firm’s back-office function.

“Law firms have four options,” Cameron says. “They can use spreadsheets; write their own software; buy domestic HR software packages; or buy ERP.” Domestic packages may suit firms that only operate in one or two jurisdictions – and those developed in the UK generally work quite well across Europe – but an international firm might have to deploy as many as 15 different packages around the world, Cameron says. However, ERP has its own problems, he says – not least the recent consolidation of four big vendors into two, which has upset some users’ long-term IT strategies.

“Six or seven large UK firms are surely realising that they have got to buy either SAP or Oracle to get global strategic HR coverage,” Cameron says. “And they are slowly steeling themselves to do it; but the problem is trying to persuade partners who have already spent millions on practice management and KM to spend another two or three million on HR software,” he says. “However, it does represent the strategic management of their largest capital expenditure – the thing that makes firms what they are.”

But massive international firms are not the only ones looking at ERP. Intellec, a SAP partner, is selling a ‘boxed and ready’ SAP solution that it says is tailored for the legal market and aimed at the whole of the UK top-100. The company’s sales pitch sounds compelling: because a firm only needs to buy full SAP licenses for staff in the finance department and far cheaper ‘basic user’ licenses for fee earners and other professionals, the cost is roughly the same as that of a market-leading practice-management system. Cameron is unwilling to say which route firms should take, but he argues that “SAP could be dangerous if they ever get their ‘act together’ in this market”. Despite his reservations – and the fact that Linklaters remains the only law firm to have bought the full-blown product – it seems there is now more interest in SAP than ever before.

Offshoring

Many of the firms currently interested in ERP are also looking at offshore outsourcing, attracted by the promise of large-scale cost savings if they move their support functions to countries where skilled labour is cheapest. Indeed, some have already done it. But several of the legal-sector pioneers – along with banks and insurance companies – are now scaling back their investment even as others prepare to outsource, and it’s anyone’s guess whether the practice will become commonplace among law firms. Cameron has come up with a formula. “Never offshore to a country that does not watch Coronation Street,” he says. “Otherwise the language simply does not provide a close enough match for the nuances to get across. That includes New Zealand, but excludes India.”

A revolution from Redmond?

The next-generation offerings from Microsoft, due for release next year, have set some IT directors’ tongues wagging. Big law firms are important customers for Microsoft and a fair number of them have been given sneak previews of Windows Vista and Office 12. “It’s very interesting how [external] influences are shaping Microsoft at the moment,” says one IT director. “They genuinely see Linux as a big threat; there are clear influences from Linux’s Looking Glass and Macintosh’s Tiger in the new operating system.” Office 12 could be a big step forward in terms of usability. “It [is] arguably being ‘dumbed down’, which could make certain features more accessible. Less is more and all that, especially with the integrated workflow. Microsoft CRM also looks to be making really good progress. The full-on integration it has into Outlook and Communicator could be an absolute winner,” he says.

With all of this going on, it is clear that the legal sector remains a hotbed of technological innovation and development. Nowadays most of the new ideas and strategies may seem less seismic but for once, they all sound eminently sensible.