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When Aon Corporation slashed its outside counsel roster from about 400 to 23 law firms in 2005, it quizzed the firms about their tech offerings. “We asked them about extranets, e-billing, and litigation management,” says David Cambria, director of legal operations at the Chicago-based insurance giant. But Cambria says that he didn’t really care whether firms had all of those products. He had another agenda: “I wanted to know if [the firms] were playing in the same pool as me,” says Cambria. When they crafted the tech section of their request for proposal, Cambria and his colleagues started from the assumption that all the firms they were interviewing had experienced, capable lawyers. But “we wanted to take it to a higher level, and the most successful firms were the ones that told us how they’d help us do what we do better, with technology,” he says. Aon isn’t alone. Law departments, once the hardware and software stepchildren of the legal profession, are steadily, if gradually, adopting more sophisticated ways to aid their work, according to Corporate Counsel’s 2007 In-House Tech Survey. What’s changed? Traditionally a cost center, legal departments have come under increasing pressure to keep costs down at the same time that they’re struggling to keep their technology current. “General counsel are being held to budgets,” says Woods Abbott, senior manager of legal operations � corporate at Raytheon Company. This year’s survey, our fourth in which we queried the technology heads of Fortune 500 corporations, shows that in many respects, law departments have had a technical awakening, and finally are getting the goodies everyone else in corporate America takes for granted. Among our findings: The BlackBerry has finally conquered the in-house legal market � 88 percent of the companies surveyed use it. And the march to the laptop continues, despite worries about theft, damage, and the security of wireless Internet networks. “Finally, technology is percolating through legal departments,” says Rees Morrison, a consultant for Summit, New Jersey � based Hildebrandt International, Inc. This newfound knowledge has made company lawyers even pushier when it comes to their outside counsel. In the past, law departments asked firms in a general way about their tech prowess. Now, says Jeffrey Schwartz, information technology partner at McDermott Will & Emery, clients are requiring firms to actually implement the technology that they’ve been boasting about. Legal departments also reported that they’ve requested a specific technology from their outside counsel, such as e-billing, or access to their case materials via the firm’s extranet. And a fifth of those surveyed, including The Boeing Company, Cisco Systems, Inc., and General Electric Company, said that they actually based a hiring decision on a firm’s technical offerings � 5 percent more than answered yes to the same question two years ago, the last time we did the survey. In fact, two companies, American Electric Power, Inc., and Johnson Controls, Inc., said that they had fired a firm because of its poor technology offerings. (AEP didn’t return follow-up calls for comment, and Johnson Controls declined to name the firm.) Law departments are also demanding � and getting � more inroads into their outside counsel’s networks. More firms, 24 percent, are giving in-house lawyers access to their knowledge management systems. And access to law firm extranets has become the norm, with 64 percent of respondents saying they have this ability. In turn, more than a third of our respondents said they’d set up extranets for their outside counsel. David Grimes, director of administration for Bank of America’s legal department, says the logic for him was simple � with all the data hosted in-house, Bank of America’s company lawyers don’t have to negotiate multiple sites with multiple log-ons at law firm sites. But it’s e-billing that’s at the top of in-house lawyers’ wish lists. Electronic invoices are typically broken down into exquisite detail, so that company lawyers and CFOs can see exactly how a case was staffed, what the firm charged for late-night takeout dinners for the paralegals, and whether the amount billed falls within the budgeted range. “If I’m controlling rates,” says Cambria, “I’m only controlling half the story.” In 2005 a sizable 35 percent of our respondents used e-billing in some form. This year, nearly half (49 percent) do, and many of those (35 percent) have made it a condition for a firm to continue to work for their company. Microsoft Corporation, for example, said that virtually 100 percent of its legal vendors now bill electronically. The sole exception, jokes Steven Levy, director of information systems for the law and corporate affairs department, is “the small real estate firm in Algeria that doesn’t need to send a bill for a lease renewal electronically.” And if firms balk? Grimes, of Bank of America, says that any outside counsel who demurs is sent a strong message, and typically backs down. Microsoft uses its billing system the standard way, to slice and dice bills to see who’s