15 Mar 2022
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How do you connect the digital dots in the legal ecosystem?

By Eric Eck

Director Legal Function Consulting and Legal Managed Services | Switzerland

Technology for Law expert, with more than 20 years of experience in the business of law, working on legal function operating models’ improvement and legal cost management.

15 Mar 2022

As digitalization drives transformation, the legal ecosystem has the potential to be more interconnected than ever.

In brief
  • To manage today’s legal workload, in-house lawyers work with internal centers of excellence, external law firms, self-service portals and managed services providers
  • These stakeholders are currently still in the process of transforming through digitalization
  • A tech-enabled ecosystem approach will enable the different legal players to contribute their strengths and deliver better services, outcomes, costs and experience

Digitalization remains high on the corporate agenda. Core business functions like Tax and Finance are progressing on their transformation journeys as part of the general push towards more digital ways of doing business. But what about Legal?

There can be something of a prejudice that in-house lawyers are slower to adopt novel technologies and digitalize their operations compared to other departments. In our experience, this is simply not true, and many individual lawyers exhibit a high level of openness to new tools and technology. At the same time, digitalizing the legal function is just one – admittedly significant – component in a general transformational shift in the way in-house lawyers work and deliver legal services to the corporation. We prefer to view legal in-house departments in the context of a wider and more powerful legal ecosystem. What’s the role of the individual players, and how can digitalization help orchestrate a harmonious ecosystem in which all stakeholders benefit from better services, outcomes, costs and experience?

Growing burden

25%

The legal workload is set to grow by a quarter.

Let’s start by considering the concept of a legal ecosystem. Taking a corporate perspective, the in-house legal team is its entry gate.  Today’s legal teams face a deluge of legal tasks and their workload is set to grow by 25%, while budgets will fall 20% in the next three years according to the EY Global Law Survey 2021. Against this background, legal teams will invariably have to involve other stakeholders to meet the legal needs of the company. Depending on the specific set-up, corporate lawyers will work with an internal center of excellence, for example, and a network of external counsel law firms. Larger companies have also already discovered the benefits of a tech-enabled self-service portal. Finally, various organizations, both large and small, are choosing to use managed services to cover certain aspects of their legal workload. Here, we explore the use of technology within the legal department – and ask: how can tech enable a better ecosystem?

The truth is, the range of available legal tech applications and solutions is huge these days. While it can be tempting to reach for the next best option in order to optimize current processes rapidly, we recommend a more discerning approach. Within the legal world, we observe a lot of peer-to-peer technology recommendations, which often leads to misplaced confidence in a product’s ability to address the specific needs of the organization. It’s important to step back and have a legal consultancy layer to really examine what you need first. Start with as-is and move to to-be, using a roadmap created based on a detailed analysis. This will help ensure the solution reflects the required focus, whether that be procurement, efficiency or growing the business, to name just a few examples.

  • Case study: Finding the right tech solution

    A large group with five or six core corporations globally was looking to gain an overview of legal spend in a first step towards optimizing investment and operations of the legal function. In a first step, EY went through all legal-related invoices to understand what was being spent and where. We have our own benchmarks and noted that the organization was often paying over the odds to external suppliers. We gave tips on how to establish good procurement practices and, at the request of the client, proposed a shortlist of five technology suppliers with modular enterprise software that would give them the tools they needed to manage the entire legal spend lifecycle. After a one-hour demo from each candidate, the list was shortened to three suppliers who provided a three-hour deep dive demo. The client was able to choose the right solution with confidence.

Making effective and efficient use of the legal ecosystem is about allocating tasks appropriately to maximize the value returned by the spend. But it’s also about bringing the individual players together seamlessly through tools and technology. Each of the five components described above has undergone digitalization in recent years, but an integrated, consistent approach is lacking. At the same time, a lack of shared effort can mean five times the investment – and effort – spent. Without a shared approach, there is a risk of blockages in the “legal data flow” from one player to another, which inadvertently creates new inefficiencies in the very process of trying to tackle the old ones.

An ecosystem approach is also a necessity if law stakeholders are to unleash the power of artificial intelligence (AI), mixing “legal data” extracted from that ecosystem with other external or corporate data  – from finance, tax, sales, etc – to augment the performance of the legal function. “Augmented lawyer” functions are essentially about getting intelligent insights from data that the legal team can use. This can be as simple as solutions that use machine learning to read faster, for example by extracting relevant information from a corpus of contract documents. As the role of technology grows, in-house legal teams, starting with the largest, will be staffing AI specialists, automation specialists and data scientists alongside trained lawyers and their legal expertise.

One of the recent trends in technology law is the shift toward working on platforms. These tend to be developed by third-party vendors, who sell access to in-house law teams, law firms or other stakeholders. Smaller companies in particular can benefit from using these platforms as a shortcut to technology and innovation without the need to develop in-house. Another option for accessing, rather than acquiring, technology is to purchase managed services. EY Legal Managed Services, for example, deliver support across people (know-how), processes and technology, which fast-tracks an organization’s access to tools and knowledge. This almost immediate access is an important advantage given that technology sourcing projects can take around 18 months from idea to implementation. 

This next frontier of the legal ecosystem drives productivity for each of the components and allows each provider to deliver scalable services or expertise, where work distribution is adjusted constantly across the ecosystem depending on the needs at any given time.
Eric Eck
Director Legal Function Consulting and Legal Managed Services, EY Switzerland

We believe the whole ecosystem needs to be digitalized to facilitate the flow of legal data, and enable entire work streams to be accessed, processed, tracked and analyzed by the relevant stakeholders. This next frontier of the legal ecosystem drives productivity for each of the components and allows each provider to deliver scalable services or expertise, where work distribution is adjusted constantly across the ecosystem depending on the needs at any given time. It is also the only means for each stakeholder to forecast and anticipate future workload. The positive effects of a legal ecosystem are far-reaching and include:

  • Managing legal operations – e.g., matter, time, legal project (task), spend management
  • Managing risks and rights –e.g., IP, compliance, legal knowledge, contracts
  • Accelerating performance – e.g.,  through automation, AI, more efficient litigation and transactions, corporate secretariat
  • Driving self-service – e.g., by extending direct use from internal clients, and even external customers

The success of the legal ecosystem depends partly on mindset and a willingness to connect and collaborate in new ways and with new partners. But there are also practical questions, like who will pay for the innovation needed to connect the data dots between players? This is something the different stakeholders will have to work out as they compare the value of a fully digitalized, consistent ecosystem to the cost involved when each player seeks an individual solution rather than teaming up.

Summary

As the entire world goes digital, legal stakeholders are no exception: tech is driving transformation of in-house legal teams, external law firms, shared service centers and legal managed service providers. We believe that the future of legal is a more interconnected approach – a digitally powered legal ecosystem where all players work together to optimize output and quality. In this article, we explore the latest frontier in the legal ecosystem.

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About this article

By Eric Eck

Director Legal Function Consulting and Legal Managed Services | Switzerland

Technology for Law expert, with more than 20 years of experience in the business of law, working on legal function operating models’ improvement and legal cost management.