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I've written previously about Legal OnRamp, but some new developments call for an update.

What's new?  Primarily, the ability of individual law firms to feature their own selected areas of expertise.  First up is Latham & Watkins, with its outsourcing practice.  But a bit of background.

LOR was founded in early 2007 with backing from Cisco Systems and describes itself as a "Web 2.0 'Community of Action'" of in house lawyers and law firms, deploying

"the latest Web 2.0 technologies- blogs, wikis, profiles, search, "connections," "Twitter-like" capabilities - in ways that are specifically focused for lawyers to improve productivity and collaboration for legal departments and law firms."

Some additional facts, all verbatim courtesy of LOR:

• Legal OnRamp's rapid, viral growth makes it the market leader in social networking for lawyers. It currently boasts nearly 10,000 members (half of whom are inhouse) in 40 countries.
• In July 2009, Legal OnRamp announced a strategic partnership with The Corporate Executive Board's General Counsel Roundtable, the world's largest network of inhouse counsel, with 14,000 individual members from more than 500 companies - this partnership will see the General Counsel Roundtable's 14,000 member group added to Legal OnRamp's nearly 10,000 members, making it one of the most powerful inhouse counsel communities in the world.
• The ongoing development of the "Legalkipedia," with hundreds of law firms' members authoring tens of thousands of frequently asked questions and answers around day-to-day legal matters.
• As part of the roll-out to the General Counsel Roundtable, Legal OnRamp is adding a series of "FirmRamps" - sub-communities within Legal OnRamp which combine deep resources from law firms or other partners with best practice sharing from clients and ongoing discussion and collaboration. Latham & Watkins was the first firm Legal OnRamp invited to create a FirmRamp, focused on Latham's highly innovative work in streamlining the negotiation and operation of complex outsourcing agreements. Latham & Watkins will be offering in-house counsel the ability to pick our lawyers' brains through forums, access to a number of materials and the next generation of our interactive tool, Capture, for speeding up outsourcing transactions.

The fourth of the above is the one I want to focus on today.

But first, a bit more about exactly what LOR looks like and what it offers.

It requires invitation-only membership (although invitations aren't very hard at all to come by), so the home page is immediately personalized to you. Here's mine of earlier today:

I've highlighted a few things with the red arrows:

• "Hot Topics"--which appears to be auto-generated depending on activity on various parts of the site--is featured top right;
• They offer a group of blogs; recent posts are featured;
• It displays "My Profile" and you can of course edit away from there; and
• LOR is "presence" enabled, so it lists Members Online pretty much in real-time; you can IM or EM them, etc. (and you can, thank the gods, suppress others' awareness of your whereabouts).

In other words, and as promised, it offers a lot of what we've come to group under the umbrella term "Web 2.0." And, like all topics Web 2.0 or social-networking-related, it invites questions, foremost among them whether this is a fad (I hereby nominate Twitter for the Academy Award in that category) or here to stay.

I humbly nominate blogs for the Oscar for Here to Stay, having demonstrated, or so I believe, for nearly a decade now, their ability to provide focused, intelligent, and informed commentary on topics far too circumscribed to engage the Mainstream Media in any sustained or material fashion. Hasty caveat: Yes, of course, you must tune your antenna quite judiciously to avoid the roughly 1:10,000 signal:noise ratio--but as a discerning reader, that's amply within your control.

Now, back to item #4 on LOR's feature list.

The first so-called "FirmRamp," or micro-community, within LOR itself was recently launched by Latham & Watkins to focus on its outsourcing practice. Core to the "Outsourcing Center" is its so-called "Capture" tool, which is designed to capture the client or prospect's key requirements for the putative outsourcing transaction in order to permit Latham to generate an RFP and or a draft of a contract incorporating those requirements. Here's the Outsourcing Center home page:

On the "introduction to Capture" page, Alex Hamilton, Latham's London-based partner in charge of this efforts, explains as follows:

One of the most time-consuming and expensive phases in any outsourcing project is building your requirements.  Latham & Watkins has developed a new approach that can capture requirements with efficiency and economy.

Capture is a set of interactive, intelligent, dynamic forms that help you to quickly and comprehensively capture the stakeholders' requirements.   As you complete the forms, questions relevant to the particular transaction are revealed, driven by the options you select.  The Capture forms act as a checklist for key issues and, once completed, provide a blue print of your deal's specific requirements.

Using the answers to the forms, Latham & Watkins can then quickly produce an RFP input and/or contract, reflecting the requirements.

The Capture forms support and integrate with Latham & Watkins' Diamond contract structure and modules.  There is a Capture form for each part of the agreement (e.g. services, service levels, pricing terms, transition and so on) and the forms may be used in IT and business process outsourcing deals

And the benefits of doing work this way are said to include:

• speed
• accuracy
• a focus on the key issues
• enforcement of specific standards
• tailored requirements (rather than requirements starting from the last deal done for someone else)
• confidence
• quality

The process can be kicked off with an online RFP submitted directly to Latham, which looks like this:

Minimal information is required, only:

• name of your project, and version if applicable
• your name
• date
• contact info including name, telephone, and email

Let's step back. What's really going on here?

Abstracting from all the buzz--which different people will view positively and negatively--about social networking, Web 2.0, etc., these various tools and sub-sites are ways for lawyers to collaborate with clients. This is what lawyers do, and what they've done since the Code of Hammurabi and before.

In that sense, lawyers have been "social networkers" from the beginning.  The behavior, the interaction with potential clients, and the hoped-for results are not new, only the coinage of "social networking" seems to be new.  Remember when we just called it "networking?"  

Another thing lawyers have always done is demonstrate their expertise.  (Some simply assert it, but that's a mug's game.)  So Latham & Watkins could say, "We know outsourcing."  That and $2.25 will get you on the subway.  

Being far smarter than that, they've of course done something altogether different.  They've said, in effect, "Let us show you what matters inyour outsourcing contract; then judge for yourself."  If there's any time-tested way to win over a prospective client, this surely is it.

