LegalTech optimism points to busy eDiscovery year ahead

One happy-looking CEO does not make a boom, but the general air at LegalTech 2010 was one of optimism. That indicates more than just good times for litigation support companies. What are the trends, and how will the litigation software and services suppliers make the most of better times ahead?

LegalTech over, I was slumped in the corner of BA’s executive lounge at JFK on Friday night, off duty for the first time in a week, and clutching a large whiskey. The CEO of a well-known software company swept past, late for his plane. His grin lit up the room: “We’ve had such a good week” was all he said as he rushed by. He may have expressed the mood more simply and succinctly than others, but that was the impression which I had already formed of the general atmosphere at LegalTech.

That general impression, the accumulation of happy smiling faces at LegalTech, is more important than the grin on the face of any one CEO. The latter may simply indicate that one company is doing well at the expense of others, but if the same message comes from several quarters, then that means that business is picking up (I have been long enough in this game to distinguish between genuine optimism and the fixed smile of the merely hopeful). This matters to the companies concerned, obviously, but it has wider implications. The whole business of e-Discovery / e-Disclosure is to do with efficiency, with achieving more with fewer resources. Recession ought to be a driver here, that is, those who deliver litigation services to their corporate clients ought to use hard times to improve efficiency. In practice they do not – they lay people off, trim their own costs and keep their heads down. The growth comes as recession recedes, when the law firms have grown used to tighter ships but want to claim their share of the post-recessionary work.

The providers of litigation support software and services are one rung down from the lawyers; they feel the effects of a slowdown before those who instruct them, and notice the breeze of recovery later than they do. If a sizeable number of them are feeling optimistic, that says something significant. What happens – what has happened in the past, anyway – is that leaner and more efficient law firms appear from the wreckage. This time around, no one doubts that the old days have gone and, as I have put it before, the lawyers are competing with their own clients as well as with each other for the discovery work which follows recession.

That identifies the first and, to me, the most obvious trend. The software providers have been aiming directly at the corporate market for some time, though hamstrung, perhaps, by the fear of upsetting their traditional clients, the lawyers. That fear is declining, partly because many large corporate clients have got the message anyway, and partly because the law firms are by now polarised into two groups – those who get it and those who do not. Those who get it will do one of two things – they either create a service offering in tandem with one or more suppliers, undermining the clients’ economic arguments for taking discovery work in-house, or they develop a new form of cooperative working with clients. The software works just as well whoever operates it; the lawyers can jump aboard or get left behind in the wash.

How convenient, then, that some suppliers have focused on making their applications more friendly to the lawyer-users and more obviously tied into the legal process and to the way lawyers work. This obviously matters most when they have actually become users. What many suppliers seem to have missed is that the lawyers only become users if you can attract their attention at the demo stage. The slightly condescending assertion that technology will solve the lawyers’ problems only works if the supplier shows an understanding of what those problems are; that goes beyond pride in the lists of features and benefits and the algorithms which underlie it all. We are beginning to see the realisation that the suppliers must bind themselves into the lawyers just as the lawyers must work cooperatively with their clients. That involves more than fine lunches and tickets to sports events (I do not knock these things, but there is more to it than that).

The hot technology trends are, on the whole, driven by external events rather than by the genius of the programmers. Litigation software providers did not invent the Cloud, they merely reacted to it. Early case assessment is not driven by technology but by the (fairly obvious) client requirement for an early assessment of the case. None of this diminishes or disparages the technology nor, frankly, does it say anything new. The prizes go to those who spot what is coming next.

What is coming next is more to do with the commercial imperatives of lawyers and their clients than with any new invention. Marketing will move away from dull recitals of features and benefits (these are necessary, of course, but they are there to underpin something else, not to be marketing tools in their own right). We still need clever people drafting the words, and smart salesmen banging on doors, but the future lies with a breed which lies between and above those roles. There are a handful of them out there and I will not embarrass them, or the rest, by naming them. The role has roots in marketing, in sales and in project experiences, and it depends on all these things, but its principal characteristic is the ability to rub shoulders with the prospective clients, to speak their language and to show understanding of the problems which they face. Binding yourself to the clients involves more than ringing them once a month and taking them out to lunch – both of these have their place, but there is a more continuous process which we can learn, to some extent, from the way music bands bind their followers to them. Much hot air is expended in loose talk about the benefits of Twitter, blogs and video; there are only a few players out there who really use these tools to keep their clients and prospective clients involved. 2009 was the year we saw a software company raise its profile with a series of cartoons good enough for us to watch out for them.

