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Last year at this time, revolution was in the air. Don Murray and John Henry II were about to “revolutionize” the relationship between general counsel and outside lawyers. Chris Kruse was poised to revolutionize the stodgy practices of litigation. In the short run, they have been wrong. And in the long run, their Internet companies (ELF Technologies Inc.; eLawForum Corp.; and CaseCentral Inc.) will be dead unless practicing lawyers pick up the revolutionary drumbeat of the Web. The central message of this year’s AmLaw Tech survey is that firms are still pouring money into technology. But they’re buying basic tools, such as fleets of new laptops and stacks of BlackBerrys, more than exotic Web-based services. According to the survey, the nation’s largest firms are hardly using ELF’s Serengeti invoicing and data mining service or eLawForum’s eBay for lawyers. Lawyers are acting like, well, hard-headed lawyers, moving forward but with caution and deliberation, streamlining familiar functions rather than using technology to change how they do things. The accompanying sixth annual AmLaw Tech Survey of large law firms looks at the technology in use at the 100 top-grossing firms in the U.S. This year 95 of those firms responded — our best turnout yet. The second message of the survey is that there is no World Wide Way when it comes to legal technology. Take extranets. Extranets are secure, private Web sites on which lawyers, clients, and even opposing counsel can swap documents. A couple years ago, extranets were being touted as the antidote to arcane paper filing systems and bulky e-mail attachments. Our survey shows that about 90 percent of the responding firms are using extranets. But they’re generally of two minds: Either they love them or they suffer them. Twenty-three percent of the Am Law 100 firms are running more than 20 extranets. “Our lawyers like them, and our clients are increasingly coming to expect these when they hire us for a big deal,” says Michael Mills, the director of professional services and systems at New York’s Davis Polk & Wardwell. Mills’ firm is home to more than 100 extranets. But 40 percent of firms are using fewer than five extranets, including New York’s Skadden, Arps, Slate, Meagher & Flom; San Francisco’s Morrison & Foerster; and St. Louis’ Bryan Cave. “There’s just no [client] demand for extranets,” says the IT director at another large New York firm. “If a client really wants us to use one, we will. But that’s an infrequent occurrence.” “They’re unnecessary,” adds Sharon Gietl, the IS director at Bryan Cave. “We can get all of our document sharing done through e-mail.” Instead, Bryan Cave is working on cutting-edge “expert systems,” Web sites programmed to answer clients’ questions on certain topics. For instance, Bryan Cave clients can find out the rules on importing bananas from Ecuador by clicking through an automated decision tree on the firm’s Trade Zone site. These systems are the rage on the other side of the Atlantic, but not over here — at least not yet. Bryan Cave, Davis Polk, and New York’s Weil, Gotshal & Manges are the only U.S. firms making splashes with expert systems. Small splashes. “Expert systems are expensive and difficult undertakings,” says Davis Polk’s Mills. “If they’re going to come at all, they’re going to come slowly and in small numbers.” Lawyers were fairly early adopters of Palm Pilots. They took to the Palm’s simple contacts and calendar features and the ease with which information could be transferred between their Palms and desktops. But the era of the Palm Pilot might be over at firms. Three-quarters of the firms that give their lawyers handhelds chose the RIM BlackBerry as their primary tool, not Palm Pilots. (Palms finished a distant second, at 15 percent. We only allowed firms to select one product, but some firms give lawyers a choice.) The pager-sized BlackBerry allows lawyers to receive e-mail through the airwaves. The device vibrates when incoming messages arrive. It also comes equipped with a tiny keyboard to type quick responses. But the best part? It talks with Microsoft Outlook back at the office. Messages sent, read, or deleted on the BlackBerry are updated to reflect that status on the desktop machine. “The BlackBerry isn’t as elegant as the Palm Pilot,” says Davis Polk’s Mills, “but our lawyers wanted wireless e-mail more than any functions the Palms could do. And the BlackBerry really does e-mail well.” Too much convenience, however, can be a bad thing. “It’s a nice toy, but it becomes totally addictive,” says an associate at a large New York firm. “Right now it doesn’t bother me that much, but I suspect that in about three months it’ll feel like a complete ball-and-chain.” The IT director of another big New York firm predicts that associates will soon start turning down their firms’ offers for free BlackBerrys. “Is quicker e-mail more valuable than giving associates some freedom, some breathing room?” he asks. “The sociologist in me says not.” Still, wireless gadgets have fared better than application service providers. ASPs are Web sites like CaseCentral and Serengeti, where businesses and individuals can rent software services rather than purchase them outright. Fewer than half of the nation’s largest firms use an ASP. And most of those reported using only one or two. But CaseCentral’s Kruse says that IT directors, who fill out the surveys, aren’t always aware when their lawyers are using CaseCentral. “CaseCentral isn’t a software application that’s installed firmwide by an IT department,” he says. “So we can sell it straight to lawyers.” He claims CaseCentral is being used by about 60 of the Am Law 100 firms. Morrison & Foerster chief technologist