LOR is, then, from one perspective a remarkably conservative initiative: One that is attempting to enable lawyers and clients to do what they've always done, only with up-to-date tools instead of their various predecessors ranging from papyrus, quill pens, messengers, faxes, and FedEx, to email.

From the opposite perspective, however--and the one you can hear loud and clear when LOR talks about its mission (see the early part of this column)--LOR and its latest invention, "FirmRamp"'s (another is in the work about ethics, courtesy of Goulston & Storrs), are all about turning the profession on its head: "Welcome to the Future" as the home-page proclaims in the lead story. Insofar as no one else is really doing this, certainly not remotely near the scale of LOR after its 2-1/2 years, then the story truly is about something New and Different.

At the intersection of these two perspectives, the timeless and the innovative, lies the challenge that I would worry about the most had I a stake in the success of LOR. (I don't.) And that challenge simply is to maintain and consistently enhance the quality of its content and of its community.

This can pose a chicken and egg dilemma. People won't visit if there's nothing of value to come for, but firms have to publish content of value in order to have any hope of attracting high-quality traffic (and, by hypothesis, before there is much of any such traffic).

In this regard, LOR is trying to beat the 1:10,000 odds (I made up that ratio, of course). To all appearances, they have quite the fighting chance.

Reminder:

If you haven't taken our quick (3-minute) survey on e-billing, please do so. You can sign up at the end to get a free copy of the complete, aggregated, anonymized results.

Take the survey!

Thanks.

"Adam Smith, Esq." is conducting research into the market penetration of e-billing of clients by law firms—as opposed to the old-fashioned paper billing (even if it's emailed, "pdf"'ed, etc.) and what analysis, if any, is actually performed against that data.

We are actually conducting two slightly different but largely congruent surveys, one targeting law firms and one targeting in-house counsel.

Please take the law firm survey:  It takes less than five minutes and you can opt in at the conclusion to receive a free copy of the aggregated, anonymized results from both the law firm and the in-house surveys.

Take the survey.

Thanks!

Apologies for a dearth of columns this week, but I was at ILTA/2008 at the Gaylord Texan outside Dallas.  Two comments about the Gaylord, Dallas, and August.  First, the Gaylord comes as close as any place I've ever been to meriting the word "indescribable."  If you start by envisioning what is essentially a circular hotel built around an enormous, enclosed atrium roughly the size of a domed football stadium, you begin to get the idea.  Now furnish that atrium with lifesize replicas of part of The Alamo, fountains, streams, and brooks, model trains running hither and yon, facsimiles of Conestoga wagons, an oil derrick, and other totemic Texas artifacts, put it adjacent to the largest conference center in Texas (which is actually saying something, unlike perhaps "the largest conference center in Rhode Island"), and you begin to have a prayer of envisioning this place.  Don't you love America?

Comment #2:  Dallas in August is an extremely hostile environment if you're a runner, or, indeed, if you like to spend any part of your day outside hermetically sealed environments.

Be that as it may, on Wednesday I presented on "Web 2.0 & Law Firms," and on Thursday, with my friend John Alber, Strategic Technology Partner at Bryan Cave, on "Law Firm Economics 103."  (If you don't know John, he is perhaps the single most insightful and creative thinker in our industry about how to measure performance internally at law firms. He comes up with stuff you've never dreamed of, and passes it off as all in a day's work.)

Here are the presentations (click each to view):

This particular presentation concludes with Information R/evolution by Michael Wesch:

And just to add some interactivity to your visit, I was also videotaped by Thomson West who posted it on YouTube.

See you at ILTA next year! (But please, dear organizers, not Dallas.)

With the news today that both Clifford Chance and Eversheds are ramping up their outsourcing initiatives in India (covered in The Lawyer and in LegalWeek), it's timely to report on a panel on outsourcing that I attended last week at the ABA's annual convention here in New York.

But first, the Clifford Chance and Eversheds news: The firms are taking slightly different approaches, albeit with the same thrust, of cutting reliance on pricey London-based personnel for low-level legal work. CC is expanding its inhouse India capability (Delhi-based) by ramping up paralegal capacity to review documents in basic due diligence work, cloning documents, and "low-level drafting." Eversheds, by contrast, has contracted with a third-party provider "to outsource small commercial contracts that are too expensive to carry out in the UK or in-house." In future it may (read: will) expand to cover due diligence. It's apparently premature for Eversheds to announce projected cost savings, but CC says it's already saving £8-million annually.

So much for the background. Now to the outsourcing panel.

Fortunately, on the panel were Sally King, regional operations manager for the Americas at Clifford Chance, Jim Lantonio, who was executive director at Milbank when they outsourced their word-processing functions to Mumbai, and Ron Friedmann, a senior executive with Integreon, a major outsourcing firm.

Ron opened by presenting pictures of the Integreon facilities in India, emphasizing the very high level of security, including biometric scans for access to workrooms, bans on all potential digital or analog recording devices, encrypted data transfer protocols, and so forth.

Sally reported that CC has 100 employees in Delhi today at its facility, and anticipates having 300 by 2010, performing tasks such as accounting, accounts payable and receivable, low-level HR functions, and, in general, all "low touch" functions which don't need to be performed in the City of London or in midtown Manhattan.

Jim explained that a key consideration in Milbank's sending its wordprocessing to Mumbai was that "there's no career path in wordprocessing at a law firm." So going to a third-party firm that does wordprocessing as a core function provides the possibility of career growth. The Milbank wordprocessing staff--drawn from the New York job market--consisted, certainly on the overnight shift, of actors and actresses whose key career priority was not, to put it delicately, Milbank at midnight.

What was the key obstacle to the offshoring at Milbank? "Not technology, and not confidentiality or security--those we could readily take care of; it was the politics of sending jobs abroad." But, reported Jim, what changed the nature of the conversation about "sending jobs abroad" was the recognition that capable people in the New York metropolitan area did not want 24/7 wordprocessing jobs. The critical battle of convincing lawyers, used to looking over secretaries' shoulders as they typed, that the work could be done as well in Mumbai, remained.

