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State of Play

Summary

Following an extensive survey of in-house counsel leaders across Europe, GC looks at the state of technology innovation hitting their profession and how their teams and businesses have responded. When asked whether technology had the potential to disrupt the legal profession over the next five years, 84% said they believed that technology will be disruptive. Of those, 71% felt that technology would be somewhat positive and 29% thought that the disruption would be entirely positive.


Between the reams of paper (literal and virtual) spent discussing the question of how technology will affect the legal profession, as well as the thousands of legal tech companies springing up around the world, technology is on the minds of in-house teams of all sizes and from all sectors.

But, often, what isn't communicated is exactly how in-house counsel feel about the technological revolution hitting their profession and how their teams and businesses have responded - if at all.

To that end, GC magazine, in partnership with World Services Group, went out to a selection of elite general counsel from across Europe with a comprehensive survey covering all things related to the use of legal tech at in-house teams.

The responses came from a vast selection of in-house counsel in a diverse range of industries. From finance and insurance, to healthcare and IT, the opinions collected and presented in this report paint a fascinating picture of the contemporary state of technology within the in-house legal community in Europe.

These responses, explored in detail in this report, provide a valuable framing of the wider discussion about technology and its various applications, both from the perspective of an in-house remit, as well as a broader look at its impact on the profession. From the pressures on external advisers to get ahead of the technological curve, to the so-called revelation of blockchain and its predicted effect on how legal work is conducted, the topic is vast.

It's evident that technology is already making an impact on the profession. Of those surveyed, 84% of in-house respondents reported that they use some form of specialised legal technology within their legal department, with 82% revealing that their department's use of technology had increased in the past five years. For a profession that's often accused of being filled with technological laggards, that's a significant change, and one which only stands to become more pronounced when you consider that every single survey respondent acknowledged that technology can enhance outcomes for in-house departments.

At a base level, there is clearly an appetite for the kinds of solutions being offered in the legal tech marketplace. Why this need has arisen, what form it should take, and what effect this is likely to have on the profession in the long term are more nuanced questions, requiring a holistic view of not just the survey responses, but the opinions and activities of the various players in the legal tech market.

Why Bother?

With over 1,400 legal tech companies around the world, the world of innovation has exploded into the lives of lawyers - in-house and private practice alike - with some interesting (and, at times, conflicting) results, not least given the notoriety of the legal profession as an outpost of conservatism.

But there is a clear need, and to predict where legal tech is going, it is crucial to understand what is driving that need for in-house counsel.

For the 84% of survey respondents who indicated that they were utilising specialist legal technology within their departments, increased efficiency was the most frequently cited factor that general counsel were considering when implementing new technology, at 84%. That was followed by ease of use at 50%, customisability at 32% and ability to integrate with existing systems at 31%.

If the pressure driving the push to adopt legal tech is the need to provide the business with better efficiencies and more value for money, then the cost of entry for many of these legal tech solutions is a barrier that needs to be overcome in order to gain the support of the wider business. A clear-sighted approach to tech only intensifies the imperative for a cost-benefit analysis, and, seldom a profit-centre, in-house departments know more than most about the need to do more with less.

To remain competitive, we need to increase productivity while enhancing the quality of legal processes against an ever decreasing cost base. In order to achieve this there is no other solution than to embrace technology, explains Johan Huizing, associate general counsel EMEA at Itron.

It was common refrain to hear a willingness from general counsel to adopt legal tech solutions throughout their department - but getting buy-in from the business and the necessary budget to execute was a clear hurdle for many. While 70% of the in-house counsel surveyed for this report felt that their company was supportive of implementing new technologies, only 56% had seen this translate to a bigger budget allocation on their balance sheets.

Teams with smaller headcounts had the worst
rate of uptake of technology.

If you consider that it's a strategic issue for you, probably it's better to internalise, or to invest into some legal tech and then to see the results. I mean invest in terms of putting money into external projects, not only buying a product or a service, advises Professor Christophe Roquilly, dean for faculty and research at EDHEC Business School.

