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Asking an in-house lawyer about technology is like asking Santa Claus about flying: Each has a system, but it’s none too fancy and a bit hard to believe. Indeed, legal departments haven’t exactly been trendsetters when it comes to gadgets and gear. That much was clear from Corporate Counsel‘s first two tech surveys, where our biggest challenge in describing the pace of the departments’ technological adoption was choosing synonyms for “slow.” On first glance, this year’s survey of Fortune 500 law departments looked like it was going to force us back to the thesaurus. All of those slick new technologies we’ve been hearing about for the last decade — knowledge management systems that capture and reuse lawyers’ expertise, corporate extranets for collaborating with outside counsel — remain more buzz than built. But a closer look at the results from the 139 information technology chiefs who responded to our survey reveals one important sign of progress. Legal departments are starting to understand that technology doesn’t just make them more efficient; it can force outside counsel to be more cost-effective as well. In-house lawyers are starting to use a handful of tools, such as e-billing, in more sophisticated and aggressive ways. Corporate legal technologists now don’t talk just about groupware, but about integrated systems, such as linking their electronic invoicing systems with their matter management systems to get all sorts of information on how — and how well — their outside lawyers are working for them. They’re also using, or looking to use, sophisticated technologies like data mining, which allow them to sift through such information as hours spent on a matter, and who worked on it, to discover how firms can work more efficiently — and to home in on the firms that aren’t delivering. It’s about time, too. “With the glaring exception of the legal department, the corporate world across the board has been using technology to get control over their vendors’ costs and efficiency,” says Dennis Kennedy, a lawyer and legal technology consultant in St. Louis. “So it makes sense that corporate leadership is pushing the legal department to get in line. That is where these initiatives are focused.” In fact, more than half of the businesses surveyed (55 percent) have requested that outside counsel obtain a specific technological product or capability. And a small but noteworthy number (8 percent) have fired a firm because of its lack of tech offerings. Many of these cases have revolved around e-billing. “We had two firms that wouldn’t convert,” says Michael Gayler, vice president and associate general counsel at Clear Channel Communications Inc., in San Antonio. “We fired one, and the other got the message and converted.” (He declined to name the outside counsel.) Lots of law firms are hearing, and acting on, a similar message: that they’ve got to exchange information digitally, and easily, with in-house counsel. Last year only 51 percent of companies’ outside firms had set up extranets that the in-house lawyers could access, according to our survey; this year, that figure jumped to 74 percent. Relatively few companies are getting access to the meat of some of their outside counsel’s infrastructure, however: their knowledge management system, the central repository for all work product. But more legal departments are asking for it, and, slowly, more are receiving it (30 percent, compared to last year’s 21 percent). “Firms are asking what more they can do for us, and we’re giving them our wish list,” says Gayler. “We need better access to the knowledge base we have already paid to build, without having to go through a paralegal every time we need something.” Companies have also had success with e-billing. Just over a third (35 percent) of the businesses that responded to our survey said that they require their outside firms to submit bills electronically. (Last year we posed a related question, asking companies only if they were using e-billing, with 41 percent responding that they were.) Little wonder: The technology allows businesses to spot, flag, and dispute charges that otherwise would often go unnoticed. It hasn’t taken these corporations long to see some serious ROI. “On one invoice a firm submitted, they had billed us for over $100,000 in fax charges even though we don’t allow fax charges,” says Steven Levy, director of information systems for the law and corporate affairs department at Microsoft Corp., which launched an invoice routing and approval system in late 2003. “This had been going on for years, but we never caught it because all of the firm’s charges had been coming to us in one big bill. There’s no efficient way to catch this stuff without technology.” (Levy declined to name the firm, but said that when confronted with an overcharge, Microsoft’s firms have all “accepted it and acknowledged it.”) Many legal departments are trying to take the voluminous data e-billing provides and use it to demand additional cost savings from law firms. By linking e-billing with its matter management system, for example, the Redmond, Wash.-based Microsoft can see how its outside counsel are staffing projects. “It lets us understand not just what the firms are doing for us, but how they’re doing it,” says Levy. “We’ll ask them why everything has to be done by high-priced attorneys, and work to get more paralegals onto more cases. We’ll ask them why we’re putting $40,000 into a matter that’s worth $6,000.” The savings so far have been “in the millions of dollars,” says Levy. “We figure it will be eight figures a year by the end of 2005.” But e-billing has its drawbacks. “It’s just an enormous amount of data to go through if you’re going to get that deep level of analysis,” says Dennis Browne. He’s the assistant general counsel at McLean, Va.