So Milbank embarked on a year-long double-blind experiment. When a lawyer submitted a job to wordprocessing, it would go either to Mumbai or to New York, at random. Lawyers were then asked to grade the resulting work product, without knowing where it came from. At the end of a year, satisfaction rates were 97-99% for Mumbai-sourced work and 75-78% for New York-sourced work. Case closed.

The New York Times reports that Wall Street investment banks are taking the next step beyond the back office:

After outsourcing much of their back-office work to India, banks are now exporting data-intensive jobs from higher up the food chain to cities that cost less than New York, London and Hong Kong, either at their own offices or to third parties.

Bank executives call this shift “knowledge process outsourcing,” “off-shoring” or “high-value outsourcing.” It is affecting just about everyone, including Goldman Sachs, Morgan Stanley, JPMorgan, Credit Suisse and Citibank — to name a few.

Here are the numbers of employees in India for some of these firms:

• Morgan Stanley:  500 "doing research and statistical analysis"
• Goldman Sachs:  3,000 in Bangalore alone, of whom 100 are investment researchers
• JPMorgan:  325 analysts in Mumbai
• Citigroup:  22,000, of whom "several hundred" are in investment research
• Deutsche Bank:  6,000, in unspecified roles
• Credit Suisse:  6,500 in lower-cost jurisdictions including India, Poland, and Singapore

And inevitably the jobs now being performed outside New York, London, and Hong Kong are slowly moving up the food chain.  One can foresee a day when it makes little sense to talk of investment banks being headquartered anywhere in particular, a day when they will have become global in the most fundamental sense.  At that point, the very notion of "outsourcing" becomes something of a metaphysical concept.

Still doubt the potential power of outsourcing? Then ask yourself what functions your firm already "outsources," even if it's to people down the block. Copying? Catering? Mailing? Website hosting? Tax preparation? Think of it in these terms or not, you're already outsourcing; the only question is where your core competencies as a law firm end and the core competencies of other firms (wordprocessing?) begin.

I asked the panel whether the ability to offshore basic document review was changing the career paths of junior associates, who presumably did that work heretofore. "Oh, yes, it has already changed things greatly," reported Sally. Jim agreed that had been his experience at Milbank. "The days of seeing a bunch of associates in a war room with boxes of documents to review are long gone."

Marry that observation to the increasing ubiquity of this trend—Clifford Chance and Eversheds are not exactly arrivistes—and you have a chance to take a "zero-based budgeting" look at what your firm does and what it engages with others to do.  Your clients are already there.

Earlier this month, I wrote a column "about wringing our hands" (its actual title was How High Quality Are Your Lawyers?  And How Can You Tell?) and I've just received a most thoughtful email from Alec Guettel, one of the co-founders of Axiom Legal, which is extensively discussed in the earlier piece. 

I want to share it with you, but first permit me a few observations. 

Essentially, Alec recaps Axiom's experience in measuring the quality of lawyers--at least as perceived by clients--and provides some refreshingly concrete suggestions, based on hard-earned experience, about how to secure meaningful client feedback.  These valuable observations speak for themselves.

But Alec also takes a roundhouse swing at the famous profits per partner "success metric," which he says "continues to amaze and entertain us.  Increasingly, it seems to be the only metric that matters to firms [even though it] is almost perfectly cross-aligned with the clients' interests." 

Is this actually correct? 

Hasn't PPP become, in some ways, everyone's favorite new whipping boy?  Alec argues that PPP can "basically" be increased by raising rates, raising hours billed per attorney, raising leverage, or cutting costs (which, he says, "we have yet to witness in a meaningful way from top firms").  Are those the only, or the "basic," ways to raise PPP? 

More to the point, what's so bad about PPP, anyway?  The poliltically correct gang is warring with the economic gang, and I wonder whose side you come out on.  Whichever side it is, thanks to Alec for lobbing in the question.

Dear Bruce –

Thanks for what you’re doing with "Adam Smith, Esq." – really interesting and really necessary. 

I was pleased to see your recent post on the failure among clients to measure the quality of legal work they are receiving and the failure among law firms to measure client satisfaction.  You could not be more right that this is a. lacking and b. critical to the improved function of the legal services market.

This is a topic we’ve invested a lot of time and energy thinking about at Axiom so, for what it’s worth, I thought I’d share some of our views.  We’d love to help you catalyze a broader discussion in this area.

After trying some less structured approaches with mixed results (read: abject failure), we began to insist at the outset of our relationships with new clients on a highly structured series of feedback sessions at specified points in each engagement.  These meetings are always in person (otherwise they get cancelled) and after some experimenting, we’ve begun to schedule them for only 10-15 minutes.  This has increased our clients’ enthusiasm for the meetings and forced all the parties into having very focused, prepared, surprisingly productive conversations.  In specified meetings during the process, we have a quantitative review where we walk the client through a survey about technical legal skills, business counsel, responsiveness etc.  We don’t send these quantitative questionnaires to the clients – again, because they’d never get around to filling them out – we walk them through the questions and record the answers.

This process yields superb feedback for our individual attorneys and for Axiom as a firm, and provides a relatively objective measure for performance evaluation and compensation of our people.  As a next step, we’re looking at ways to provide transparency to future clients about the performance of individual Axiom attorneys on prior engagements and about the firm as a whole. 

These lines of thinking have also generated a separate internal discussion about the whole notion of “profits per partner” as a success metric.  The level of importance and pride assigned to the P3 metric by traditional law firms continues to amaze and entertain us.  Increasingly, it seems to be the only metric that matters to firms - a very  public, highly scrutinized measure of success of firm management and overall status.  Even where individual partners care about more than the size of their paycheck, they have to manage toward that number because it’s become shorthand for the quality of the firm.

The problem, of course, is that P3 is almost perfectly cross-aligned with the clients’ interests.

There are four basic ways to increase profits per partner. Three of them put the firm in direct conflict with their clients’ goals and the fourth has been neglected:

• Firms can increase rates, which we have seen plenty of in recent years and is self-evidently a negative for clients.
• Firms can increase hours billed per person, which is bad for associates and bad for clients as they result in lawyers who are unhappy, overworked and moving between firms at an alarming rate.
• Firms can increase their leverage (number of associates per partner). This is destructive in countless ways, including deterioration of work quality and the quality of life of the partners themselves, which exacerbates rising attrition among associates (who wants to be a partner these days?).
• The fourth solution is to cut costs, which is a solution we have yet to witness in a meaningful way from top firms. In fact, costs have increased as lawyer salaries have escalated. Ironically, this is the only one of the four approaches that is, on balance, good for clients.

