Virtual Fear and Loathing – Can GCs get law firms to collaborate on tech?

Clichés abound over the stereotypical contrast between stuffy lawyers and progressive tech start-up gurus. Clearly law firms – whose liberal and often misplaced use of the term ‘innovation’ often adds fuel to the fire – have plenty of work to do. At the same time, some clients are far more insistent on innovation from their external advisers than others.

To what extent is this true? Are clients really driving a technological shake-out in the procurement of legal services? As Stuart Whittle, business services director at Weightmans, says: ‘The appetite varies massively among clients. Some want a solution on a stick while others are willing to invest time in tech and work with start-ups. They are all doing their own things and they are subjected to all kinds of pressures.’

To answer these questions, we spoke to general counsel (GCs) and law firm tech leaders in an attempt to cut through the noise.

The sceptics

An obvious place to start is TransferWise. The start-up, named an emerging company in our GC Powerlist 2017: The Clients of Tomorrow, secured the sought-after ‘unicorn’ status in 2016 after being valued over $1bn by industry analysts. The company, which achieved the benchmark less than five years after its inception, claims to offer ‘the real exchange rate’ by transparently displaying the full fee upfront and sending the money at the real Reuters exchange rate.

There was a sense of inevitability that speaking to such a high-profile start-up would draw platitudes on innovation, compounded by TransferWise’s apparent antipathy towards the telephone. Google Hangouts and Zoom meetings were suggested as alternatives before a Skype call was accepted.

However, Alena Danyliuk, TransferWise’s recently-appointed head of legal operations, comes across as a bona fide sceptic: ‘If we are talking about tech, our biggest hope is finding contract management software for the management of our internal agreements. I have not seen any outside counsel who have tried to give any relief on that process. It might happen in the future, but from what I’ve seen legal start-ups are a new thing and a lot of lawyers are still working in an old-school way.’

And it is not just that law firms fail to provide what Danyliuk needs; she does not even expect them to provide it: ‘Our relationship with our vendors and our external counsel is pretty standard. I haven’t broached this topic with them.’

Currently, TransferWise is utilising a range of Google tools and software to assist the in-house legal function and she says Microsoft Office 365 may even offer some relief on contract management.

In addition to the lack of a tech relationship with law firms, Danyliuk is equally cynical when it comes to the current batch of legal start-ups on offer, with affordability a major sticking point. ‘It starts anywhere from $5,000 a year and goes up to crazy amounts like $200,000. The price range is so big, sometimes it’s not clear what we’re paying for.’

‘I asked a partner how he planned on keeping our data safe. He replied: “It will be somewhere in our building.” I want my data in a datacentre, surrounded with razor wire, guard dogs and proper cooling systems!’
Rob Booth, The Crown Estate

 

Whittle counters that when start-up technology is wrapped in a law firm package, it can lead to savings for the client. ‘There are some things we provide that are not price-related but are adding value. For example, we act for a lot of corporates, and sometimes we give them back some of the insight we garner from them and they turn it into something actionable.’ Outside of these free services, Whittle argues that if he can turn a piece of work around in one week when it would have taken six without the technology, ‘that is a premium product they might be willing to pay for’.

Ned Staple, GC of ZPG (owner of Zoopla), contends that pricing should never be a problem and that it comes down to the GC’s ‘ability to negotiate a deal’. However, he concedes: ‘It’s certainly fair to say that [legal] start-ups have delusions about what they can charge. If Thomson Reuters wants to charge a lot, that’s fine because it’s a well-polished product.’

Were it not for the firm’s clear sector focus, Clyde & Co’s ‘Clyde Code’ product would seem a natural solution to Danyliuk’s problems. Clyde Code, a smart contracts consultancy backed by blockchain guru Gary Nuttall, is currently limited to the firm’s key sectors of insurance, transport, infrastructure, energy, and trade and commodities. The product is being kept low-key by the firm, with a partner close to the initiative noting: ‘I spoke to a legal operations head recently who said: “A law firm is not going to be my port of call for tech. We’re not going for off-the-peg solutions.”’

Danyliuk is not alone in her cynicism. Stuart Kelly, GC of Network Rail, does not hold back when it comes to the inefficiencies of his external legal providers. Kelly says he ‘expects more’ and asserts ‘what we get at the moment is not enough’. He insists that if firms were to offer tech solutions, he would be interested: ‘I’m absolutely open to it. In fact, I’m desperate for it. I need it more and more quickly. I’m frustrated that it hasn’t happened, but it’s beyond their traditional supply chain.’

Dan Jansen, chief executive of legal tech investor Nextlaw Ventures – linked to Dentons – thinks Kelly is right to expect more from his external law firms. He cites the growing pressure that GCs are under to reduce legal expenditure, resulting in slimmed-down panels. But most importantly, he says: ‘They’re putting in tools and technologies, and that’s where we come in.’

Kelly admits that the way data is stored and accessed at Network Rail is ‘not good enough’, and a digital remedy brought by a law firm is on his wish list. ‘There’s some off-the-shelf products out there, but they’re not as good as they should be. They’re a bit like Betamax – outdated.’

