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According to Wolters Kluwer’s Future Ready Lawyer survey, the top challenges for corporate legal departments today include reducing and controlling outside legal costs, improving case and contract management, and automating routine tasks and leveraging technology in work processes.
I recently discussed this topic with Ali Butler, Deputy General Counsel at Wolters Kluwer. Ali was previously a partner at Mayer Brown LLP and has a lot of experience working within a law firm as well as within a corporate legal department. We had an interesting discussion about the impact of innovation from the perspective of the corporate legal department.
Technology Innovation
In-house legal departments are looking to technology solutions to help them become more efficient. “At Wolters Kluwer, we created a technology committee to evaluate ways to leverage technology to better address the expanding legal needs of the business. Anything that maximizes efficiency and reduces the time we spend on administrative work allows us more time to focus on the substantive legal work where we add the most value.”
Most corporate legal departments deploy enterprise legal management solutions, which include eBilling and spend and matter management. Not only do these solutions streamline the review of legal billing by flagging invoice items that aren’t in line with the department’s outside counsel billing guidelines and allowing rejection of specific line items rather than the entire invoice — they also provide technology to manage legal matters from start to finish. “We are fortunate to be able to use our own enterprise legal management tool, which includes an AI-enabled bill review,” according to Ali. The added AI component enhances the analysis of outside counsel billing guidelines compliance.
The enterprise legal management solutions can also provide valuable metrics on outside counsel usage and spend. Having these metrics helps corporate legal departments in planning and budgeting, including evaluating the need for additional headcount. “Our enterprise legal management solution has the ability to deploy a workflow where in-house counsel can provide feedback about outside counsel which can then be used to guide discussions with their outside counsel about the relationship, including what is working and where there may be areas for improvement.”
Law firms also recognize the value of that feedback. “Obtaining candid feedback from clients is critical — it helps us to meet our clients’ expectations as to service delivery and value and to understand how we can better partner with them on budgeting, billing and other matters,” notes Jennifer Keating, a partner at Mayer Brown LLP.
Non-Technology Innovation
Non-technology innovation can complement technology innovations as corporate legal departments are under increasing pressure to control legal fees. “Many law firms try to raise their hourly rates every year,” Ali said. “As the hourly rates continue to climb at some firms, corporate legal departments look to alternative fee arrangements (such as fee caps, collars, portfolio fixed fee, etc.) or alternative legal service providers who can provide certain services more cost-effectively.”
While I don’t believe that alternative legal services providers can replace law firms, they do offer a more cost-effective alternative to law firms for routine work. “If you have a significant or complex matter or transaction, your corporate legal department will use a law firm (unless they have the ability to handle it in-house) that has lawyers who work in all of the practice areas needed for the transaction, such as benefits/ERISA, environmental, tax, and IP,” said Ali. “On the other hand, you might have routine work — such as licensing agreements or services agreements — that would not necessarily require the attention of a traditional law firm. For example, a software agreement with a modest license fee of $50K might be perfect for an alternative legal services provider, rather than paying $500-$700 an hour to an outside law firm to handle it.”
Ali noted that some law firms are competing with alternative legal service providers by opening offices in lower-cost geographies or having their own contract attorneys who bill out at a lower rate than an associate.
Ali offered some considerations that law firms should keep in mind to stay competitive as technology and innovation continue to shift the landscape for their corporate legal department clients.
Law firms’ use of innovation and technology: “Law firms have to embrace (or continue to embrace) innovation and technology to help streamline their own legal work or they risk becoming uncompetitive. This can include deploying AI-driven document review, contract automation solutions or working together with an alternative legal service provider. For example, having an alternative legal service provider do the contract review during due diligence and having the law firm handle the other aspects of the transaction. A number of law firms we work with are already doing a lot in this area.”
A long-term view of the relationship: “It helps when our outside counsel doesn’t just see us as a transaction,” said Ali. “We want to hire firms that value long-term relationships. We want law firms that are solution-oriented and work with us to manage our costs — and we’re more likely to want to partner with those firms on future work because they’ve demonstrated that they understand the pressures we’re under.”
What do these in-house pressures mean for law firms? As technology and innovation continues to evolve the legal industry, there are new opportunities for law firms to identify ways to deliver value to their clients.
Dean E. Sonderegger is Senior Vice President and General Manager of Wolters Kluwer Legal & Regulatory U.S., a leading provider of information, business intelligence, regulatory and legal workflow solutions. Dean has more than two decades of experience at the cutting edge of technology across industries. He can be reached at Dean.Sonderegger@wolterskluwer.com.