 

In contrast to profits per partner, we’ve been developing an alternative metric based on the percentage of the client’s overall legal spend that Axiom constitutes year-over-year.  This provides client-favorable motivation in both the numerator and the denominator.  In the numerator, we are motivated to win “market share” within existing clients.  In our view, this is the most reliable expression of a client’s level of satisfaction (though we also ask them to rate us, as outlined above).  In the denominator, we are motivated to reduce our clients’ overall legal spend, which has resulted in our doing free consulting on best practices and recommending a range of solutions that have nothing to do with Axiom.   (Note: one could argue that the numerator provides an incentive for us to raise rates, but we think that’s outweighed by the primary focus on winning “market share” within the client.)

Finally, I wanted to draw readers’ attention to the comments you quoted from Jeff Carr, GC of EMC.  The system he reports combining performance feedback and performance compensation is in our view close to ideal.  We’ve proposed a similar approach to a few clients but have never succeeded in getting a performance compensation system adopted.  Carr’s comments are inspiration to try again, and I encourage other legal service providers to do the same.

We all appreciate the work you’re doing to highlight this issue via your publication and look forward to continuing the discussion. Thanks for being a catalyst for these conversations!

Best regards,
Alec
_____________________________
axiom
law redefined

alec guettel
23 austin friars
london EC2N 2QP UK

Here's an addendum to the coverage I gave to Eversheds' Report on The Law Firm of the 21st Century, as well as to the story I published last month on the conference held here in New York sponsored by Eversheds.  This email came in over the weekend from RSG Consulting. 

If you're not familiar with RSG, you're almost surely familiar with their work.  Perhaps their most high-profile work is as research partner (now for the third year) to the FT's annual "Innovative Lawyers Report." Next year they will be expanding the report to benchmark US firms. 

Dear Bruce,

As the research consultancy, which designed and conducted the 100 interviews for the 21st Century Eversheds report, we wanted to add our thoughts, if we may.

The most interesting revelation emerging from our research is the gap between client expectations and law firms’ performance. A general counsel at a FTSE250 company said, “Law firms at the moment get the benefit of clients not taking a standardized approach to tackling issues. There aren’t many other areas that have escaped so miraculously from significant re-engineering. GCs only have themselves to blame. There has not been a consistent call anywhere for the legal profession to rethink the provision of services to business. It’s a medieval guild. “

That’s a powerful client who knows the symptoms and has produced a diagnosis for what might be called ‘Big Law Malaise’. The general counsel of a Fortune 100 company felt that the lack of forward thinking amongst big law firms would soon end: “At what point in history was the horse and trap most successful? About the time Henry Ford released Model T.“

Is the stage set for radical change? Not even the impending recession will really affect the prosperity of the biggest firms or alter their behaviour. But we do see evidence from another research project we designed, the Financial Times Innovative Lawyers Report, that law firms are gradually re-engineering themselves.

Last year, the UK’s top ten firms earned combined revenues of 6.3billion. Some of this revenue was ploughed back, in the case of Allen & Overy, into an innovation panel with a two million pound budget. Innovations submitted from other firms ranged from non-lawyer project managers to partnerships with third parties to both enhance their client service offering and their roles as responsible businesses.

This year, the innovations are more client-focused and consciously add value. Some are even positively imaginative!

Big law firms are broad churches; they are homes to both great experts and commoditisers. Some high priests pursue the new in legal expertise as if their livelihoods depend on it (they often do) whilst triumphantly resisting any other form of change. Meanwhile, those in the next office devote considerable intellectual and financial capital to the next generation of IT-based systems that will deliver tomorrow’s legal advice quicker and more efficiently.

In other words, great change and great stasis can co-exist – as they have done in the history of many a service industry. But law firms who understand themselves and who are willing to adapt to changing business conditions will close that gap between them and their clients.

Congratulations on a fascinating e-resource,

RSG Consulting

My take on this?

His core observation that large law firms are "broad churches" with room for many approaches to client service is surely correct.   The truly high end, "bespoke" client matters will always go to the Magic Circle, the New York elite, and their equivalents (Latham, etc.), and that is a tried and true model that has worked for a century or more. 

The challenge will, as always, be on the more routine, "commodity" type work.   Specifically, it will be whether those firms—or others, perhaps, that specialize on doing little else—will be able to design and deliver compelling value through the innovative use of IT combined with creative fee arrangements.  People have a tendency to look down on this work and this segment of the market as second tier, ever so slightly "slumming," and not where the excitement and challenge are.

I beg to differ.

If anything, figuring out how to profitably deliver these more routinized—but essential—legal services to the FTSE 100 and the Fortune 500 is the territory that's uncharted.  Marty Lipton presenting a seven-figure bill "for professional services rendered" is at this point an old game that everyone understands.  Few if any people really understand the new market.  Which means mistakes will be made and experiments will fail.  That's what experiments are for, you know; just don't run the failed experiment a second time.  Here, and not in the "premium, price-insensitive, high-end work," is where innovation in new business models will occur.

Did you know that the venerable Booz Allen & Hamilton has truncated its name to "booz&co."?  Not only abandoning a name with tremendous recognition and brand equity but, in a "what were they thinking!?" blunder, shining a spotlight on the unfortunate bibulous associations of the name "Booz."  Did they engage a management consultant before pulling off this stunt?   They're not talking.

But that's not what today's column is about.

It's about their article, The Practical Visionary, which covers one of the great unsung heros of 21st Century business:  The CIO.   Although I've written some about IT and its separated-at-birth sibling, Knowledge Management, the importance of it cannot be overestimated and it's worth recurring to some of the key learnings we now have about IT and the CIO function in general. 