But he also concedes that there is a certain skittishness surrounding innovative providers, as evidenced by Network Rail’s most recent panel tender, which included comments to the effect of: ‘We want to do things differently. We want innovation. We are open to different models.’ Kelly recalls: ‘We had a market day about three weeks ago, but the same old guys turned up. Maybe we could have been more explicit with our messaging.’

Even when collaboration does take place, there can be horror stories. Rob Booth, GC of The Crown Estate, states that problems commonly occur when firms put forward their partners, rather than their tech specialists, to liaise on digital solutions. He recalls: ‘I asked a partner once how he planned on keeping our data safe. He replied: “I don’t know exactly, but I know it will be somewhere in our building.” I couldn’t believe it. I said: “The last place I want my data is in this building, mate – I want it in a datacentre, surrounded with razor wire, guard dogs and proper cooling systems!”’

The believers

While TransferWise is uncharacteristically conservative on the collaboration front, there are those from the in-house sphere who are more enthusiastic. BT’s Chris Fowler, who oversees the telecoms giant’s legal operations, believes that partnering with law firms is becoming more important and points to Kent/Sussex-based firm asb law as being particularly accommodating with tech.

One key component at law firms, which Fowler believes makes a great impact on its tech collaboration capacity, is the level of seniority that ‘innovators’ possess. ‘If the innovator in a firm is sat underneath the managing partner, then collaboration happens. Take DWF for example: it’s quite clear that the person who runs the services team has a clear line of sight to the management.’

Fowler has an established background in the legal tech start-up space, having acted as a mentor at Mishcon de Reya’s MDR LAB. The incubator programme, launched in January 2017, saw Mishcon welcome six start-ups into the firm for ten weeks during the summer. Fowler advised Indian start-up Surukam Analytics, a contract management tool.

He is upbeat about law firms’ ability to collaborate with clients on tech but calls for patience: ‘Some are genuinely picking it up and making it their USP. They are becoming the same way we are internally. We have to automate. It’s unfair to criticise them as “they are only doing it because their customers are asking for it”. They are trying to get their heads around the pressures we are under every day.’

Among the other firms Fowler cites as progressive on this front are Bryan Cave Leighton Paisner (BCLP), Allen & Overy (A&O) and Pinsent Masons. For Mishcon, he says: ‘The fact that Elliot Moss [the firm’s director of business development] is a non-lawyer but an equity partner at the firm says a lot.’

And it is true that firms are launching initiatives to improve these relations. In April, CMS Cameron McKenna Nabarro Olswang unveiled a partnership with GlaxoSmithKline (GSK). The pair have created a digital academy to improve the technological understanding of GSK’s lawyers, with the consumer goods giant’s digital lead for consumer healthcare, Peter Currie, working in tandem with CMS head of digital and data Elle Todd.

For Booth, collaboration has largely been a success story. He says: ‘We spend a lot of time encouraging our firms to use technology, but we take it as a means to an end. There has been a panic in the legal profession where people realised they didn’t understand it all. We have cajoled our firms into a position of using a tech solution when it is the right thing to do and when it will deliver us more value. It’s worked quite well.’

‘The fact that Mishcon’s director of business development is a non-lawyer but an equity partner says a lot.’
Chris Fowler, BT

When pressed for a concrete example, Booth pointed to BCLP’s implementation of process-mapping software. In its dealings with The Crown Estate, the firm used a bespoke version of HighQ technology, with Booth noting: ‘They went beyond the typical law firm offering.’

The future

The consensus is that the dynamic will improve, even if that is out of necessity. Simon Rhodes, director of knowledge and learning at Herbert Smith Freehills, says: ‘I would 100% say that firms will be more proactive in ten years’ time. If you look at the demands of all industries, there has been a fundamental change in how client value has been found. If you can be more innovative, you will have better conversations with clients.’

Even Kelly, who was downbeat about the innovation of his external providers, can see things improving, albeit at a slower pace. He observes: ‘Things will change, but how do we make it happen sooner? We want to perfect it as much as we can, but we’ve got to be realistic too.’

Recent developments include Barclays joining the trio of law firms that have already introduced forms of legal technology incubators by launching its own space for the rapidly-growing UK legal start-up market. The 100-person law-tech Eagle Labs in London’s Notting Hill is backed by 13 law firms, including A&O (which already runs its own ‘innovation hub’ called Fuse), Baker McKenzie, Clifford Chance, Clyde & Co, DWF, Gowling WLG, Latham & Watkins, Norton Rose Fulbright, Simmons & Simmons and TLT.

Barclays UK chief executive Ashok Vaswani said the UK had every reason to be a world leader in law tech. He added: ‘It is home to some of the greatest law firms in the world, and we want to help build on the success of its legal sector and play a leading role in transforming law-tech in the future.’

GCs could and should be keeping abreast of the latest technological innovation, but understandably the onus is on law firms to lead. As Whittle concludes: ‘In ten years’ time, everyone will be doing it. It’s like being at school: you were allowed to be bad at maths as long as you were good at English. In a law firm, you’re allowed to be bad with IT. That won’t be accepted in ten years’ time.’ LB

tom.baker@legalease.co.uk

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