Jo Haraf concedes that she might not know every time a lawyer is using an ASP. But usually, she says, “word gets around.” Still, Haraf doesn’t like what she sees in the ASP market. “I have over 400 applications on my desktop, but very few of these are being ported to the Web,” she says. “The pickings are slim.” A couple years ago ASPs were the next big thing. In 1999 a well-funded time-and-billing ASP called Red Gorilla appeared. Later that year CaseCentral beefed up its workforce and became a Web company. And by early 2000 ELF had raised $30 million for Serengeti. The plan was that lawyers would abandon their desktop applications and move to the Web. But Red Gorilla went belly-up in the middle of last year. CaseCentral has restructured and eliminated positions. And ELF recently laid off over half of its employees. Last year was also the year of Web-based auction sites like eLawForum, iBidLaw, and Firmseek. In-house counsel could post work orders, and firms would then bid on the work. In this year’s survey, only six firms admitted to using auction sites of any sort, among them Los Angeles’ Gibson, Dunn & Crutcher and Houston’s Fulbright & Jaworski. “We visited one of the sites hoping we’d find some good work to bid on,” says one IT director, “but we didn’t see much [on the sites] that we liked, and our clients certainly weren’t demanding that we do it.” Don’t write off the auction sites yet. John Henry, eLawForum’s chief executive, says that, by his records, 14 Am Law 100 firms bid for work through his site last year. The North American division of Dutch publisher Wolters Kluwer NV also recently invested in eLawForum. Henry won’t disclose the size of the investment. But he says it’s a “huge figure” that will allow him to double the size of his staff, from 10 to about 20. “[Companies] trying to compete with us are now going to have their work cut out for them,” he adds. Law firms are also starting to concede that the Internet has shortcomings. This year 26 percent of the firms blocked their lawyers from objectionable Web sites. This is up almost 5 percentage points from last year. One of those firms, Pittsburgh’s Kirkpatrick & Lockhart, blocks “offensive material” — pornography, Third Reich stuff, and the like — says Steven Agnoli, the chief information officer. “Someone even glancing at the wrong site can set up hostile work environment liability.” Patrick Tisdale, the chief information officer at San Francisco’s Orrick, Herrington & Sutcliffe, says screening Web sites has a practical benefit. “There’s a rough correlation between objectionable Web sites and viruses,” he says. “It’s more risk management than anything else.” Lawyers may be approaching technology with a lot of caution. But firms are still spending money. Their average technology budget for the year (both capital and operating expenses) is $29,745 per lawyer, an increase of 15 percent from last year’s budget. On the other hand, those budgets may be scaled back. Nathan Fineberg, the chief executive of Interface Software Inc., says that firms have grown noticeably more cautious in the second quarter. Knowledge management is one initiative taking hold at firms. KM systems are huge electronic databases made up of recycled work product. Firms hope that someday these searchable, electronic libraries will cut down on lawyer research time and, in turn, save their clients money. Thirty-eight percent of responding firms have chief knowledge officers or an equivalent post, up from 27 percent a year ago. These officers include Blake Bell of New York’s Simpson Thacher & Bartlett and Kingsley Martin of Chicago’s Kirkland & Ellis. Twenty-four percent of the firms have also moved to the Windows 2000 operating system. It’s about 40 percent pricier than Windows 98, but worth the cost, according to converts. “The hype is true,” Kirkpatrick & Lockhart’s Agnoli says. “Our system doesn’t crash nearly as much as it used to.” And firms aren’t afraid to switch products in core areas. IManage’s market share grew from 22 to 32 percent in the document management software market, taking market share away from leader Hummingbird/PC DOCS, whose penetration slipped from 68 to 61 percent. But the biggest mover of the year was Interface Software, the maker of InterAction. The software assembles all of a law firm’s contacts into one centralized database. More than just a souped-up address book, InterAction is a sort of intranet that pulls together detailed information about clients, lawyers, and support contacts like expert witnesses. It can be a powerful tool for large, multioffice firms where partners only congregate annually, if at all. Slightly more than half of the Am Law 100 firms use InterAction. Its closest competitor is Microsoft Corporation’s Outlook, at 20 percent, which doesn’t do nearly as much as InterAction. But don’t worry about Microsoft. This year’s survey shows that Microsoft Word continued its glacial march toward total conquest of law firm word processing. Every year a few more firms ditch Corel Corporation’s WordPerfect for Microsoft Word. At that rate, by 2003 WordPerfect will likely be a distant memory. But Microsoft knows the risks of having too large a market share. Last fall the company made a $135 million nonvoting investment in Corel in order to keep Corel afloat. The investment has provoked the curiosity of U.S. antitrust regulators, who have wondered whether keeping a competitor alive can be anticompetitive. We have been predicting the demise of WordPerfect for years. Perhaps there’s a lesson here. Large firms don’t move in Internet time, unless they are closing a deal. They don’t even necessarily operate in real time, at least when it comes to technology matters.

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