Doubt the importance of technology?  Earlier this week I had the opportunity to ask the Chairman of an AmLaw 30 firm what had surprised him most during his 20 years of practicing and his answer was:  Technology, and how it had transformed the practice to an unrecognizable and unimaginable degree.

Shall we jump to the conclusion?

"The strategic CIO has never been more important to the future of the organization. As operations and markets become more fragmented, there is an ever-greater need for IT to bind together a company and augment its collective intellect (to paraphrase computer interface pioneer Douglas Engelbart). IT can be used to address problems of mounting complexity and to help an organization move into new products, new processes, and new markets, at home and around the world."

What precisely does this mean?

In May 2003, Harvard Business Review editor at large Nicholas Carr "ignited a firestorm" with an article titled, "Why IT Doesn't Matter."  This prompted a rejoinder in August 2003 , and led Carr to turn his article into the 2004 book, Does IT Matter?, which, incidentally, was a core assignment to the class when I taught "Strategic Technology & Innovation" at SUNY/Stony Brook's executive MBA program for law school leaders last year.

Carr's argument is not precisely that IT doesn't matter; it's that IT has become a commodity, available to all, and therefore incapable of providing lasting, meaningful competitive advantage.  “What makes a resource truly strategic,” wrote Carr, “is not ubiquity but scarcity.” He employs the analogies of the railroads and electricity as earlier technologies that seemed revolutionary at the time but became utterly commonplace utilities. 

Many have been the critiques of Carr's argument, but two strike me as particular bulls-eye strikes:

• Previous technological revolutions were rooted in the physical world.  Trains may have speeded up from 20 mph to 80 mph over 40 years, and the continent-wide build-out of the track network may have been accomplished, but Moore's Law shows no sign of abating.  Over a comparable 40 year period, the computational power per $1.00 spent on IT has not quadrupled but has increased by a factor of 10 to the 7th power, or 10-million times.    Your BlackBerry has more processing power than the Apollo lunar landing craft (and your BlackBerry will be obsolete in 18 months or less).
• Far more important, but also stemming from the rootedness of prior revolutions in the physical world:  The only limits to the IT revolution are limits of the human imagination.  Which is to say, no limits at all.   Who, 15 years ago, would have envisioned the Internet?  And once the Internet arrived, who could envision eBay, YouTube, Google, Facebook, wikis—or for that matter and keeping it within the family, the global readership community of "Adam Smith, Esq."?

Swimming in the water of IT, as it were, we may become forgetful of how profoundly it has changed our lives and our careers, but every once in awhile you realize the power of its achievements so far.  I experienced one of those micro-epiphanies two weeks ago standing in the checkout line in a store on the Upper West Side where I downloaded on my BlackBerry near real-time pictures being returned by the Phoenix Mars Lander of the Arctic Plain of  Mars.  Think of the enormous chain of interlocking and coordinating IT assets, hardware and software, involved in bringing me those 2" square images—and until I took a moment to reflect on it, I took it utterly for granted, as unremarkable as expecting my watch to actually keep time.

But back to CIO's.

There's a baseline requirement you need to meet, and after that there's a strategic opportunity.  The baseline is the obvious:  To keep the proverbial trains running on time.  Depending on the infrastructure you have to work with, that may be a challenge requiring months or years to meet.  The story is recounted of Michael Gliedman arriving at the headquarters of the NBA in 1999 as the brand-new CIO, finding a silo'd IT environment with "isolated pockets everywhere."  It took him 18 months to bring everything together and ensuring the core technology requirements worked reliably and efficiently. 

Only then could he embark on his real job:  Making a strategic difference to the NBA.  “There’s no way anybody in the business is going to take you seriously if it’s taking your guys 20 minutes to answer the help-desk phone,” he says.   But now he:

"... is the model 21st-century CIO. These days he is training his focus on the demand side of the IT business equation, where the needs of the business are paramount, rather than spending most of his time on such typical supply-side concerns as cutting IT costs — although these responsibilities are still very important. He has become a serious contributor to the league’s business results by harnessing powerful new technologies that make real-time information attractive and accessible both internally and to the NBA’s constituents and fans around the world. That’s why he — like any other truly strategic CIO — needs to be among the inner circle of senior leadership."

Gliedman—and his fellow senior leaders of the NBA—now views his job as deploying technologies that will support the League's three key strategic goals:  Boosting international interest, building the female fan base, and increasing the audience overall.  As markets and operations become more global and fragmented, the role of IT in binding a firm together has never been more important.  And in a way this is "back to the future:"

"In [supporting the strategic direction of their firms, CIO's] will bring back one of the almost-forgotten aspects of the personal computer revolution of the 1980s: It made work more engaging by making people more powerful. That shift turned out to have enormous strategic value. Word processors allowed people to pull their thoughts together, revise, and bring in new ideas iteratively, without having to retype each time. Electronic spreadsheets spawned thousands of “what if” scenarios that made business options clearer and eliminated the need for painstaking calculations conducted on paper by roomfuls of clerical staff. Databases provided the means to store and analyze huge amounts of data, providing insight into the supply chain, customers, and more at an unprecedented level of detail. E-mail made it possible to connect with many more people quickly. And the presentation program, though much derided, has been a vital tool for helping people convene teams and organize ideas. The resulting boom in productivity in the developed world has yet to slacken. Another result was an increase in scope: Organizations could do much more, with much less, than they could in the past. Without IT, as it soon came to be called, globalization would not be possible.

"But by the mid-1990s, that sense of liberation had turned to a sense of being shackled by the tools themselves. E-mail became a source of spam and irrelevancies, and took more and more time to tend. Word-processing software led to unnecessary revisions and overwritten documents. PowerPoint was actually banned at some companies."

So today the goal is not to be guided by the vision of the desktop PC but to embrace the range of Web 2.0 technologies—social networking software in general, which enables people to collaborate at a distance.  Because, after all, what do lawyers do?  They collaborate.  And in today's economy, they are almost surely collaborating "at a distance"—in space or in time or both. 