But for teams with a smaller head count in particular, taking that first step was often the hardest. Teams with smaller headcounts had the worst rate of uptake of technology, with 42% of departments with less than ten people saying that they didn't use any legal technology at all. They were also less likely to have received an increase in budget for technology over the past five years, with only 47% reporting an increase in budget for technology (compared with 57% overall). Yet, in many cases, it was smaller teams who thought they stood to benefit the most from tools that can deliver better bang for the buck.

There is still the need for smaller teams to provide increased efficiencies, but the budget doesn't allow for it. It's then left to us to find ways to use technology to provide efficiency, but essentially for free. That's not to say it can't be done, it's just more difficult, said one general counsel from the consumer goods sector.

Some corporates we spoke to were lucky - or large - enough to have internal resources for tackling bespoke software development projects, or budgets for cultivating start-up arrangements - though the latter is much less common for in-house teams than for law firms. But whatever the infrastructure or budget available, investment in tech requires bravery, given the unpredictable return on investment and, in many cases, the long-term nature of that return.


How is technology
changing relationships in
the legal industry?

The headlines are fraught with impending doom and gloom for lawyers today. The reality is that there are only a handful of law firms racing to implement the latest innovations that technology has to offer. Law firms are slow-adopting, service-based partnerships driven by providing the best value to their clients. It is the relationships that hold the most significance for both in-house counsel and law firms alike. Therein lies the reason why, ultimately, the true drivers of change within firms are their clients.

In-house counsel can better identify reasons to pressure firms to evaluate their processes, and firms are doing just that to find opportunity. However, it is the re-evaluation of simple processes and the use of current technology within the firm that can bring enormous gains in creating better efficiencies without ever adopting anything new.

For the leading firms who are a part of World Services Group (WSG), being able to leverage innovative technology with firm relationships globally is just one resource that has enhanced the speed with which firms can react to in-house needs. Though technology will continue to play an incremental role in the firm's evolution, it is the 'people' that will continue to be the key to success in the legal industry.

Like the motivation for WSG, which is to create a powerful relationship-based network among the premier firms in each location of the world, it is not the technology, but the access to important technology, that will be paramount. There will be no 'robolawyer' to take away the personal relationship required between in-house counsel and their advisers to achieve true results. It is the proven, results-focused relationships that are becoming the true innovation.

Firms are not losing business because of their lack of cutting-edge tech, but they should take time to analyse processes, investigate new technologies and invest in access to long-term solutions for their clients. That is what will retain ongoing, long-lasting client relationships in the face of an increasingly tech-heavy world.


But while budget proved to be one of the biggest predictors of tech use and implementation within in-house legal departments, communication and demonstrating the value - particularly for larger companies, which required a higher degree of coordination across existing systems - was also proving a challenge.

Money is nice, but implementing a new bit of technology will require the cooperation of the whole business - from the board down to the IT department. So money is something, but it's not the only thing, explains one general counsel from the utilities sector.

Types of tech

The legal applications of technology are vast, ranging from the rudimentary to the complicated. Generating by far the most interest among those surveyed were the basics: for example, the most commonly cited use of technology was for contract management, from 55% of respondents

But technology can provide legal departments with solutions far beyond a contract management system (often little more than a repository of documents) or a standard contract template.

Software for law firm relationship management, including e-billing and increasing transparency around legal spend, is often seen as a boon, and such tools can be make or break for a frictionless relationship. At present, 20% of respondents cited that their use of technology included tools for law firm relationship management, but based on the interviews complementing the quantitative research, this is an area that appears to be prime for expansion in the short term.

We demand use of our billing platform and insist that our rules for invoice submitting are followed. This has increased our understanding of the drivers for outside legal spend and budgeting and resulted in a better control of such spend, explains Huizing.

We move away from firms that are low performers when it comes to the use of our billing solution or that execute poorly on following our instructions for entering reports or invoices.

At the least, technology can assist external firms to be more cost-efficient, so that those savings can then be passed on to their in-house clients. But there are more benefits to be reaped from an internal-external relationship that leverages technological solutions. Through this, the firm and the in-house department can cut through the noise that comes from two independent, far-away entities trying to collaborate with one another.

