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How law firms can use technology to save money (podcast with transcript)

By Stephanie Francis Ward

December 2, 2013, 2:45 pm CST

Podcast Transcript

Stephanie Francis Ward: There’s a lot of technology out there to help lawyers be more efficient. But many lawyers are missing the boat. If a law practice is well-managed, technology should be putting money into the firm’s pocket, rather than taking it out.

Mitch Kowalski: There are not many businesses on this planet who see time spent as equaling quality or value. And unfortunately, lawyers think that “the more time I spent on this file the more value I’m giving to the client,” and that is absolutely false.

Stephanie Francis Ward: I’m Stephanie Francis Ward, and when we return, guests tell me how lawyers can use technology to save clients–and themselves–money.

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Stephanie Francis Ward: So for you guys, what technology do you think has had the biggest impact on saving clients money?

Andrew Perlman: My view is that it really depends on the type of practice, and the size of the firm. I’m not sure that we could give–and this might be the hesitation at giving an answer and I don’t blame her–is that it really varies a lot from practice setting to practice setting, both in terms of the type of practice and the size of the law firm. For smaller firms, my sense is that the kind of technology that’s really being transformative are things like online law-practice-management tools, automated document assembly, cloud computing, software as a service–those are some of the obvious ones.

In my view, some of the less obvious transformative technologies are the ones that lawyers use every day: things like Word, and Outlook, and Excel. And my sense is that lawyers just don’t know how to use that technology very well, and that that technology actually could be used very effectively to bring down the cost of legal services and save clients money, if lawyers just knew how to use those basic technologies more efficiently.

So I think there are lots of possible answers to that question and those are just a few ideas, for what it’s worth.

Mitch Kowalski: I think you’ve hit the nail on the head. The technological skill of lawyers with just the software that’s available now is atrocious.

And I think you’re right in terms of where different practices are going to have different things, and I’m not sure what more I could add to that. Other than to say that things coming down the line, which will have a bigger impact or just as big an impact, are going to be things like risk-analysis software, and predictive-capability software, and logarithms that are going to really shrink down the amount of time that lawyers need to review case law or think about fact situations, are going to be able to send out probability fairly quickly and will allow clients to make decisions much faster.

Or just online document assembly software. We’ve seen LegalZoom be very, very successful in that market, in the retail, day-to-day market with the do-it-yourselfers out there. So I think those things also have a pretty big impact on client savings.

Lisa Solomon: From the solo and small-firm perspective, I do agree that even learning more about the basic software that pretty much every solo and small firm has–like word processing and email calendaring programs–can really do a lot to make a solo and small firm more efficient. Other things that are coming from outside, like electronic filing, really also contribute.

Carolyn Elefant has a great new post on My Shingle about how she could do a filing in two hours that used to take the better part of a day. And so it really demonstrates that really, very basic–not all the bells-and-whistles stuff–but really basic technological advances can really make huge productivity gains.

Stephanie Francis Ward: Well, and I think that comes back to something that I am very curious about. We were talking about that ability to save clients money and do a job in two hours that used to take you a day. What does that mean for the money lawyers are making?

I think that there is this sense that if you bill by the hour–I don’t know who does that anymore, but if you do–then your money’s going to go down. But on the other hand, are there ways that you can use it to make yourself more efficient and do more work for more clients?

Lisa Solomon: Well, sure. I’ve had the same experience. If you are still billing hourly, yes–this is one of the reasons, I think, why the people who attack hourly billing have expressed that there is a disconnect between the interest of the client and the interest of the lawyer. So if it takes you less time, then you can either adjust your rate; you can bill using an alternative fee structure; or you can use that extra time for marketing.

The bottom line is that you’re doing better for your client, because even if you end up charging a flat rate that might be equivalent to what you would charge if you were billing hourly for a longer amount of time, you’ll still be able to get the client their results quicker, and so it’s still benefiting the client.

Andrew Perlman: Yeah, I agree with Lisa. I think that technology can make lawyers more money. First of all, if you’re charging a flat rate, the more efficient you are and the faster you can produce whatever it is that you’re doing–that particular document, working on a particular project for a litigation–the faster you can do that, if it’s a flat fee, the more money you make and the lower the amount that you can charge for that service. And so therefore, more clients are on your plate, or potential clients will be attracted to you.

If you’re charging by the hour, as I think many lawyers still do–most lawyers still do–I think part of the problem here is that the billable hours create a bit of a disincentive to learn some of these new technologies. Because as long as you are billing by the hour, you don’t have an enormous incentive to be as efficient as possible. And we’re finally seeing some push-back from many clients, and I think that technology will be the answer that many law firms are looking for, in terms of bringing down those hourly costs and yet still making the kind of profit that many firms are accustomed to. So I think technology is an answer to many of these questions.