doing what. That’s good for the Redmond giant, Levy says, but it’s also good for the firms. “We see partners who are doing the same work they did as associates,” he says. “If they’ve been promoted, why should they still be writing contracts?” Pitney Bowes Inc.’s legal department uses e-billing data to ensure that firms adhere to its diversity guidelines via a checkoff for race and ethnicity on its staffing form. “It’s not enough just to recruit diverse attorneys,” says Beverly Wolfe, manager of legal operations at the Stamford, Connecticut � based mail services company. “We want them to use diverse teams on our matters.” The move toward e-billing isn’t universal, which consultant Morrison finds surprising in view of the proven benefits. Just over half of our respondents said that they didn’t require firms to submit bills electronically. When asked in follow-up interviews, some respondents vowed that it won’t happen again. Raytheon’s Abbott explains, somewhat sheepishly, that most overhead, including legal costs, can be passed on to Uncle Sam. Besides, he adds, current e-billing systems just weren’t good enough for the defense contractor, and didn’t show the kind of detail Raytheon needed. But he says newer systems now generate PDFs of original invoices, and Raytheon plans to purchase a system and roll out e-billing this year. However, a small minority is wedded to oldfangled ways. Deere & Company is unapologetic about its lack of e-billing. Beth Bollinger, law and patent business manager of the Moline, Illinois � based farm equipment maker, says that the legal department isn’t convinced of the savings, and that the accounting department put the kibosh on moves toward e-billing. Plus, she adds, the department does not demand detailed invoice data. Tracking outside counsel costs aren’t the only worry for in-house lawyers. They’ve also been forced to obsess about electronic data, and more specifically about what lies in corporate e-mail in-boxes. In December the federal rules concerning the discovery of electronic data changed to mandate that companies be more transparent in handing over files on corporate PCs and file servers during pretrial discovery. Our respondents said they’ve scrambled to get up to speed. Fifty-eight percent reported hiring an electronic data discovery vendor (up from 39 percent in 2005), while 47 percent said they have formal document retention procedures. This big scramble comes after years of relative laissez-faire policies during which, at least in the nation’s legal departments, in-boxes served as de facto case management systems. Retention policies, however, are all over the map, ranging from draconian (time limits for files to remain on the system) to wishful thinking (if we put a size cap on their mailbox, they’ll be forced to delete). Take IBM Corporation, for example. The Armonk, New York � based technology colossus uses the latest version of its own Lotus Notes program, and the system automatically deletes e-mails and attachments from the system after 30 days. “As the deadline approaches,” says Roberta Warburton, the manager of the law library and databases at IBM, “users get a bold, red notification” in their in-box. But then comes the fuzzy part: Employees are mostly free to save the material to their hard drives or other devices. Or they can print out the documents. Raytheon’s Abbott, for example, says there’s a written company policy governing document retention, but that there are no electronic controls yet. He doesn’t think the technology is effective enough yet to prevent the unauthorized leaking of information. It’s that kind of freedom that worries IT directors and in-house lawyers. Data can be dispersed in a multitude of ways, from being forwarded to private accounts, to spiriting that printout past the front door. “One of these days we’ll hear about how someone stole eight gigabytes of sensitive HR information with his iPod,” says Abbott. Another reason slightly more than half of the businesses surveyed don’t have formal retention procedures, says Dennis Kennedy, a St. Louis � based legal technology consultant, is that it’s hard to come up with a policy that applies to every situation. If a company deals with a lot of in-house IP, for example, keeping data around long-term becomes crucial. In other tech areas, law departments are on the cutting edge. Almost nine out of ten respondents told us that their company supplies BlackBerrys. Thankfully, only a small fraction of those mobile device � toting lawyers have to take them along on vacation � 26 percent � and then only for emergencies. The laptop has conquered the desktop � and no respectable laptop comes without wireless networking � which about half of the departments are happy to supply. It may look as though law departments have finally gotten the hang of things when it comes to using technology. But some of our respondents report that they’re just getting started. Says Aon’s Cambria: “We were living in a mud hut at Aon when it comes to technology. Now I’m in a one-story bungalow, and people are pushing me to move into a mansion.”

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