Technology Tips the Scales

Gone—or almost gone—are the days of lawyers with two-wheelers, carting boxes of files into courtrooms, an image has given way to the convenience and storage capacity of the modern thumb drive.

But the impact of technology on law firm operations—both internally and with client services—is a frenzy of change that continues to define the way the best firms, large or small, manage huge volumes of information in the era of Big Data and e-Discovery. Consider, for example, the case of Stinson Leonard Street, the Kansas City/Minneapolis law firm formed with last year’s merger of Stinson Morrison Hecker and Leonard Street Deinard.

“From a communications standpoint, as a result of the merger, we exchange about 400,000 emails a week on our new platform,” says Mark Hinderks, managing partner for the firm’s Kansas City operations. “We have to have a system that facilitates that—and it’s a giant number—in a way that doesn’t break down. We’ve been very lucky there”—especially in January, when a broken water main flooded the building that Stinson calls home. There was almost no power, and the site was evacuated. “But our system was up and running throughout that whole disaster, processing those 400,000 e-mails in addition to document management,” Hinderks said. “So the resiliency to keep the firm going is very
important and we were very pleased that worked out.”

From managing internal communications and operations to crunching huge volumes of information, from billing tools to systems that provide clients with real-time updates on the status of even complex cases, law firms are awash in
technological change. And it’s remaking the nature of the legal profession as a result.

One way that’s happening: electronic discovery. “E-discovery has bubbled to the top rapidly over the past five years,” says Bryan Kress, IT director for the McDowell, Rice, Smith & Buchanan law firm. An example, he said, was
a search of digital files for the word “river.” Those searches can be customized to include “creek,” “stream,” or other
variants, and to pull out references that appear within five words of, say, a client’s name. “There’s a big raft of people and
companies competing in that space right now,” Kress said. “They’ve added algorithms to the functionality to allow you to search for information in ways you’d never dreamed of, and in ways one couldn’t, even if you wanted to, just a few
years ago.”

From typical cases where documents for discovery might run in the hundreds, or even into the thousands, discovery requests are now routinely meeting with massive files of 20,000 today, he said.

That kind of information might have been an outlier in, say, an Enron case a decade ago, but for most cases, 500 would have been closer to average, and still something
manageable by a couple of attorneys in a few days. “There’s no real comparison to how it used to be done vs. now, because the amount of data has gone crazy. Personally, I think they dump that much in hopes that you won’t find what you’re looking for.”

The pace of technology, says Vickie Schatz, president of the Kansas City Metropolitan Bar Association, “really changes the practice. Before, if you needed to see a document, you had to go to the document depository and count through date-stamped files, figure out which box it was in, dig though it and make a copy. It was a process that could take a human being many hours to accomplish. Now, everything is online and accessible, even from a phone or tablet device. And it’s accessible by multiple users concurrently. It’s really changed the practice significantly.”

Jeff Schwarz, chief operating officer for the Polsinelli law firm, deals with that kind of change every day. “Technology enhances access to information and collaboration with clients,” he said. “That’s how we’re seeing the biggest shift and change. Back in the day, it was all about infrastructure: building servers, making e-mail run. Today, it’s all about user applications, client collaboration tools, analysis of Big Data and providing service to clients on real-time basis,” he said.

Infrastructure is a given for most any firm these days, but for Polsinelli, he said, “it’s that relentless end-user focus and making our system easier to use.” There are so many tools now, he said, “and everyone has to use them, but there’s not enough time to train everyone on all the tools, so we have to make those intuitive.”

Anyone can get in a car and know how to drive, Schwarz said, “but of the number of apps attorneys use today—far more applications today than in the normal course of business—they have to have a deeper understanding of how to use the apps and make it easier to get the real value out of it.”

Patrick Roark, IT director for the firm of McAnany, Van Cleve and Phillips, sees the same challenges Schwarz does, but from the perspective of a midsize firm in this market. The common denominator for those firms, regardless of size, though, is the increasing share that technology commands from an operating budget.

“We continue to increase spending in technology,” Roark said. “We continue to utilize outsourced IT services, as it is difficult for a mid-sized law firm to have in-house talent capable of servicing the diverse platforms required to meet the needs of our clients. We are also investing in specific technology that allows us to support a multi-office firm with a limited number of support staff.”