-based Capital One Financial Corp., which switched to electronic billing two years ago. “E-billing gets the bills paid faster, and it flags certain types of expenses, but the big payoff we’re all expecting is not there yet.” Even getting access to the data can be a problem. Some e-billing systems work on a subscription basis; they store data on a vendor’s disks, and run reports only when clients ask for them. For many users, this is one step too many. “You want to be able to warehouse the data yourself, so that you can go through it,” says Tracey Schreiner, CIO for legal at Wilmington-based E.I. du Pont de Nemours and Co. When DuPont’s e-billing service couldn’t provide the level of access it needed, it switched to a service that could. (DuPont declined to name either vendor.) Legal departments are also demanding quick and easy access to their law firms, and, in particular, the work product outside counsel create for them. For many companies, the solution has been extranets set up by their law firms (only 30 percent of companies surveyed have set up their own extranets that outside counsel can access). The firms’ private networks provide in-house lawyers with immediate and secure access to a firm’s computer systems. Because the extranets are built and hosted by the outside counsel, clients get speedy access to information without having to worry about maintaining the system. “We’re a small department of 30 lawyers, while big firms already do this for so many clients,” says Clear Channel’s Gayler. “Economically, it’s much more efficient for the firm to do it than for us to do it.” But not all companies agree with this approach. Outsourcing the job to firms, they argue, isn’t nearly so efficient when you’re working with a lot of them. “We have over 40 primary law firms, and we don’t want to go to 40 different extranets to retrieve work product,” says DuPont’s Schreiner. “So we built our own extranet and have the firms come to us.” Legal departments have been more successful ramping up their internal communications capabilities — particularly when it comes to mobility and security. Fully 100 percent of businesses now scan e-mail for viruses. Over 99 percent of the companies surveyed filter incoming e-mail for spam, up from 86 percent in our 2004 survey; just under 70 percent dole out BlackBerry mobile devices to their lawyers, a big rise from last year’s 51 percent; cell phones are now standard issue at 64 percent of companies, up 16 percent from last year. But when it comes to sharing knowledge internally, well, it’s still a work in progress. When we asked respondents what problem they would tackle if they had the resources to do so, knowledge management continually got the nod. That wasn’t a surprise: For years, a computerized system that could capture, track, and share all of the expertise and experience of a company’s lawyers — whether it be work product, or published papers, or presentations — has been desired by just about everyone. But building this type of system can be onerous; years after knowledge management became a buzzword in legal technology circles, it has been implemented by just over a third of survey respondents, roughly the same as last year. The problem is part technological, part cultural. “There’s no plug-and-play solution, so developing a system is very labor-intensive,” says Heather Greenawald, assistant general counsel at SLM Corp. in Reston, Va., which is trying to figure out how to implement a knowledge management system. The real culprit, says technology consultant Kennedy, has been the hype over these systems. “Knowledge management was oversold before the technology was ready,” he says. It was pitched as a way to capture and leverage every bit of knowledge within an enterprise — and it didn’t deliver. “It left a bad connotation,” says Kennedy. The technology has improved. “We’re seeing tools that integrate document management systems with timekeeping and billing systems, so you can type in a matter and see who has billed the most hours on it and know who you need to talk to,” says Kennedy. “It points you in the right direction.” Instead of one �ber-tool, companies are relying on multiple tools. “They’re more sophisticated technologies, but they’re also more narrow,” says Kennedy. More tools, however, means more demands on tech support — another area in which we found significant divergence among the companies surveyed. On average there was one IT professional for every 24 lawyers. But that figure is a bit deceptive. Some businesses, like Microsoft, field large IT staffs dedicated exclusively to the legal department. Others, like Capital One, rely on the company’s central support department, with just a single IT staffer dedicated as a liaison between the lawyers and the help desk. Each approach has its proponents. DuPont’s 160-lawyer legal department has — and needs, according to Schreiner — a 20-person dedicated IT staff. She says, “We exist because of a recognition that the legal department has special needs, like connectivity with outside firms, matter management, invoicing, systems to manage our intellectual property, and litigation support.” But at Lucent Technologies Inc. in Murray Hill, N.J., where there is no dedicated legal IT staff for the company’s 85 lawyers, the argument is that a shared staff “lets us pool our resources more economically,” says Karen Castellon, the director of operations for the company’s legal department. Legal departments may be asking more of their firms and more of their tech support, but to truly take advantage of technology they’ll have to ask more from their own lawyers. The most common demand that survey respondents would like to make on their in-house attorneys: Use the tools. It was a challenge two surveys ago, and it remains one now. “That’s a problem I don’t think will ever go away,” says DuPont’s Schreiner. “Lawyers are thinking about cases and strategies, they see technology as an administrative burden. Our job is to show them the payoff, to get them to see it and say, ‘Aha!’” It’s a great dream, and one that may be fulfilled before Santa Claus drops in.

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