Monday, October 31, 2022

Legal tech experts compare general enterprise and legal industry solutions

By Matthew Garza, J.D.

The recently-held 5th Annual Legal/Reg Tech Workshop hosted by Doon Insights took place at a turbulent time for markets, but despite, or maybe because of that, progress in legal and reg tech continues to push ahead. Tech penetration rates in the legal industry are still much lower than other comparable fields, which means there is a lot of upsides for gains, as evidenced by the heightened pace of financings and M&A in the sector, according to Doon. With that background Doon gathered a panel of legal tech experts to discuss a big question facing law firms and in-house legal departments—do we invest in enterprise-wide platforms that integrate data management across the organization, or go with more bespoke solutions built for lawyers?

Peter Krakaur of Ernst & Young explained that he faces the challenge of measuring and connecting data from EY’s various global businesses, and asked a baseline question for the panel—do lawyers really need specialty legal technology products to do their jobs effectively?

Shelby Austin, a former law firm partner who runs legal tech firm Arteria AI, said that the adoption of legal technology by law firms has been an evolution, but early efforts, like organizing legal discovery documentation using general database principles, often failed. Now firms face even bigger challenges because of the explosion of data, meaning bigger dollars are needed to build bigger systems.

Wolters Kluwer’s Ken Crutchfield, who started in the nascent field of legal tech as a teenager in the 1980s with Lexis Nexis, said he has watched unique technology needs grow out of legal, tax, and accounting departments who were low priority tech spends within businesses. Off-the-shelf products didn’t fit their needs so they were forced to go looking for more bespoke solutions. “There are a lot of things going in spreadsheets that makes people shudder,” he said. That drives demand for tailored solutions within range of department budgets, who are struggling to find what they needed in all-of-enterprise platforms.

Julian Tsisin, Director of Legal Technology and Data at Meta, talked about the challenge of getting the needs of the legal department served by the central IT infrastructure of a company. “My goal is to make the legal department as efficient as possible,” but IT is focused on enterprise security, performance, and costs, with the importance of a single department’s efficiency way down the list. A task like automating a decision-making tree is a challenge for a central IT department that sees a narrow company benefit, challenges with data protection, and specialized support costs.

Mr. Tsisin said enterprise tools have gotten much better and more flexible than five years ago, but Meta takes a hybrid approach that also takes advantage of legal-specific tools that can offer its legal team exactly what it needs. A central IT platform can’t, for example, provide contract analytics, which Meta needs to better understand what is inside its huge portfolio of contracts.

Data in the modern legal business. Given the explosion of data and how its management is transforming business, firms and corporate counsel understand the need to go digital, said Mr. Krakaur, but face the reality that not all tech solutions fit. Law firms have different needs than corporations, and for practical reasons. For instance, they may handle contract lifecycle management for clients but they do not own the contracts, which are assets of the client. The lawyers are only one part of the management of that contract, and they are not in control of company systems to build them out for legal needs, he said.

Shelby Austin said niche data solutions might not have the sophisticated features and security enterprises require, and in fact the separate needs of the legal department and tax and accounting departments points to the need for an integrated solution. For a large company the value of the contract to the enterprise may be more important than saving time for the legal department to efficiently manage the contract, she said. The legal department, she said, needs to fit its strategy within the rest of the enterprise.

Ken Crutchfield addressed the “data silos” that develop within companies, saying that they could create compliance problems for the business by not being integrated with other departments’ needs. But in heavily regulated industries it might be impossible to find enterprise-wide solutions that account for specific legal compliance needs. How do you bridge that gap?

Julian Tsisin of Meta said the data can be connected, but there are real legal issues around confidentiality and privilege, with privilege being a uniquely legal issue. “I am not aware of any solution that, out of the box, will solve that,” he said. He noted that in the past his position lived in the central engineering department of the company, but now he sits in the legal department, which allows him to be more forceful in advocating for the department’s unique needs. And he expects he will continue to do just that, “assuming we still need specific legal solutions.” At some point he expects that enterprise solutions may develop sufficiently to solve for every department’s need, he said, but in the meantime, a hybrid approach will be necessary.