Don't underestimate the challenge:

"Given the degree to which IT has infiltrated every aspect of large enterprises, strategic CIOs must be able to speak a wide variety of corporate languages — operations, finance, manufacturing, marketing, sales — and to work with top executives, including the CEO, COO, and CFO; the heads of procurement and HR; and the leaders of individual business units. That demands an unusually broad set of business and communi­cation skills, a combination not often associated with “techies.”"

Gratefully, there are some guidelines:

• Start fast.  Don't be an "order taker," but give people tools you know will help them without waiting for them to ask.
• Be a capable executive in your own right.  Easier said than done, perhaps, but realize that decisiveness and effectiveness in project management will go a long way towards earning your peers' respect.  Make sure your staff understands your vision of what IT is all about.
• Once you have management's respect, don't ask for permission.  Move forward freely on initiatives you've earned the right to handle.
• Keep looking ahead.  No one else in the firm is responsible for peering out five or ten years to envision what new technology coming down the pike might—when it "grows up"—fit into your firm's strategic direction.

What do I mean by "keep looking ahead," probably the most important part of your job? 

I mean this:  Brainstorm out loud with your lawyers about what they could use to do their work better.  They don't know what's possible and you don't know what they need, but together, all of you can, if you're candid and imaginative, come up with applications that are truly useful.

One of my favorite examples is what I call "caller ID on steroids."    Now, caller ID is an antique and timeworn technology, and one well-understood by the most Paleolithic among us.  But imagine putting it to new and inventive purposes.  One firm I know of is working on a project that would do this:

• Instantly examine the "caller ID" info when a lawyer's phone rings;
• Match it against the known phone numbers of the firm's clients;
• If there's a match, "grab" the lawyer's computer screen to display not just the name, title, and company of the person who's calling, but also pull up a list of most active matters for that client, responsible attorneys on each matter, and Reuters newsfeeds about the company (all with hot clickable links, of course).

Think there's nothing new under the IT sun?  Think again.  It is not, with apologies to Nicholas Carr, a commodity.  It is limited only by your imaginations.

And good luck, because the challenges of deploying IT to support and turbocharge your firm's strategic direction are only going to become more intense, and accelerate.  Just imagine what a BlackBerry from 2018 will be able to do.

In the course of two hour-plus long interviews over the past couple of weeks with Ray Bayley, co-founder of NovusLaw, I learned that everything I thought I knew about outsourcing was wrong. Or rather, that I hadn't thought about outsourcing, really, at all. Read on.

NovusLaw cruises under the radar online (barebones overstates the depth of their website), but Ray has an impressive background. He was the managing partner of business process outsourcing at PriceWaterhouseCoopers when it was the #1 business process outsourcing ("BPO") organization in the world, and he was also a member of the firm's US management committee, consisting of 15 people overseeing $9-billion in revenue in the US (PwC at the time had 170,000 employees including 9,000 partners, almost half of whom were in the US).

If you're not familiar with BPO, in its simplest form it's hiring another company to perform business activities for you. More fully, BPO is something you should consider when a necessary, but not "core," activity could perhaps be performed externally by a more focused and efficient organization. We don't think of hiring temps through an agency or making travel reservations as outsourcing, but that's what they are. And it's unimaginable that we'd generate electricity for our offices or write word-processing software, but once upon a time those were candidates for BPO as well. For that matter, when any Fortune 500 hires your law firm, they're engaging in BPO right then and there--and your firm is the fortunate target.

In 1999, as Ray reports, Arthur Levitt began to break up the professional service firms--Accenture came out of Andersen, BearingPoint out of KPMG, and so forth. Meanwhile, the BPO business of PwC was sold to IBM and when Ray chose not to follow, he asked himself the question: "Where can we apply our knowledge of the global best practices learned at the largest professional services firm in the world to provide value in some other professional services industry?" (I report on Ray's background not to impress--which I suspect would estrange him from anyone automatically impressed--but to provide context for what follows. He's not a newbie at this stuff.)

He embarked on two years of market research, meeting over 200 people in the legal industry in the US and the UK, including General Counsel's, AmLaw 100 and UK 50 partners, and law school deans, trying to assess the market need. And the findings were that there were three market failures:

• On the demand side, "cost is the biggest issue on GCs' minds when considering outside counsel." Consider these survey results: When asked "are law firms doing their best to reduce costs?," 84% of AmLaw partners agree, but only 6% of GC's. The marketplace failure is in this disconnection: Law firms can be better off by being more innovative, and GCs can benefit by getting lower costs. Out of 45 GCs asked the question, 44 reported that they'd give a larger share of "wallet" to a law firm that could offer NovusLaw type services.
  
  
• On the supply side, new graduates from top law schools are being offered enormous amounts of money to do work that they hate. Many studies, including some by Professor William Henderson of Indiana University Law School/Bloomington, and other work by NALP, consistently show a statistically significant negative correlation between associate income and job satisfaction. (The correlation doesn't mean more money makes people unhappy. It means that the conditions that come with high associate income--high expectations for billable hours, a low level of communication from partners about career prospects, low communication about the state of the firm overall, no pretense of "work/life balance"--make associates unhappy.) Also on the supply side, the changing demographics in the US and the UK over the next ten to fifteen years will further decrease the pool of available top-notch law school grads.
  
  
• The third "market failure" is what Ray calls "legal work that's not lawyer work." Compare the healthcare industry, where about 4% of all workers are doctors: In the legal industry, more than half of all workers are lawyers. "How much of the work done in the US legal industry is legal work but not lawyer work?," Ray asks rhetorically. The best estimates, he reports, are on the order of 70-80% according to the two years of market research that he did, and he goes on to describe a study done at the Institute of International Economics in which two economists concluded that 77% of the US legal industry is susceptible to globalization.

So what does NovusLaw intend to do to address these failures?

First of all, let's clarify some terminology. What everyone calls "outsourcing" is nothing other than the familiar "make vs. buy" decision. All law firms are already intimately familiar with this decision point, because corporate clients are already "outsourcing" complex legal work to their firms rather than doing it inhouse in the law department.

Ray also provided a brief history lesson in reminding us that the word "offshoring" was invented by John Kerry when he was running for President; before that, the conversation was simply about globalization, or the familiar notions of importing and exporting.