Mitch Kowalski: I think it illustrates a huge disconnect between how lawyers work and how the rest of the world works. There are not many businesses on this planet who see time spent as equaling quality or value. And unfortunately, lawyers think that “the more time I spent on this file the more value I’m giving to the client,” and that is absolutely false.

And so what technology exposes is the fact that clients are not looking for you to spend your life on a file. They’re looking for a result from that file and they’re willing to pay for that result. They’re willing to pay for the perceived value from that result.

So we have to disconnect ourselves from this concept that “my time is valuable to the client.” It’s not. It’s the result. And so if I can spend less time and get the same result, my client’s going to pay me for that value that I’m providing for them.

So it is always better for me, as a lawyer, to be spending less time to get the same result. I think technology helps us on that and I don’t see technology as taking money out of the lawyers’ pocket at all.

It gets us to think differently, and provide value at a price and still make money, and also forces us to rethink our entire business model because there’s far too much fat in the law firm.

We’re not very lean machines in terms of business structure and how we operate. And the more technology, the more we use it correctly in a better way–it allows us to lean-down firms to get to a point where we really should be. And that’ll allow us to make the profits that people are looking for.

Stephanie Francis Ward: Let’s talk a bit about some of the knowledge-management software that’s out there. I’m thinking of what’s available to help you preparing for a dep, and going through evidence, and how quickly and efficiently some of those programs can work.

Do you see, in the near future, the cost of that coming down so a solo could afford–my understanding right now is its pricing is as such that it’s really only an option for corporate, large firms or boutique firms–do you see the cost coming down so that a solo could take on a huge class-action and not have to worry as much about the evidence?

Andrew Perlman: Well, my view is that technology is pretty uniform in this regard: that as time moves on all technology becomes cheaper. And so I don’t think knowledge management is going to be an outlier in that regard. I think that it will be increasingly available to firms of all sizes, so I think it’s just a matter of time. That’s my view.

Mitch Kowalski: Yeah, I agree with that. Technology typically always comes down year over year over year. And so really, technology and the Internet is the great equalizer among law firms and allows smaller firms to punch way above their weight.

Stephanie Francis Ward: Let’s switch a bit. I know that when I go to the tech shows, cloud computing seems to be very popular with the vendors right now and I’ve been curious: To have a good system, do you need to pay for one of these offerings of cloud computing, or can you get everything that they’re offering on Google?

Andrew Perlman: I think you have to pay for the proper service that’s reasonable for your firm. The issue with cloud computing, really, is making sure that you’ve done your due diligence on the cloud provider to ensure that you can comply with your ethical obligations as a lawyer. And whether that’s Google, whether that’s Amazon, whether that’s one of the other providers–that’s for the lawyer to be comfortable with. I think we don’t have an absolute obligation to make sure that everything is absolutely impenetrable in terms of being hacked.

Law firms are getting hacked every day just by having their systems in their offices, so we don’t have an absolute ethical obligation to make sure that everything is absolutely, perfectly confidential. We just have to do our best to ensure that we’ve selected the right provider. And I don’t think, actually, that they are terribly overpriced.

Stephanie Francis Ward: Well, do you have a sense of if just for writing documents, maybe sharing documents with a client–for what’s available that is free, do you think the security is enough for the attorney?

Andrew Perlman: I think the free products are getting a lot better than they used to be. Dropbox had a variety of issues and they’ve come out with new products. I think the newest version is called Safebox–that allows for greater protection and encryption. And so I think there are ways of sharing documents now that are free and that offer enough protection. But it’s up to the lawyer to make sure that he or she is using those protections: making sure that it’s encrypted; using two-factor authentication; and using appropriate passwords.

I think if lawyers take appropriate precautions there are certain free services for sharing documents and collaborating online that can be very effective. But lawyers just need to be very careful in terms of the provider they select and the security protocols they put into place.

Stephanie Francis Ward: Okay. And with technology now and outsourcing doing a lot of the tasks that were previously done by young lawyers, like document review–how can young lawyers or law students adapt to that? Maybe they didn’t want to do document review in the first place, but that was a job at one point. How could one adapt to build your career and be successful?

Andrew Perlman: I think that law students today really need a lot more than the standard curriculum that most law schools provide. Just putting a lot of legal doctrines in your head is really not going to be enough to compete in this marketplace. So what new lawyers really need to be able to know about and do is understand all of the new types of law-practice-management tools–some of the things that we’ve already been talking about: knowledge management, computing, electronic discovery, and how to use existing tools like Word, Excel, and Outlook effectively.

And they also need to understand a lot of concepts from the business world, like project management. And that way, so if they’re not hired to do some of the traditional law firm work, like document review, they can offer a lot of new kinds of services, both to existing law firms that are out there–small and medium-sized firms that are really looking to innovate and take advantage of these new technologies–but also so that they’re competitive in the range of new jobs that are out there: working for an electronic discovery company or taking a job with an automated document-assembly company.

