A Revolution Comes To Legal Technology

Wednesday, June 2, 2010 - 00:00

Editor: Can you tell our readers about DataCert and your role in the company?

Tallman: DataCert has been a legal technology innovator for over 12 years. Traditionally, the company has provided software to corporate legal departments and law firms to help them manage legal matters, legal spend, IP matters and to analyze their performance through business intelligence reporting solutions.Today, we serve the Global Fortune 500 and over 10,000 law firms in over 150 countries throughout the world. My role is CEO and president, and I am member of the board of directors. Beyond the title, however, my role is really one of industry change agent, with the directive to transform DataCert from a software company with specific legal applications to a legal industry technology platform company with the specific objective of helping corporate legal departments and law firms not only consolidate and reduce their total cost of IT ownership but also to facilitate better collaboration.

Editor: What are the greatest challenges facing your clients today in terms of controlling their legal costs?

Tallman: There are three areas where we typically see challenges to controlling legal costs.

The first challenge for corporate legal is simply understanding both their costs and the effectiveness of their legal spend. General counsel now are being challenged to understand their global legal costs and to justify the value to the business. Law firms also are being challenged to understand their costs and to justify the value of their services to the corporate legal department. Legal departments need the ability to forecast, analyze, and benchmark the cost versus the value for the business and a "pass through" of expenses. Just increasing rates is no longer an acceptable cost coverage model. They simply do not have visibility of all their costs and outcomes to be able to make a decision on the effectiveness of legal spend.

The second challenge for both law firms and corporate legal departments is the burden of managing the vast number of software systems and technologies supporting the legal function today. Over the past decade, there has been a staggering proliferation of legal systems and technologies. In fact, we know legal departments that use over a hundred systems just to support their department or firm. The cost of ownership and the inefficiency caused by so many systems is untenable. The challenge now is to find ways to reduce the total cost of ownership of the applications and technologies that support the legal function.

The third challenge is globalization. The challenge now is managing costs on a global basis and having decision support systems to help make better global decisions regarding how they support the business. Is it more cost effective to centralize or decentralize? Given the current economic environment, CEOs in large corporations are having every department across the board cut tens of millions of dollars, and they expect general counsel to do the same. General counsel are faced with one of the toughest corporate challenges today - to reduce costs while managing corporate global risk. It's a daunting job, and they need systems that help dissect information on a global basis. Becoming a global business manager is a huge change for some general counsel and law partners.

Editor: How does the technology support alternate fee arrangements?

Tallman : Within the last two years, pressures on both law firms and corporations have increased, forcing the need for solutions that enable legal departments to implement, enforce, and measure alternative fee arrangements (AFAs). When people think of AFAs, they typically think about them as a one-way operation, from the corporate legal department to the law firm. However, people like Jeff Novak at American Online have been industry thought leaders and recommend incenting the law firms to earn bonuses through an AFA. So using AFAs doesn't have to involve just a law firm working for a reduced structure or a set fee or a contingency fee. In some cases it actually can mean they work for a bonus, such as achieving a favorable outcome for a matter at a particular cost that is below what the firm originally budgeted, which results in getting a premium for their fees.

To implement and enforce these more complex AFAs, we recommend an AFA module, such as we offer with our spend management application. Our clients are being very creative in terms of how they utilize that to manage their AFAs with outside counsel.

Editor: How do you think your company is addressing its product mix to enable its clients to respond to all of the current legal challenges?

Tallman: DataCert's product mix can be summed up in one word, Passport, our new technology platform. Passport facilitates the consolidation of systems and collaboration for both corporate legal departments and law firms. Traditionally, companies like DataCert, along with our competitors, have been outstanding at providing what I would consider point solutions to address specific legal business needs. Today, legal departments and law firms have too many systems, and they need a technology platform not only to reduce the number of systems and the cost of support but also to enable them to configure (not program) new solutions.

Passport means our clients can use systems from DataCert, such as our spend and matter management applications, integrate their existing best-in-class applications for things like eDiscovery, purchase third-party applications that have been built on the Passport platform through our partners, and even configure custom applications in-house using the Passport Developer Toolkit.

Bringing all of a legal department's systems onto a single platform is really going to simplify work for their lawyers by giving them a single workspace to access all of the systems they need to do their jobs. It facilitates collaboration between inside counsel and law firms while reducing the total cost of ownership of their systems portfolio.