Where NovusLaw fits in this constellation is as a truly global company, and Ray gave me the example of a current engagement knitting together a global supply chain of legal ideas and legal work, where they're providing services to a GC in London, touching upon legal issues in Eastern Europe, based on a contract written in Singapore, overseen by lawyers in Chicago, and where the actual routine legal work is performed by people in India.

It doesn't get much more global than that, and Ray offered this engagement up as an example of truly "boundary-less" work, where people on the project have no particular awareness of geopolitical, border, or time-zone issues. (As has been said, "it's always daytime somewhere.")

What marketplace resistance have they encountered?

"A few years ago, we would hear things about 'the unauthorized practice of law,' various unspecified 'unethical' concerns, and the objection that 'we can't benefit from BPO--law is more an art than a science.' Today we've stopped hearing those things."

So what do you hear instead?

"Who's done this before" is the big one. "In my mind," says Ray, " the key to resistance now is simply resistance to change. Nobody ever gets up in the morning deciding to change," as the Harvard Business School professor Rosabeth Moss Kantor has discussed.

But ultimately, what matters to NovusLaw is that there are leaders, laggards, and the vast group in the middle waiting to see what's going to happen. "Maybe fewer than 10% of all the institutions we work with are true early adopters, but that's all you need at this early point. Others are truly in denial about the immutable forces of economics--maybe 20-30% are in this category. They'll say 'It's unethical, the ABA will never let it happen, it's the unauthorized practice of law, no no no.' But the vast middle isn't hostile and isn't adopting it; they're waiting to see."

OK, I say, but what does NovusLaw actually do?

In two words: Document review.

They:

• collect
• filter
• process
• prepare for review
• review, and
• produce

documents. For example? "Well, litigation, obviously, but also M&A transactions, Hart-Scott-Rodino second requests, contracts, regulatory documents, and so forth, all in an effort to extract meaning to be able to tell lawyers what the documents really mean without them having to spend excessive time and money going through volumes of documents themselves."

And nothing else?

"Actually, no, nothing else. If you look at our offering memo, it says that we plan to offer IP work such as patent applications and patent prosecutions, but as we started exploring what that would require, we realized that they were far different processes than document review, requiring different technology, different processes, different personnel, and so forth, so we decided to keep it simple and focus only on document review.  If you read the management and business literature on strategy, it's a mainstay that if you try to do too many things well you'll confuse your clients and your own people; we're not going there.  Michael Porter said 'Being all things to all people is a recipe for strategic mediocrity,' and I believe he's right."

He continues:  "Too many people who say they're our competition claim to do lots and lots of things; I just have to believe that's an inadvisable way to go."  And who is your competition?  "While there are new companies coming into the industry every day with a lot of different business models, I don't want to sound corny, but I really believe our biggest competition is the status quo—the resistance to change.  But you know what?  That's fine.  We don't necessarily need 100 or 200 clients; what we really want is half a dozen, or 10 great clients."

How do you size the market?

"Well, if you assume that 70% of the typical Fortune 500 GC's budget goes to litigation, and that only 2% of cases go to trial, you know immediately that discovery is an enormous slice of the pie.  We also know that, slicing up 'discovery' into interrogatories, depositions, and document review, document review is by far the most labor-intensive and time-consuming.  We think it's a reasonable guess that around 40% of the Fortune 500's outside legal spend goes to document review."

Let's talk about quality:  How do you measure it, how do you ensure your clients it's top-notch?  Because I imagine one of the towering reservations people have about operations like NovusLaw is that things won't be done to the exacting standards of BigLaw.

"Obviously it starts with who we hire: with recruitment.  The average lawyer at  NovusLaw has approximately eight years of experience, and we believe we've been able to attract talent on a par of those in AmLaw 100 firms with comparable experience.  Everyone interviews with me and each of my partners, as well as going through nearly a half dozen other interviews to ensure cultural compatibility.  NovusLaw is not for everyone.  If you can work independently, have a strong work ethic, and if you're smart about BPO—and if you have a sense of adventure—then you're a good candidate for us.  And I think our attrition statistics bear this out:  Only 3-4%/year.  It's a tough process to get in, but once you're in, you're in."

Skeptics would say that brings you to parity with the AmLaw.  What else are you doing?

"Quality is one of our 'cornerstone' initiatives, along with ethics, security, and business continuity planning—all of which report directly to me.   In fact, we started our quality program before we even started the company.  But now our 'lean six Sigma' processes and quality control programs are certified by Underwriters' Labs, with full-time six sigma black belts on board that do nothing else but focus on quality.  'Lean,' which is a term that comes from the Toyota Production System, stands for the methodology used to eliminate non-value-added time and activity, a/k/a waste.  'Waste,' in turn, has a very simple definition:  Anything the client wouldn't want pay for if they were given a choice.

"Six Sigma is what we use to eliminate defects as we measure and analyze our work processes.  Typically, undocumented processes will yield 20,000—60,000 defects per million opportunities.  Six Sigma is designed to get that down to fewer than 4/million.  On our most recent document review we performed at Five Sigma, or approximately 200 defects per million.  By the way, that's about 200 times better than the average in the legal industry today."

Ray is on a roll.

"Every other portion of corporate America has been re-engineered, 'Six Sigma'd,' and so forth—just look at finance, IT, HR, marketing, supply chains, R&D, you  name it.  The only function that's been immune is the legal function.  I think part of the reason is that lawyers don't think in terms of BPO and often don't understand it.  That leads them to believe that legal processes cannot be systematized or statistically measured, which isn't the case. 

"I'll give you an example.  One of the things we need to be able to do very very well is forecast what the costs of a document review engagement will be, because we price our services on a fixed-fee basis.  We want people to pay for our work, not for our time, so we detest the billable hour.  But this means that in calculating our price we can't afford to be wrong. 

"So we've built a model using multiple regression analyses and have determined there are 17 independent variables influencing the cost of a document review project.  You can imagine what some of them are—number of documents/pages, turnaround time, what shape the documents are in when they're delivered, etc.—and when we tell people this they're usually at some stage of disbelief.  An AmLaw 100 partner said, 'The document review process is an oral tradition; there are no checklists or ways to measure it,' but we're finding that there are actually several ways to measure quality and predict costs."

