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The once-hidebound law firm has finally gotten hip to technology. Lawyers at the big firms edit briefs online and file complaints with the click of a mouse. Million-page document productions are squeezed onto small stacks of CD-ROMs. But life is not so advanced at the homes of law firms’ clients, the nation’s legal departments. According to Corporate Counsel magazine’s first technology survey, many in-house departments are still mired in the late 20th century. Seventy-nine companies responded to our survey, a collection of questions covering all things tech, from word processing to wide area networks. Our findings show that most law departments have the technological basics covered. But financial constraints, communication problems with upper management, and, most recently, having to find (and fund) replacements for the recently discontinued LawPack, a popular software tool, have kept bigger initiatives on the shelf. As a result, law departments are mostly in a holding pattern, rather than employing the latest technology to streamline operations and cut costs. But that’s the least of it. E-mails, Microsoft Word documents, and other forms of electronic data are pouring into companies at a breakneck pace. Few businesses really understand just how much information they’re sitting on, let alone how to organize it or where to store it. Without help from tech-savvy law departments, companies might not know how to compile electronic data when new corporate governance requirements and voluminous document requests come in the door. “With technology, the main driver is risk,” says Scott Rosenberg of Baker Robbins & Co., a Chicago-based legal technology consultant. “Companies that don’t use technology to organize their information are, sooner or later, going to pay a price.” STRETCHING THE ESSENTIALS Explaining the survey results requires a little history. In the mid-1990s, the business world figured out that new tools like Windows, e-mail, and the Web could make a lot of jobs easier. So companies moved en masse, replacing their old DOS computers and IBM Selectric typewriters with flashy and powerful new desktops, servers, printers, and software. The new equipment wasn’t tailored specifically for in-house departments. But that didn’t matter at first. Corporate counsel tweaked the tools to fit their own needs. They used Microsoft Word (and the now all-but-ignored WordPerfect) to create all sorts of documents and started using e-mail to send documents to other lawyers, both inside and outside the office. Companies committed themselves to Microsoft Corp.’s Word, Windows, and Outlook, and routinely upgraded to the latest versions. As a result, law departments today are well-equipped with the basics, according to our survey. Close to two-thirds of the legal departments that responded to the Corporate Counsel survey use either Windows 2000 or Windows XP, Microsoft’s newest and most robust operating systems. All of the departments surveyed use Microsoft Word, and every participating company seems to have some form of sophisticated e-mail platform (90 percent use either Microsoft Outlook or IBM’s Lotus Notes). “Most [in-house departments] have the fundamentals covered,” says Curt Canfield, a consultant in the Chicago-based Huron Consulting Group’s New York office. “They’re all getting a lot of mileage out of Word and Outlook.” FAR CRY FROM CUTTING-EDGE But the Corporate Counsel survey reveals that when it comes to cutting-edge, tailored-for-lawyers digital help, the results are less than impressive. For example, take extranets. These Web-based virtual “rooms,” in which documents can be swapped and edited, have been around for several years; law firms embraced them early on. But fewer than a third of our respondents have set them up to communicate with outside counsel. And only 37 percent of the responding in-house departments are using electronic invoicing to handle their bills from outside lawyers. The in-house/law firm disparity doesn’t stop there. Only 40 percent of the departments have electronic systems for storing and cataloging work product. A paltry one-third report having tapped an outside electronic discovery vendor (either to handle document productions in large litigations or to help implement document retention policies) in the last two years. Incredibly, many departments, including those at Navistar International Corp. and Johnson & Johnson, admit that they keep lots of their records not in databases but in manila folders and file drawers. “Some in-house departments are ahead of the curve,” says Baker Robbins’ Rosenberg. “But most of them just haven’t given enough thought to technology. Lots of them don’t even know where to begin.” MUDDLING THROUGH Why is it that when the country’s biggest law firms are running snappy document management systems and building huge electronic troves of “knowledge,” their in-house counterparts are still chasing so much paper? Money — or lack of it — is a big part of the answer. Companies may have managed to keep up with the fundamentals. But when it comes to plunking down cash on projects specific to legal departments, corporations are balking, asking instead that their legal departments “make do” until the economy improves. Take Baxter International Inc. The legal department at the Deerfield, Ill.-based company is by no means a technological stick-in-the-mud; it recently installed a pricey, state-of-the-art document management system. But according to Jeffrey Kendrick, a systems consultant at Baxter, the department has since put the brakes on technology spending. “We’d like to get into electronic invoicing, but we’ve had money whacked from our budget already this year,” he says. “We’re pushing everything back to at least 2004.” But it’s more than money; part of the tech deficit stems from the ways of corporate life. In-house lawyers often have to go through a phalanx of MBAs when they want money for new technology. And that’s not always an easy sell. Corporate masters are too often content to let their law departments languish or simply let their outside law firms absorb the big-ticket tech investment. “It’s a battle for me here, and it was a battle for me at my last company,” says Catherine Crowell, the legal administration supervisor at the St. Paul Companies Inc. “Upper management always gets this idea that the legal department thinks it’s ‘special.’ But we don’t think that. We just have needs that other departments don’t have.” Legal departments also suffered a huge setback at the end of 2001, when software vendor Hummingbird Ltd. discontinued LawPack, its wildly popular matter management system. LawPack, which tracks developments in cases and organizes billing information, is a mission-critical piece of software for a lot of in-house departments. According to our survey, nearly 20 percent of corporate law departments surveyed use LawPack, the largest share in our matter management category. Hummingbird’s decision to stop supporting LawPack sent shock waves throughout the in-house world. Most departments had invested tens of thousands of dollars on LawPack and had spent countless hours customizing the product to their own uses. “We were absolutely devastated by the announcement,” says Marla Davis, a legal administrator at the Anheuser-Busch Cos. “We made a huge investment on LawPack [in 1997], and now have nothing to show for it. We really feel cheated.” LawPack’s demise is having a ripple effect. Companies are setting aside money for its replacement. “It’s going to be a huge amount of work and very expensive,” says Baxter’s Kendrick. And, more crucially, “it’s taking money and steam out of other initiatives that we’d rather be pursuing.” PENNY-WISE NOW . . . Low-tech law departments aren’t going to start losing cases because they don’t have the latest and greatest technology. But in the long run, they’ll toil inefficiently. They’ll miss out on cost-saving tools, like invoicing software that keeps detailed statistics on just how they’re spending money. And it may sound simplistic, but, yes, their lawyers and paralegals will continue to waste time making copies, searching for documents, and performing other tasks best left for silicon chips and motherboards. Unfortunately, the pitfalls of falling behind don’t stop there. The recent passage of Sarbanes-Oxley and the heightened focus on corporate governance have put law departments on alert: SEC and other filings need to be composed of complete, meticulously compiled information. And more than ever, plaintiffs lawyers are going after electronic data to build their cases, including backup tapes and long-forgotten troves of e-mails. “It’s just not a paper world anymore,” says Huron’s Canfield. “Companies that don’t get up to speed with technology are going to struggle. It’s that simple.” This article was distributed by the American Lawyer Media News Service. Ashby Jones is a staff reporter at Corporate Counsel.

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