Who is Ahead on Innovation – Legal Departments or Law Firms?

published on General Counsel, Legal Technology

While the legal profession has been slow to adopt cutting-edge technology, it would appear that a revolution is sweeping the industry today. Legisway Sales Manager Eveline Willigers explains, “a few years ago the number of companies that digitalized their legal documents was next to none. We had to generate interest ourselves because companies had no idea what to do with our legal management software.” These days, both law firms and legal departments acknowledge that innovation is the key to success. But who is more open to the idea?

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Legal Departments – Looking at the Big Picture

The days of filing cabinets and Excel sheets are slowly disappearing. Eveline recalls, “before, companies weren’t even aware that there was a problem. We had to convince them. Now, many companies are able to recognize that a filing cabinet full of contracts and legal documents is a risk and Effacts is the solution.” This problem became more apparent during the economic recession, when reducing costs became a high priority for companies. By implementing Legisway, they realized they could work more efficiently and therefore save money in the long-term.

There has also been a culture shift in how the legal department is integrated with the rest of the company. A decade ago, the corporate legal department and its related activities were a bit of a mystery. Nowadays, the legal department is viewed as an integral part of the business. The general counsel are expected to be both lawyers and business partners that protect the company as well as provide guidance on how to run it. Furthermore, the general counsel works more closely with the IT department to implement technology solutions that help them to make data-driven decisions.

Law Firms – Slow and Steady

On the other hand, law firms are generally less open to working with technology. While there are technology tools available, most of them help with productivity and not the content of their work. Eveline suspects one reason why law firms are hesitant to adopt legal technology is that “they charge an hourly fee. The more efficiently they work means they can do the same work in less time but they risk earning less.”

However, being a lawyer today is much more than being able to memorize laws. These days lawyers have become part-time sales representatives and marketers as they have to actively search for clients. “Within five to ten years I suspect there will be a new kind of lawyer – they will be more service-oriented,” Eveline predicts. One company that is taking advantage of this approach in The Netherlands is LegalMatters.com, which offers legal advice by phone to businesses for a mixed monthly fee. Their team of lawyers can even help draw up a contract, give written advice, and handle a case for an additional fee. The arrangement is attractive for small businesses that don’t necessarily have the budget to hire an in-house lawyer, but still need to manage their legal affairs. In order to remain competitive in a constantly changing marketplace, law firms need to monitor emerging technology trends and adjust their management practices accordingly.

Who is ahead?

When it comes to innovation, legal departments edge out law firms because “their role is different than that of a law firm,” Eveline explains. “Their job is to look at the bigger picture and oversee the company.” Another factor is the current mindset of the general counsel. “When it comes to technology they are more open to integrating tools to help them do their work.” While it’s not necessarily a competition, both the general counsel and law firms need to work together and expand their partnerships to drive innovation in the legal sector. Innovation requires a combination of communication, technology tools, policies, processes, change management, education and collaboration with outside counsel and legal service providers.