Monica Enand, Corporate Counsel
Corporate Counsel recently reported on the dramatic
growth of legal startups over the last two years —
increasing from 412 to 1,104 today. This showed the increase in innovation
targeting legal technology. While it’s valuable to be aware of this trend
(noted by legal blogger and former ALM Executive, Robert Ambrogi), it is strategic
for in-house counsel to understand the “why” behind it and the opportunities it
presents. This knowledge will help corporate counsel make smarter decisions
that can reshape how their legal teams work.
The legal
market is an industry ripe for change, and is attracting startups due in no
small part to the estimated $3 billion spent on legal technology annually. A
new architecture fueled by the shift to cloud computing is creating one of the
largest economic opportunities in a generation—an opportunity that will attract
the best and brightest talent and top-tier investors.
Imagine
having tools to handle complex issues without relying on outside experts. Now
think of the improvements in decision making that are made possible by having
information and analysis at your fingertips. Better yet, the acquisition of
this technology is as simple as signing up for a subscription, no onerous RFP
(Request for Proposal) process necessary. And your team can start using the
software that very day. Both the acquisition process and use of the technology
will become a frictionless experience, and it might just give you your weekends
back.
How the Cloud Changes Everything
When Ambrogi
speaks of startups, the overwhelming majority are software companies. The
reason? Most software in use by legal departments today was developed more than
a decade ago. Right now the raw materials of computing are fundamentally
changing. The extent to which cloud computing will impact how in-house legal
teams do their jobs is still not yet understood by most.
In short,
computing is turning into a utility, much like electricity did in the past.
Historically factories used to have their own dedicated power plant. Then the
electrical grid was developed and electricity was available on demand and
people paid for what was used. Those dedicated power plants of old are what
data centers will look like a few years from now—antiques, irrelevant.
We are
shifting to where computing power is waiting at the ready and you pay for the
amount used. This shared resource model is driving down costs
precipitously—making computing power virtually infinite and free. Now corporate
legal teams can implement software that solves their business challenges
without worrying about servers, network connections, back-up systems, security,
upgrades or maintenance.
Changing the Life of Corporate Counsel
The best
software in the world does exactly what you want with the least amount of
effort. The best example is Google. It's one box. The simplicity of a Google
search means the user doesn't need any training or support, yet it's a
complicated piece of software that is doing all kinds of amazing things to
serve up the most relevant content.
A vast
majority of legal software in use today is bloated. It is far from frictionless
which is a legacy of how companies buy it. Prior generations of software were
linked to specific hardware and the total purchase was a capital expense that
often ran into the millions and would be around for a decade. In order to
mitigate risk, corporations typically purchased using an RFP process, which has
become an institutionalized "CYA" exercise that involves dozens of
people who never touch the software.
Developers
design products that tick all of the boxes. The software gets complicated to
use, has complex user interfaces and is difficult to do quality assurance
testing (QA) resulting in frustrating bugs. Legal professionals are busy and
are not engineers, so they tend to "punt" to outside providers rather
than investing in weeks of training to become certified to operate the
technology.
In the new
world order of legal software, the power shifts to the user. Legal teams should
be concentrating on the merits of the case, not the capacity of the hardware.
When the hardware goes away, it eliminates all those barriers to adoption. That
RFP now transforms into an annual subscription, so the risk and commitment are
lower. Now IT doesn't call the shots; the users do.
This is where
the innovation that Ambrogi talked about comes in. It means that the true
competitive advantage is the software developers' ability to know their users
and understand what they're trying to accomplish. Successful software providers
of the future will be intimately familiar with what users must have in the
software, and they'll prune any of the "nice to haves" out of the
user interface and out of the code in order to reduce the amount of bloat.
Let me give
you an example. I recently spoke with a paralegal at one of the top airlines
who handled litigation support. She was spending two weeks of every month
pulling multiple reports out of a complex system in order to cross-reference
them for compliance tracking. After upgrading to modern software that was
designed to support preservation audits, she said, "Now we're using it,
and my life is so much easier. I complete the audit in two hours. So I went
from two weeks to two hours and I am more than happy."
A Level Playing Field Opens Doors for Startups
When the
users become the buyers, it ushers in a completely different system that can
level the playing field. In the old world, the "big iron" software
providers dominated simply because the buying cycles took so long that it was
virtually impossible for a newcomer to survive long enough to even get a shot.
The barriers to entry for newcomers are being eliminated because they can
develop and deliver the software more efficiently than established players.
With new lower cost architectures and short buying cycles, startups have a
shot, and can challenge the old guard.
The
technological forces at work have already occurred. We see this transition has
already happened in our personal lives where consumers are more nimble.
Corporations are slower to change, but they are changing.
Anyone who is
a student of technology and investing sees the unfolding opportunity at hand.
In the sector of legal software over the last 12 months, major venture
capitalists such as Andreesen Horowitz, Bessemer Ventures and Storm Ventures
have backed cloud-based legal software companies. Other areas are already
tipping, led by companies such as Salesforce.com and Box, which are
transforming CRM software and enterprise storage, respectively.
Empowering
legal teams with technology that enables them to manage the complex operations
of the legal department, and removes friction from the process, will also lower
cost and risk.
No comments:
Post a Comment