None of this, of course, is a substitute for doing the job properly. Everyone wants glowing customer references to print on their marketing material, but the word is spread now by much more powerful and insidious forces. Twitter is not merely a means of getting your own message out but a way of keeping tabs on what is being said about you by others. I can see the temptation to use Twitter, blogs and video simply as billboards for your services, but that equates to those suppliers who use their conference speaking slots simply as advertising. There is a demand for high-quality educational material, and suppliers have more access than most to experiences from which others can learn. More importantly (actually very much more importantly), all these things – modern media and old-fashioned conference slots – allow the opportunity for dialogue, in the formal Q&A and in the bar afterwards. This is more complex than the mantras about “getting to know your client” or “finding out what the clients want”. Many of them do not know what they want, and the dialogue helps you find out what they do not know. That in turn informs the marketing.

Where will we be this time next year? A quick recital will do for now, without argument or analysis.

Clients will take more work and more technology in-house, both information management at the far left of the EDRM, and extending rightwards from there into lawyer territory. Many of them will make a complete bollocks of it in much the same way, and for the same reasons, as governments (the UK government at least) do – that fatal combination of under-investment where it matters and overspending where it does not, of confused communication lines, inadequate specification and ill-defined responsibilities, of compromise, delay and timidity and, most of all, because of the lack of skilled project managers. There will be work for those who pick up the pieces, including lawyers.

The corporations will not have the option of ignoring the problem. The pressures will increase as courts raise their expectations, as regulators make more use of their powers, and as the reputational fears grow to match the legal ones. Subjects which have fallen off agendas (“I think we can come back to Mr Geek’s illuminating paper on information management at the next meeting”) will move up the list.

There will be fewer suppliers out there, probably through acquisition and merger than as a result of business failure. The recent Gartner report on eDiscovery software concluded that no new players will fight their way in from scratch and that consolidation is inevitable. I do not see this as a proposition which needs proving.

Those who mock new media forms will fall silent as it becomes clear that the corporate press release is the beginning, and not the sum, of a company’s or firm’s outreach to their clients and possible clients.

Trans-jurisdictional litigation will grow, both in the volumes and in the problems which it creates. The EU will kick back against perceived US aggression (this will be part of a much wider political battle as well as a narrow e-Discovery one) and Asia will bring challenges with its expansion not just as a market but as a dominating supplier.

The non-US e-Discovery market (Gartner again) will increase as a percentage of what is anyway a growing market, and suppliers will apply more of their marketing resources outside the US. This means more than just spending money – they must get out there on foot, carrying their messages and finding out for themselves what is going on.

Software suppliers will focus less on the functions of their own applications and more on the ease with which they fit into, and exchange data with, other systems. Just as car manufacturers have stopped boasting about performance and talk up their eco-credentials instead, so software suppliers will want to be rated for the support which they give to their clients.

Lawyers will find different ways of distributing tasks to where they can be done most efficiently and cheaply, mainly through technology and outsourcing (or a combination of both). If the proper answer to the question “Where?” is that the client should do it, then some lawyers will say so, albeit reluctantly – and thus keep a place at the table.

All this looks fairly obvious when set down like this. So it may be, but I am not sure that I have seen any obvious strategies geared towards capitalising on it.

First things first. The CEO with the broad grin at the airport, and the others who contributed to my general sense that things are looking up, must convert their LegalTech optimism into sales. Let’s take it a step at a time, but perhaps hang a notice above the desk:  “What will I be saying at Legaltech 2011?”.

Other articles about or derived from my week in New York will follow shortly.

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About Chris Dale

I have been an English solicitor since 1980. I run the e-Disclosure Information Project which collects and comments on information about electronic disclosure / eDiscovery and related subjects in the UK, the US, AsiaPac and elsewhere
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