I think lawyers today and law students today need to think outside the box and start delivering and understanding new ways of delivering legal services. So I think that’s what young lawyers need to be doing, is really thinking outside the box in terms of the skills they need to acquire and the knowledge they need to have.

Stephanie Francis Ward: In terms of what’s available with the technology–or the people, sometimes–for outsourcing, do you all see disdain with third-party vendors? Or do you see law firms maybe buying or setting up some of these businesses, so they can have the profits for themselves as opposed to seeing part of what they previously would have billed out at going to someone else?

Andrew Perlman: Yeah, I think we’re seeing that in electronic discovery. A lot of electronic-discovery companies were formed in providing those services to law firms. And now you’re seeing law firms getting into that game and having their own electronic discovery outfit either inside their firms or setting up ancillary businesses to provide those kinds of services. So yeah, I think we are seeing that, to some extent.

Mitch Kowalski: Yeah, on the LPO front I think–I haven’t seen any law firms set up their own LPO, but they have been starting to form alliances–strategic alliances with them because we’re seeing–especially on the client side with banks, specifically–asking law firms on the RFPs, “What is your LPO capacity? Who do you have that can manage the services that you are just too expensive and inefficient to deal with?”

So they’re being forced on the law-firm side to find these alliances with providers who can do the work that clients are just refusing to pay for.

Stephanie Francis Ward: What are some tasks that you think, for lawyers, will never be able to be outsourced?

Mitch Kowalski: I think the more complex things, the things that you go to law school for now–nobody goes to law school now to fill out forms. Nobody goes to law school to review documents, as we said. Nobody goes to law school to write a bunch of briefs, very generic, similar briefs day after day after day. People go to law school to use their brains and think of creative solutions to complex questions.

That’s the kind of stuff that will always stay onshore, that will always stay in a lawyer’s office.

The question is, how do you separate the process of law from the real legal thinking of law? And everything below the really true legal-thinking stuff can be done either by technology or outsourcing.

Andrew Perlman: Yeah, I tend to agree. I think that the legal skills that we’ve historically taught are still valuable and it will still be prized in the marketplace. But even that can be outsourced, but in a very different sense.

There are some law firms that maybe don’t have the in-house expertise to do very sophisticated legal work. They can reach out to other law firms to assist them on those kinds of efforts and that is a kind of outsourcing. So even those kinds of high-level thinking can be outsourced. We don’t think of it that way. We think about coordinating with another law firm, but it is outsourcing in some regard.

So it seems to me that just about everything that we think that lawyers do can be outsourced, either to other lawyers or to non-lawyers, to ensure that it is done more effectively and efficiently.

Lisa Solomon: I think that what’s going to be core is the client relationship and counseling aspect, as well as the high-level analysis.

Mitch Kowalski: Where we’re going with this conversation really is “lawyer as quarterback” or “lawyer as a project manager,” and figuring out what each client problem needs to be resolved, and then looking at all the pieces available to her and saying, “OK, this particular question needs this kind of skill set and these kinds of expertise or this kind of process, and how do I go out and find it? I don’t have to do everything myself. I just have to manage the entire solution for the client.”

And I think that ties into everything that we’ve just been talking about, is the “lawyer as the solution finder” and being able to put all the pieces together, rather than seeing herself or himself as “I’ve got to figure everything out myself and I’ve got to do everything myself because everyone’s counting on me.” They have to be able to let go and put the pieces together.

Lisa Solomon: I would say don’t be afraid to be efficient. Efficiency is not going to undercut you. You and your clients will benefit in the end. And efficiency does have a lot to do with what the other panelists have just said: learning to use both basic software and applications that are available. Managers do need to do–they don’t necessarily need to know the minutiae, but they need to know the capabilities, so that they know how efficient the people who are working for them really can be. So it’s not just the people who are actually implementing; it is at all levels.

Mitch Kowalski: I love that comment Lisa said; don’t be afraid to be efficient. I guess, all I would add–and I guess I’m duplicating a bit–is the fact that the lower your costs, the more money you keep. And that ties into efficiency, that ties into being able to use your technology better.

You now have the ability, more than ever before, to have the leanest law firm on the planet and still make a pretty good living. And so I think that should be the goal of lawyers today, is to lean your operations down and make it as efficient as possible because that lowers your costs.

And if you lower your costs, your profit margins go up, so that’s just basic Business 101. And I guess that’s another good reason why business courses should be part of law school.

Stephanie Francis Ward: Okay, and on that note, that’s everything I have for you all. Thank you so much for joining me today.

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Updated on Dec. 20 to add the transcript.

There’s a lot of tech out there to help lawyers be more efficient, but many lawyers are missing the boat. If a law practice is well-managed, technology should be putting money into the firm’s pocket, rather than taking it out.

ABA Journal reporter Stephanie Francis Ward speaks with three guests to find out how lawyers can use technology to save clients—and themselves—money.