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Five technology challenges that are holding back legal innovation

Five technology challenges that are holding back legal innovation

The “in house” Legal function has been arguably the most under-invested in department over many years in terms of IT spend, and has missed out on the benefits of available technology enablers. Yet, as an often-unrecognised consequence, so has the business the Legal function serves. Indeed, Legal has historically been viewed as a cost centre, despite the role it can play in business optimisation. As one general counsel of a major investment bank said recently during a legal transformation programme, “There is no “P” in the Legal P&L but there is an “L.”” 

This approach has created a plethora of manual processes, physical documents – and haphazard software selections (often tactical solutions chosen on cost considerations only) leading to manual and often broken processes with a negative resultant impact on risk, cost and the service provided to internal and external customers. Furthermore, it has simply ignored the business value and optimisation an in-house legal function can provide.

The flipside is that there are often huge potential benefits that can be relatively easily achieved through the use of LegalTech, be it e-Billing or time-tracker systems, document automation, clause libraries, knowledge management, document storage or NLP/AI applications to extract data from legacy document portfolios. This, coupled with the drive for legal innovation, (recognising that the business processes in legal must now be scaled to address the complexity of regulation and the increasing cross-border considerations) – has to make a stronger case for investment than ever before.

Legal teams are at a tipping point. They know they need to take advantage of legal technology, but, as Damian Enskat, Programme Manager and Akber Datoo, CEO of D2 Legal Technology explain, there are five key challenges legal teams face when it comes to selecting legal technology software. The question is, how can these challenges be overcome to progress legal innovation?

Challenge One: Playing a different role 

Time to shed the naturally cautious legal perspective and embrace change, including a programme leadership role.  

Of all the business functions, the depth of knowledge and expertise of the legal function is almost unrivalled, however the level of cross-functional project delivery experience within the legal function may often be limited to the negotiation of supplier contracts which support these projects. Yet, legal transformation projects (many of which have a software selection component) require the legal team to play a different role on these projects entirely.

From supporting the software contract negotiations on programmes in other functions, senior members of the legal team now must become business leads of programmes which benefit the legal function itself. They are now at the heart of defining and ensuring delivery of the business benefit of the programme. This means that cross-functional project experience becomes crucial as the legal business lead will need to mobilise stakeholders from not just within legal, but also IT, COO office, procurement, finance, risk, and front office and to fully engage with project teams if these initiatives are to succeed.

Challenge Two: Allocation of internal resources

Not having the right change management expertise is truly a false economy.  Not having a dedicated independent project manager, or accepting a “free” partial resource from the software vendor to manage the project are just some of the common paths to failure.

Due to the growth in digital transformation programmes in recent years, much of an organisation’s Capital Expenditure (CapEx) – and hence the most experienced Business Change, Procurement and IT professionals – have been diverted into those functions with greatest perceived transformation potential such as the Front Office, Risk and Finance.

This means that historically, legal transformation programmes have been allocated internal resources who have less experience than is required for the role either to save money or because the resources with sufficient levels of experience have been allocated elsewhere. This often means that best practice approaches are not followed. Governance/oversight models are often not fully developed, leading to unclear roles and responsibilities and insufficient accountability for business and supplier teams.

Software providers often offer “free” partial resources to help to manage the selection. This can lead to sub-optimal decision making and a final solution which is too expensive and does not meet the needs of the legal function or deliver the intended business benefit.

Challenge Three: Access to software selection tools and templates

Utilisation of best practice tools and templates to help the process is critical. Managing the intended business benefit of the project through the requirements gathering process, functional and technical specification documentation, through to implementation is vital for the project to be a success.

Due to the historic focus of corporate transformation programmes on other functions, legal teams may not have access to (or even be aware of the existence of) the best tools for the software selection exercise such as detailed selection plans, governance templates, requirements documentation, proof of concept methodology, Request for Proposal (RFP) documentation, self-calculating scoresheets, supplier briefing documents and commercial negotiation templates such as those which might support an iterative sealed bid. Where legal teams are able to source some of these tools from other departments with recent software selection experience, they may not know which ones should be prioritised for their selection and how these should be adapted to ensure success.

Correct use of software selection tools and templates means that legal will have the information they need to fully consider the options prior to purchase as opposed to feeling under pressure to accept the first available option.

Challenge Four: Future-proofing the software selection decision 

The LegalTech market is still maturing, and there is a dearth of standards that can be seen in more mature departments. Flexibility of the system is key and requirements should be introduced which build this into the decision-making.

Once approval for a software selection decision has been achieved, it is important to future-proof the choice of software as much as possible, as when new requirements emerge after the selection it may not be easy to adjust the software, change the decision and/or realign stakeholders for a new software selection process to begin. Future-proofing can be achieved by supplementing the current list of requirements with a small number of additional future requirements, which may already exist in other legal functions within peer companies from the same industry. Some requirements can be designed in a flexible manner such as introducing tables to allow users to “soft code” certain variables.

As legal teams may not know what these additional requirements might be or have an industry network through which these can be gathered, software selection decisions often become dated very quickly, meaning that opportunities may be missed for additional business value or additional costs to the organisation may be incurred.

Challenge Five: The fragmented legal sector software market 

There is a wide range of software options available to legal teams ranging from choosing a small number of products from large software vendors to buying from smaller vendors and new market entrants and integrating these products together. Larger organisations may also have the option to build part of the solution themselves. Careful navigation of these options is critical so a comprehensive solution can be designed which meets the needs of the legal function. 

The number of software products which target the typical legal requirements (document storage, legal agreement data management, data governance, workflow and document review systems) are numerous and often dominated by very large market players, and then a number of smaller companies and new market entrants – with very little in the middle. Larger organisations may also have the option to build part of the solution themselves. Whilst these software products can be combined in various different configurations to meet the needs of the legal function, it can be very difficult to find the right balance between software specialisation and enterprise-level features.

The number of possible permutations are huge and navigating these options without an in-depth knowledge of the market can lead to incorrect software product(s) being purchased (or developed), resulting in “regret spend” (non-refundable software licence fees being paid and substantial additional investment being required to rectify mistakes). It is important to choose a software provider which has a broader technology roadmap aligned to the vision and goals of the legal function.

Conclusion

It’s time for in-house legal teams to raise a hand and ask for help. Yes, the legal software sector is saturated currently with multiple vendors vying for business, but this also means there are plenty of options to give legal teams the help they need to become far more effective and well positioned to manage risk. Getting a new legal innovation project off on the right foot is essential, rather than facing the consequences further down the line, so getting experts in early and seeking advice is the best place to start. There have been far too many poorly executed or failed LegalTech initiatives – it is time to go back to the basics of change and transformation and think before you spend, so essential legal innovation can thrive to the benefit of the wider business.

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