Why GCs Aren’t Buying What Legal Tech Is Selling and Why It Matters for Firms

Legal technology companies have to get out of their own way in vying for law department adoption, and buyers need to know what they want.

“It’s overwhelming,” says HUB International chief legal officer John Albright. “There are hundreds of these vendors, and most of them you’ve never heard of.”
As Albright sees it, the legal technology industry is “heavily fragmented,” with vendors selling solutions to a discrete issue that doesn’t necessarily solve the full problem he has or fit into the larger organization’s information systems.
“You need to understand where this is going to fit in my universe,” Albright says. “How is it going to be most effective? If you have all of these toys that are doing their own thing in a vacuum, they aren’t being fully integrated and data isn’t flowing into the so-called data lake.”
Albright touches on a common problem raised by both buyers and sellers of legal technology: the idea that the solutions only solve part of the problem or don’t seem geared toward any real problem at all.
“Everybody wants to sell you their thing that’s not necessarily what you are looking for,” says Howard Harris, vice president of legal affairs and general counsel for the U.S. and Canadian BMW Group companies. He argues that the whole definition of legal technology has become too amorphous for buyers to get their heads around.
Legal industry analyst Ryan O’Leary of research firm IDC agrees, noting that this confusion often comes from legal technology companies themselves. Too often, he says, these companies are more focused on what they can do, rather than what they should do.
“All of the vendors are obsessed with trying to prove the use of the technology, as opposed to accepting the fact the lawyers want the technology and they need to differentiate among themselves,” he explains.
Brooks Brothers general counsel Rachel Barnett adds that legal technology is only as good as the business case it solves for.
“Technology should be focused on, ‘How do I use this to create a business case with ROI?’ Instead they create technology and say, ‘You figure out what you need it for, here are 20 different use cases for our tech,’” Barnett says.

Finding a Path

The budget is the No. 1 inhibitor to tech adoption, Barnett says. Any company pitching her should at least have a slide or two detailing how the product will save her money.

“Their entire proposition has to be, ‘My tech saves you money and here’s how,’” she notes.

Michelle Fang, general counsel of car-sharing company Turo, agrees. Her company was founded in 2010 and still maintains a legal department with fewer than 10 attorneys. The idea of piecing together disparate solutions, she says, is simply infeasible from the start.

“Companies like mine just don’t have the resources to invest in legal in that way,” she explains.

The perception that legal technology isn’t solving actual problems or doesn’t provide a clear return on investment has driven many large legal departments to address the problem themselves, using in-house technologists to build out solutions that work for their organizations, GCs say.

Harris says he either needs to justify the cost of buying technology or use internal resources to meet his department’s needs. He often chooses the latter.

Zach Abramowitz, an analyst and consultant in the legal technology space, has spent the past several months helping GCs at large companies navigate their adoption of legal technology, showing the in-house community is engaged in this space.

Like many of the GCs who spoke for this article, he thinks things are progressing somewhat normally for an industry’s adoption of tech. And he’s bullish on the future.

“A lot has to do with building a product that really, really solves critical issues, and the legal industry is complicated,” Abramowitz says. “I think we’re just at the tip of the iceberg on this.”

While general counsel can be slow to adopt technology, they are quickly looking for ways to operate like their chief financial officer and chief information officer counterparts, who come to board meetings with plenty of data on hand, Abramowitz says.

The problem is that there is no central repository for that data in the legal department, O’Leary says, similar to what human resources has in Dayforce and the sales department has in Salesforce.

“Each of these internal departments has something that does everything they need to do. Lawyers don’t have that; everything is so piecemeal,” O’Leary says. “You have to buy a contract management solution over here, you have to buy an e-discovery solution over here, you have to buy spend management, an e-billing solution, a LexisNexis subscription.”

Beware of the Buyer

The reason adoption or clarity around legal technology may be slower, Albright says, is because the buying audience is slower. Couple lawyers’ generally slow buying cycle with a product few of them understand, and the industry’s penetration into the market is slowed as a result, he says. But he doesn’t think that will stop the consolidation of legal technology companies, as those who aren’t selling enough need to look to merge into new offerings.

“Our entire industry has had a hard time updating itself to become more practical and efficient,” Barnett adds. “And so what you are seeing is other people coming in to try and fix a problem, like legal ops and technology. But until the whole industry is willing to change, we will always be in this disjointed place.”

Having some GCs sit back as the industry wades through the morass of legal technology offerings isn’t necessarily a bad thing, as Albright sees it. Waiting it out could be a good alternative for those who don’t want to be cutting-edge.

“We don’t target leading-edge. One, we don’t have the budget and, two, we don’t want to be the test case,” Albright says. “We want Walmart or someone else out there to go ahead and validate it. Once it’s working, we will invest. Most GCs fall into that bucket.”

Once a critical mass of GCs adopts, though, the floodgates could open for tech vendors—as long as corporate customers are kept happy. As Fang puts it, “a satisfied customer is the best referral that any company can hope to have.”

In a women’s general counsel network she participates in, Fang says posts asking about different technologies are constant.

“I would certainly tap my network of GCs to say, ‘What vendors are you using, and are you happy with them?’ That tends to be one of my main go-to places for anything, whether it’s a law firm or whatever it is I’m looking for,” she explains. Barnett says.

Are Law Firms the Solution?

Short of using a legal technology consultant, which Albright says have their own agendas in pushing the tech companies they’ve partnered with, GCs are left to figure this out on their own. But what they should be asking, he says, is for their outside law firms to help.

“You should be asking your law firms to give you annual tech presentations,” Albright says. “What do they have? What do they bring? You can start making decisions not just based on lawyers you like or law firms’ reputations, but on who has the best technology.”

Clients have forced the adoption of alternative fee arrangements and pushed outside counsel on diversity. So, Albright asks, why can’t they do the same with technology?

As Abramowitz sees it, law firms are best positioned to assess and compile the best legal technology to help a broad array of clients. And some, like Reed Smith spinoff Gravity Stack (Abramowitz consulted on its launch) are starting to offer technology consulting as a value-add at no charge because many view it as the price of doing business.

The companies that have been most successful, whether it be law firms, tech companies or alternative service providers, Abramowitz says, are those offering solutions with multiple touch points into a client’s problems, not just a one-off product. The more successful those companies become, the more they will be able to further consolidate as companies look to match up different solutions into one service, he says.

For Albright, the companies doing the best at offering complete technology solutions are the Big Four.

“They have a service and operational footprint that is massive and a completely different mindset to approaching this,” Albright says. “They are a sizable threat to law firms.”

The corporate legal market agrees. In an IDC survey of 200 corporate legal department respondents that was provided to ALM, 76% of legal departments said they have hired or plan to hire a consultancy or advisory firm in their digital transformation efforts.

“They’re really the gatekeepers,” IDC’s O’Leary says. “As a legal technology company, to penetrate the corporate market, it’s really important to partner with a Big Four or other consultancy to get your foot in the door.”

Originally published in Law.com

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