Clients may be all in favour of the legal profession moving towards one common extranet platform, but most firms are loath to surrender their own systems. Kieran Flatt looks at the current situation and the race to find an industry standard
Given the recent turn of events – with industry buzz about extranet standardisation at its highest point for more than a year – many readers will be wondering exactly why the world’s largest law firms are continuing to develop their own client-facing systems individually, at a not-inconsiderable expense to each equity partner. Why, for example, is Clifford Chance spearheading the move for standardisation by actively supporting a generic product and developing its own second-generation dealroom at the same time?
In the good company of several large US law firms, Clifford Chance was seen last month to
be promoting a third-party dealroom product that will be marketed by Orrick’s spin-off legal portal, LawCommerce.com. By some estimates, clients’ enthusiasm for virtual dealrooms is turning out to be far lower than expected. Surely, by continuing to bankroll its internal development programme, Clifford Chance is pouring good money after bad? After all, it has been established that most clients would prefer a single generic system to the virtual Tower of Babel resulting from each firm maintaining different facilities for collaborative working.
The head of technology at a top US firm told Legal IT that there was never any question of Clifford Chance, or any other large law firm, abandoning its extranet programme.
For one thing, many of the firms that have endorsed the LawCommerce platform are hedging their bets. While most view the standard as either a good thing or an inevitability, few intend to use it for anything other than low-end, transactional work, the source said.
Paul Greenwood, head of knowledge and information at Clifford Chance, makes an interesting analogy. “It is like renting out a basic meeting room on neutral ground to conduct urgent business,” he says. “Then you take the client back to your own, well-appointed suite.”
LawCommerce is following a two-phase strategy, he explains. The first stage is to develop an accepted third party service that can become a standard solution that most people are happy to use. The next stage would allow views from this into other proprietary systems used by consortium members such as CC Connect, so that approved users were only authenticated once and given an automatic login to the other systems. This would allow the unified view and single password that most clients would like to see, although the dealrooms themselves would still be held on dispersed systems.
However, there was more than a hint of desperation in the unprecedented move by a large group of bitter rivals, with little or no basis for trust between them, to commit even notionally to a common technology platform.
Some of the biggest buyers of legal representation in the world were moving to seize the initiative of extranet development from their law firms, Legal IT can reveal.
Weary of having to use as many as a dozen different and incompatible virtual dealrooms provided by the firms on their panels, a number of clients had started to develop their own dealroom systems individually, which they planned to oblige all their law firms to use. In theory, passing the burdens of integration, compliance and end-user education from client to service provider sounds fair, or at least in tune with general market dynamics. But while client corporations might struggle to effectively use a dozen or so different systems, a law firm could find itself completely swamped if the roles were reversed.
Greenwood says the LawCommerce announcement “was expressly designed to head that off”. He said that once the clients saw some evidence of law firms making a move towards standardising their dealrooms they would drop the idea of creating their own systems.
However, a number of prominent firms, notably Linklaters & Alliance and Davis Polk & Wardwell, have declined to commit to the standard. As with any standard, success hinges on adoption reaching a certain critical mass. While there is some optimism, it is still early days.
One of the major threats to the LawCommerce system would be if a powerful group of clients declared themselves in favour of using a cheap, off-the-shelf solution. Derek Southall, the partner responsible for IT at Wragge & Co – and a budding futurologist in his own right – predicts that within the next 12 months most UK law firms that do corporate work will have some form of extranet. As far as standards are concerned, he says everyone has underestimated the influence of the document management suppliers.
Hummingbird, in particular, has enormous leverage because more than half the large law firms in the UK, and a similar proportion in the US, rely heavily on its products: PC Docs, Fulcrum and Hummingbird EIP.
Legal IT last month heard of a tentative agreement by most of the big investment banks to use another company’s virtual dealroom as the standard collaboration tool for all their transactional work. However, the company in question, Peopledoc, was subsequently acquired by Hummingbird, which is rapidly emerging as a central player in the extranet standardisation game.
If the investment banks are still prepared to put their weight behind Peopledoc – either as a managed ASP or as a Hummingbird product – they will have put behind them a whole host of issues and vested interests. Deutsche Bank has taken a stake in Intralinks, another dealroom supplier. And Morgan Stanley and Merrill Lynch have invested a considerable amount of capital in developing their own systems. Credit Suisse First Boston is understood to be working closely with Linklaters.
But some people do not think that standardisation is even a real issue any more. One senior industry source told Legal IT that, at least for the very large firms, the notion of a common technology platform was outdated and irrelevant. He said that in the bigger picture, with all sectors of commerce and industry moving towards globalisation – fuelled by the unavoidable integration of IT systems – it is global standards that are important, not sector-specific ones.