We're building collaborative tools. We saw that a lot of time goes into emails and phone calls between a lawyer and a client. Now obviously that's part of the personal relationship with the lawyer and client, and that's not going anywhere. But if you've got five emails back and forth trying to describe what part of the land the lawyer is talking about, that's just inefficiency. So by bringing both the lawyer and the client onto a collaborative workspace on [our] platform, you can cut out a lot of that needless, repetitive back and forth, says Ed Boulle, co-founder of legal tech company Orbital Witness.

The baseline is that we must be able to communicate very effectively with our external law firms. This requires that they use state-of-the-art communication and cloud-based collaboration software, adds Gábor Kukovecz, head of legal and operations at Diageo.

In the near future, we will implement a collaboration software, in which we work together with our external law firms, that they must fully implement.

The predictive power of technology is
encroaching on the legal system itself.

Far from being limited to external relationships though, tools and platforms which assist legal in becoming more accessible to the wider business also proved popular.

Legal is building knowledge management tools to get to a single source of truth - a lot of the technology we're using, because we're operating at scale, supports us when we need to have information held reasonably accessible, so that everybody can rely on them, explains Nina Barakzai, general counsel for data protection at Unilever.

IBM also has a shared knowledge platform called the Legal Community, which is used to integrate items such as contractual provisions, presentations and internal processor memos on regulations.

It's a collaborative community space, and that's very useful. You have owners, who can replace or change things on a particular subject, and it is shared with all the rest of us who are members, says Vincent Martinaud, counsel and legal manager at IBM.

Legal case management is another popular focus and 40% of in-house counsel surveyed cited case management as one of their uses for technology. This can include the basic paperwork-inducing case management tasks, but can also extend to case review administration and analytics.

Increasingly underpinning many tools is artificial intelligence (AI), as machine-learning tools are designed to quickly parse and categorise vast amounts of information, presenting it back for lawyer review in a fraction of the time taken for junior associates or paralegals to do the same.

I really think that our job will change, especially the analysis of documents, because of the way AI now is able to read and understand natural language - including your notes and the ability to decipher a picture, for instance, says Martinaud.

At the outer reaches of technology applications in the sector are predictive justice tools, employed to forecast case outcomes, including judges' decisions - although these are by no means widespread or particularly popular among those who contributed to this report. But, as algorithms creep into our everyday lives, often unseen, the predictive power of technology is encroaching on the legal system itself, for example, in the criminal justice system.

[In Spain] work is being done on "algorithmic justice" - for petty thefts and things that are repetitive, the possibility of being able to come up with a first verdict, of course allowing the two parties to appeal if they don't agree with the verdict, but releasing many human hours that could add value in more complex cases, says Enrique Dans, professor of information technologies and systems at IE Business School.

All the things related to an insurance claim, traffic problems when there's no victims for example, these could be very well examined right now, with the current state of technology, by algorithms. You could ask one insurance company to negotiate with the algorithm of the other and get into an agreement, only bringing the human lawyers in if they are really required. That could take away a significant part of the burden for lawyers right now.

Measuring the impact

When asked whether technology had the potential to disrupt the legal profession over the next five years, 84% said they believed that technology will be disruptive. The real trouble comes when trying to drill down on what form this disruption might take.

Just 6% of those who believed technology will be disruptive in the next five years thought that the disruption would be negative. 66% felt that it would be somewhat positive, and 29% thought that the disruption would be entirely positive.

Short of profession-changing disruption, technological tools like collaborative platforms, AI document review and smart contracts, and the increased automation that they facilitate could adjust the day-to-day lives of lawyers in subtler ways, by disrupting routine, everyday processes. However, introducing more technology often means more constraints on flexibility.

It does start to mean a little less flexibility and a bit more rigidity around the terms you're putting in place and the structure of the relationships - because it has to have been thought out in advance, especially if you have multiple parties involved in supply chains, says Chris Wray, CLO of blockchain start-up Mattereum. It's kind of legal design - mapping out who are the parties here, what are the contractual relationships and what are the key provisions and then, given all that, once that's clearly in mind, what is it we're trying to automate, and have we mapped out different kinds of disputes that may arise and provided appropriate procedures for the resolution of those disputes?


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