Virtualizing servers and desktops for satellite offices, Roark said, can keep support costs low while increasing accessibility, productivity and client satisfaction. “Virtual desktops allow our attorneys to work from ‘virtually’
anywhere, anytime,” he said. “We will continue to analyze the value of outsourcing our datacenter to a third-party provider and look to the “cloud” for potential added benefits.”

But for now, the cost implications for firms are considerable, legal executives say.

“Twenty-five years ago, tech was a blip on the screen of most law firms,” Hinderks said. “Now, it’s a very meaningful item. Depending on the year and the firm, it’s likely to be No. 2 or No. 3, behind employee costs and facilities costs.
With all the tech licensing for hardware and software, whether you buy or lease is major expense for most firms.”

And yet, says the bar association’s Schatz, there’s been no emergence—yet—of a digital divide that separates large firms and small shops. In fact, if any range of firms is challenged by the costs of tech, it’s those in the middle. Big firms might be able to finance their way out of tech challenges, she said, but those operating as one-man shops or with a handful
of lawyers—even if they lack massive IT budgets—have a technological advance that helps level the playing field: The Cloud.

“My perception is that those small two- or three-person firms are actually more nimble and have an easier time adapting than some of the mid-size firms,” she said. “Because at some of the smaller firms, getting everybody on board is a lot easier with just two of you. There’s not as much infrastructure, so potentially adapting is not as complicated as for some of the mid-size firms that might fall into that gap but don’t have the resources of the mega-firms.”

Roark sees a greater threat looming for smaller firms.

“Unless the attorneys of the future are capable of developing and operating the technology, the advances in technology will be a barrier,” he said. “Small firms will not have the resources to invest in the equipment and staff required to participate in larger cases that are utilizing technology.” As a result, he said, consolidation of firms could be one answer, “but third-party providers offering affordable solutions to these smaller firms could certainly make things interesting. Much of this will be determined by the courts and their efforts to incorporate technology into their system.”

Kress said that until costs for software come down, mid-size firms could be at a disadvantage if pitted against the resources of larger regional or national firms.

“What it’s going to come down to is whether you can compete on big cases or not,” he said. “McDowell Rice is a mid-size firm, but if we’re going head to head with big firms on the biggest cases, we need a platform comparable to what they’re using. They’re going to be able to cull the data quicker and come up with what they want to, and do it more effectively. So it’s a matter of an attorney’s ability to bring big guns or not being able to equitably compete.”

Even if there is a digital divide in the works that way, he said, it might not last long. “I don’t see it being permanent. The software will come down in price and they will find ways to get smaller firms involved. A million dollars might be a prohibitive investment for some firms, but at $250,000 that might not be. Once that software is built and R&D costs have been recouped, no matter what you sell it for, it’s pretty much all profit.”

Schwarz, assessing the cost implications, offers a chuckle that belies the seriousness of the challenge. “Some of that is still shaking out in the marketplace,” he says. “We used to have to buy all of it and install it yourself. But there are huge costs to do that.”

And those costs, invariably, had to be picked up by clients. But today, he said, “many companies provide software as a service, so you don’t have to purchase or install it; it’s provided in the cloud. It’s an interesting mix, because it opens up access to far more people. You don’t have to buy all of it, you can buy it piecemeal and have another firm host it. If we spend wisely, we also increase our efficiency, and provide more value to the clients.”

That, say law firm executives, is absolutely key to long-term success. Technological change is not happening in a vacuum; what we’ve seen in just the last half-decade has coincided with a sort of revolution in American business: Many client
companies are leaner now than they’ve been in a generation, and they’ve rethought their approaches to their legal needs. Some have moved away from an all-in-one approach, separating out different kinds of legal work to firms with different practice specialization. All are looking for ways to reduce legal bills that, for years, increased the way health-care premiums or energy costs did.

“Clients want more real-time information about what’s happening in their matters,” said Polsinelli’s Schwarz. “We want more real-time information on what’s happening to manage cases more efficiently going forward. We’re buying non-legal commercial tools, tablets, that helps visualize data in a user-friendly way, not in spreadsheets, but more graphical, to get more meaningful information in a shorter period of time. That’s a whole different skill set that we have brought into the firm in the past few years, bringing technology in, in a more actionable way and making it actionable data, instead of many spreadsheets we have to figure out. That’s been a big shift. “The old tools,” he said, “don’t work anymore.