Tell me more about cost and pricing, then.   Where do you stack up against doing the same work in the US or the UK under the conventional model?

"We're typically 50—80% less, but the important point is that it's not just about having people on the other side of the world.  That's why words like 'outsourcing' or 'offshoring' don't describe what NovusLaw is:  A truly global, 'boundary-less' organization.  Of course people are cheaper in some jurisdictions than others, but only about half our overall cost savings come from personnel; the other half, and the interesting and important half, come from process optimization, quality management and technology, the things we put into place at PricewaterhouseCoopers. 

"We're not in the business of 'lifting & shifting:' Taking what's done here and moving it to a cheaper jurisdiction in order to do it the same way.  That's a brute force approach that adds nothing to the quality, reliability, and repeatability of the work.  It's fundamentally an unsustainable business model."

I ask Ray if this doesn't mean he foresees a future of disaggregation in the delivery of legal services.  And of course he absolutely does.  I have written about how Hollywood movie production relies on bringing together "just in time" teams to create a movie:  A director, producers, actors, scene, lighting and costume designers, scriptwriters, as well as everything from location scouts to cameramen, grips, and catering crews, and Ray mentions the same analogy:  Imagine assembling an on-the-spot team to staff a case or a transaction.  Of course, to a large extent this is already what happens inside law firms when a new matter comes in.  But imagine extending it outside the firm to include other individuals and firms with specific expertise that you couldn't get inside.

According to Michael Hammer (Harvard Business School professor and expert on operational efficiency), the adoption curve of BPO follows this trajectory:

• You get it;
• You adopt it internally across your firm; and finally
• You integrate it across suppliers and clients.

Another industry, Ray notes, that has "in its gene pool" a facility for assembling ad hoc just-in-time teams is the construction industry.  The combination of developers, architects, designers, general and sub-contractors that comes together to build any building of reasonable size or scope never existed before and will never exist again. 

This leads me to venture the following thought experiment:

"You said that you could go into virtually any AmLaw 100 firm today and reduce the cost of the document review process 25% to 40% using process optimization, quality management, and technology.  That gives me an idea.  The first reaction of any partner to that type of discontinuous disruption will be to resist, but I wonder if there isn't an opportunity here.  We know the cost—economic and human—of associate attrition seems never to have been higher, and one of the reasons all those departing will cite is the mind-numbing nature of much of what junior associates do, which is document review. 

"What if a firm could get  NovusLaw to do 95% of the document review, leaving just enough for the associates to have the exposure to it that they need so that they understand what's truly involved—but not such an overdose that these Ivy League thoroughbreds revolt at the repetitiveness of it all?  Wouldn't that address both clients' increasingly vocal concerns about fees and, at least to some measurable extent, the shocking level of associate attrition?"

Ray elaborates on the thought:

"We've thought of offering our clients the opportunity to 'second' associates to us for a period of months so that we could teach them  a new way to manage e-discovery from start to finish and learn how to manage a global team.  Wouldn't that be a terrifically exciting career opportunity?  But so far, no one has taken us up on it."

Why, I wonder, stop there?  If Michael Hammer is right that BPO can extend outside the walls of the firm to suppliers and vendors, it shouldn't be seen as an exercise in throwing something over the transom and hoping it comes back nicely wrapped up with a bow on top.  (This is the blunt instrument model where the law firm pushes document review out to NovusLaw, who performs their magic and returns the results on time and on budget but without much if any interaction.)

Why not envision a reciprocal, embedded relationship—a busy two-way street, if you will—where the law firm and NovusLaw collaborate on defining the strategic and client-oriented goals of the document review?  The goal would be to ensure not just the document review is done professionally, on time and on budget, and so forth, but to achieve a joint consensus on why these documents are being reviewed to begin with:  What are we attempting to demonstrate?  Is that the most valuable/compelling use of this set of documents for our client?  What are we missing?  What is the other side going to attempt to demonstrate from this same set of documents?  What should we be on the lookout for that we're not expecting (for better or worse)?  And so forth.

This brings us back to Ray's initial resistance to the term "outsourcing," and what he derides as the "lift & shift" model.  If that's all there is to it, intellectually you have accomplished little more than cutting your personnel costs, and you have taken the first step towards positioning your firm as one that competes on price alone.  Once you have one foot on that down escalator, it's hard to keep the other planted in the land of elite quality.  Ray reminds us that John Ruskin once said, "There's hardly anything in the world that someone cannot make a little worse and sell a little cheaper."

Again, why not envision something completely different:

• An intimate strategic alliance;
• Permitting you to do things better, with less waste, and with greater reliability by orders of magnitude; and
• With the potential to liberate your expensive, highly-tuned, high-performance associates from being sentenced to years of repetitive clerk-work?

Now that actually sounds like "business process optimization" with a vengeance.

Here at "Adam Smith, Esq." I've written about Knowledge Management a fair amount, since it's my belief that knowledge is what law firms sell.

But despite the (I believe) inarguable centrality of KM to what we do, there are three enormous problems with it:

• Too many lawyers don't understand why it's of value to them, or, more precisely, why the return they could get out of it would exceed the investment they'd have to put into it.  (Never mind the threat of "giving away" your core professional asset—what you know.)
• Too many technologists and IT types don't understand how lawyers work, and end up creating shockingly powerful but essentially useless applications.
• And even the most powerful and user-friendly system requires constant care and feeding because legal learning is in a state of constant flux:  In a sense, pure white ignorance beats obsolete and mistaken knowledge.

Because some of these obstacles are a blend of the intellectual and the emotional, a brief foray, presented in video, yields two of the best visceral explanations of why Knowledge Management matters.  

With a big fat hat tip to Matthew Parsons and Neil Richards of Knowledge Thoughts, then, our first (2:21 running time, sponsor's logo at the very end):

And our second (5:29 run time, academic credit and "CC" license at the end):

Enjoy.

And reflect.