The way DLA Piper global co-chairman Roger Meltzer sees it, the last couple of years in the legal industry have been good, but law firms leaders all over are wondering “when the next shoe will drop.”
“There’s going to be a pullback at some point,” Meltzer said.
As a hedge against a recession and to meet other goals, DLA has poured significant resources into technology and innovation initiatives, overseen by newly hired senior level and C-suite staff. Those initiatives include using data analytics to get client payments in faster, using artificial intelligence to help build legal briefs and using blockchain-related technology in real estate transactions.
Besides helping the firm weather a potential downturn, Meltzer said the efforts will improve the outcomes of client matters, improve firm profitability and lower costs per hour. DLA, he said, has already seen some returns on its innovation investments that have “materially impacted profitability.”
While DLA’s latest tech efforts are multifaceted, they are the latest example of an innovation-race in the legal industry, with several firms boasting of artificial intelligence capabilities or partnerships in the last few years.
DLA’s new hires in the last 18 months overseeing the initiatives include Eric Wolff, director of data analytics, and Andrew Gastwirth, now chief information officer.
Gastwirth, who arrived at DLA in December 2017, worked at Microsoft for seven years, including two years as digital adviser, working with large companies and some federal agencies. Wolff, who arrived at DLA in June 2018, is an economist by training, arriving from the U.S. Justice Department, where he pushed for better use of data.
Chief operating officer Bob Bratt, who has been at DLA for about eight years, oversaw the new hires. A guiding motive, he said: “How can we enable our lawyers to do a better job and to do it faster and cheaper?”
Billing and Collections
One data project involves analyzing client payment history. DLA sends out 12,000 to 15,000 bills every month, Bratt said. “There’s a group of clients that always pays, and there’s a group that sometimes pays, and there’s a group that we need to pay attention to,” he said.
Sometimes the blame for nonpayment or delay can fall on DLA, Bratt said, such as if it submits a bill to the wrong client contact.
DLA is also beginning to use data and AI to sort out which issues generate client billing inquiries, in order to ultimately help the firm bill and collect faster, Wolff said. “From the data so far we’re identified several types of questions raised by clients,” he said, citing missing information, budgets that require additional attorney involvement and questions about how a bill relates to an overall budget for a matter.
The firm aims to systematically review questions that might not be apparent to individual lawyers and offices so that the billing process can be improved, Wolff said.
The firm is also using AI to help understand reasons for write-downs of bills and discounts. “We feel like we have developed classifications for the write-downs. We’re just starting to put in place changes right now, so that will help us measure and set a baseline,” he said.
This work isn’t about resolving individual client inquiries, Wolff said, noting the lawyers responsible for the client relationship still respond to the client.
Meanwhile, DLA has written a software AI tool that will survey and scrape the firm’s existing litigation briefs to find relevant cases and clauses for writing new briefs.
With some guidance from Microsoft on machine learning, the firm wrote an application that scans all of the firm’s briefs and extracts data, Gastwirth said. The data then goes through an AI machine learning model that learns more over time, as the firm gives it more good data.
About 25 attorneys and staff are part of a pilot program using the database, and the firm plans to expand it to a larger group later this year, he said.
The goal, Gastwirth said, is to gain a competitive advantage with briefs that can be put together more quickly and with a higher chance of success, while lawyers will still control the end result.
Overall, DLA is leveraging AI throughout the firm to capture more business by having systems that boost efficiency and deliver insight on how to help clients, Gastwirth said.
“If we can automate the abilities we have now, we can potentially (acquire) new work that we previously didn’t have before,” Gastwirth said. Machine learning, he said, “allows us to do more informed and intelligent work more quickly than we would otherwise be able to do, and some of that may be more commodity work from an automated standpoint, but it wouldn’t just be limited it to that. “
“That’s not replacing the traditional work we do, It’s just a new opportunity for us,” he added.
On another project, DLA is working with a consortium of nonlegal companies to use blockchain-related technology. One use would be in real estate transactions with multiple parties to “create a chain of secure transactions,” Bratt said.
During a February event in Seoul, South Korea, a distributed ledger technology group called Hedera Hashgraph announced the first members of its governing council, including DLA. Besides DLA, which is the only law firm in the council, the other approximately 40 members include businesses such as Deutsche Telekom, Magazine Luiza, Nomura Holdings Inc., and Swisscom Blockchain AG.
The group will help set policy, operations and fairness across the platform, and each council member is responsible for running a node—a computer running an application to process transactions on the blockchain—which will generate transactions fees.
DLA anticipates its membership on the platform to generate revenue, including from transactions fees and other business related to the Hedera platform, Gastwirth said.
As part of this effort, DLA has again worked with Microsoft to build a “proof of concept” model for property conveyance in blockchain, and the firm hopes to roll it out in other industries, such as insurance and health care processing, he said.
The initiative would allow the firm to remove some intermediaries and costs that would typically be associated with real estate transactions, Gastwirth said, while helping to mitigate risks. DLA said the firm is hoping to use the technology as soon as this year, but the exact timing is unclear, Gastwirth said.
“It also allowed us to take the opportunity and educate our clients on how blockchain worked and how it would be meaningful for their business,” he said.
To this end, Gastwirth is now consulting with clients to help them understand how they can adopt technologies such as blockchain and AI. So far, Gastwirth has helped at least a dozen clients—for free at the moment, Bratt said.
The February event in Seoul came less than two years after the firm made headlines for a different technology event: a major cyberattack that knocked out phones and computers across the firm in 2017.
Bratt said the cyberattack was not an impetus for any of these new tech initiatives, but the firm’s data professionals can lend their expertise for cybersecurity.
“We were able to pivot and quickly recover from it,” Bratt said about the attack, adding that no client data was touched or obtained.
Bratt said it was an “18 to 24-month” journey after the cyber attack to get the firm fully secured, with enhanced defenses to ward off future attacks.
“It takes a long time to fine-tune,” he said, adding, “we immediately made some pretty dramatic changes,” such as segmenting certain parts of the network.
The cyber attack prompted an enhanced relationship with Microsoft, Meltzer said, when the company helped the firm in the aftermath. “They clearly had some expertise that we did not have in-house, and given the magnitude of the issue, they came into to help us, as a consultant,” Meltzer said.
No ‘Token’ Investment
DLA, a Swiss verein that generated $2.835 billion last year in gross revenue, continues to spend significantly on cybersecurity and, separately, technology efforts to become more efficient.
While he declined to specify the dollar amount dedicated to innovation efforts, Meltzer said it wasn’t a “token” investment. The firm’s capital resources budget has grown, he said, but “it’s well within our means” to meet technology demands.
The investments improve outcomes for clients and help the firm reduce costs, and a reputation for technology and innovation excellence also helps DLA compete for new clients and lateral hires, he said.
DLA has hired Wolff, Gastwirth and others to pursue these new technology efforts because the stakes are high for law firms, he said.
“Law firms that don’t have a sophisticated business group,” Meltzer said, will lose market share and fail in competition for “the highest and most valuable matters.”