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When Aon Corp. slashed its outside counsel roster from about 400 to 23 law firms in 2005, it quizzed the firms about their technology offerings. “We asked them about extranets, [electronic] billing, and litigation management,” said David Cambria, director of legal operations at the Chicago-based company. But Cambria said 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,” said 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 said. 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 the 2007 In-House Tech Survey, done by Corporate Counsel, an affiliate of The National Law Journal. 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,” said Woods Abbott, senior manager of legal operations-corporate at Raytheon Co. BlackBerrys triumph This year’s survey queried the technology heads of Fortune500 corporations. It 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 the findings: The BlackBerry has finally conquered the in-house legal market-88% 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,” said Rees Morrison, a consultant for Summit, N.J.-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, said 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 Co., Cisco Systems Inc. and General Electric Co., said that they actually based a hiring decision on a firm’s technical offerings-5% more than answered yes to the same question two years ago, the last time Corporate Counseldid 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.
TECH TRIUMPHS Goin’ Mobile Have BlackBerrys:2003: 29% 2007: 88% Have wireless (Wi-Fi) networks: 54% The Bottom Line Median capital budget: $200,000 (32 responses) Median operating budget: $337,500 (30 responses) Median salary of Top IT professional in legal: $100,000 (18 responses) Coming in From the Cold Outside counsel have extranets for in-house lawyers: 2003: 46% 2007: 64% Legal departments have extranets for outside counsel: 2003: 29% 2007: 36% Legal departments that hired a law firm because of technology offerings: 2005: 15% 2007: 20% Legal departments uses e-billing: 49% (2007) E-billing is a condition to work with firms: 35% (2007)

(American Electric didn’t return follow-up calls for comment, and Johnson Controls declined to name the firm.) Accessing networks Law departments are also demanding-and getting-more inroads into their outside counsel’s networks. More firms, 24%, are giving in-house lawyers access to their knowledge-management systems. And access to law firm extranets has become the norm, with 64% of respondents saying they have this ability. In turn, more than a third of respondents said they’d set up extranets for their outside counsel. David Grimes, director of administration for Bank of America Corp.’s legal department, said 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 logons 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 chief financial officers 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. In 2005, a sizable 35% of respondents used e-billing in some form. This year, nearly half (49%) do, and many of those (35%) have made it a condition for a firm to continue to work for their company. Microsoft Corp., for example, said that virtually all of its legal vendors now bill electronically. The sole exception, joked 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, said 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 Microsoft, Levy said, but it’s also good for the firms. “We see partners who are doing the same work they did as associates,” he said. “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,” said Beverly Wolfe, manager of legal operations at the Stamford, Conn.-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 more than half of respondents said 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 Raytheon, and didn’t show the kind of detail it needed. But he said newer systems now generate PDF-format files 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 & Co. is unapologetic about its lack of e-billing. Beth Bollinger, law and patent business manager of the Moline, Ill.-based farm equipment maker, said 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 added, the department does not demand detailed invoice data. Tracking outside counsel costs isn’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 personal computers and file servers during pretrial discovery.

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