Editor: How were you able to discover the need in the marketplace?

Tallman : DataCert is a very market-focused company, and we listened to our clients. It was clear 18 months ago when we embarked on this project how much negative impact the system proliferation I talked about earlier was having on their businesses. Our clients wanted to reduce the number of systems they work with, reduce support costs, and make it easier for their lawyers to do their jobs. We have spent millions of dollars building a solution to solve this problem for them. In doing so, we have engaged a lot of people to help us think through our strategy, including corporate legal departments, law firms, and industry thought leaders like Richard Susskind, whose book, The End of Lawyers?, talks about the transformations that must occur in the legal profession and legal technology space.

Editor: Is there anything else about Passport that is revolutionary?

Tallman: Yes. The way Passport enables consolidation, integration, and collaboration is revolutionary. One of the main requirements that the corporate legal department and law firms gave us is that they did not want to hire armies of C++, Java, or Web application programmers to make changes to the software. They wanted a platform that would allow them to simply define business rules of how they wanted to work together and configure the system, not program the system. Passport is revolutionary in that our approach includes patent-pending tools that streamline the way legal systems will be configured and deployed. A recent analysis by both industry consultants and clients confirmed that, although some vendors claim to have a platform, it still requires programmers, and that Passport was, in their words, "a leap ahead in technology thought leadership."

Editor: Do you offer any other products or services that help clients control legal costs?

Tallman: Yes, we have collaboration modules, which are focused entirely on enabling discrete business processes that occur between inside counsel working with an outside counsel. These modules help them work more effectively together so that they don't have to replicate data in both systems such as tracking costs and the workflow associated with the project. Also, we now have Stack, our expert witness service, which is a perfect complement to our cost savings value proposition for corporate clients and law firms.

Editor: What is Stack?

Tallman: We noticed a lot of corporate counsel were relying upon their law firms to select and engage expert witnesses for their cases. These expenses, which are often a significant percentage of legal spend, simply are viewed as non-negotiable pass-through charges. Therefore, one of the services that we launched recently is Stack, which is an expert witness service designed to help legal departments control those hidden costs. This is a logical extension of DataCert's core competency of helping companies control legal spend.

What makes Stack unique is that the service is delivered by people who really understand what makes a good expert for a particular industry or technical field. They also use a comprehensive vetting process to validate a witness's credentials and determine whether or not a particular expert will be a good witness on the stand.

As part of the vetting process, we maintain a database of potential conflicts. Beyond the expertise, we examine where they previously have testified. We also try to isolate the particular technology and the expertise they have and whether it is an ideal match. We have isolated general technology areas and then the specific technology competencies needed for expert witnesses. We also maintain a database on what the outcomes were of those experts that were used in prior cases and the fees associated with the expert witness life cycle.

Editor: DataCert is known for its expertise in intellectual property spend management. How do you support the unique needs of IP departments?

Tallman: Some of our largest clients are high-tech, intellectual property-intensive companies. Part of the responsibility of their corporate legal departments is to track the registration and any litigation associated with their technology, be it registering it and/or defending it. We actually track IP spending within our system as part of our legal spend management system. So, if you engage outside counsel or you are trying to manage budgets around intellectual property spending, we provide that capability in our spend management system for the corporation.

Editor: What added value does being a global company bring to your clients?

Tallman: General counsel of global legal departments want to gain control of their legal spend on a global scale. One key aspect of this is to automate and use a spend management application to process their invoices electronically. But this system needs to support the processes and provide the tools that enable legal departments to remain compliant with the unique global regulations for processing electronic invoices and for data privacy.

Being the global leader in this technology means having people on the ground in many different countries who understand the unique regulatory requirements in the different countries and who speak the language, so that they can interact not only with corporate legal departments in those countries but also with the law firms that support them.

Editor: We all know that law department operations are changing and businesses such as yours are key players in shaping the future of corporate law departments. Can you comment on the changing role of law firm operations as part of how the evolution of corporate law departments will be moving forward?

Tallman: I have observed two key shifts. The first is that corporate legal departments are being forced to operate more on a global basis. So they are going to have to be more aware of the global compliance and risk issues. GCs and AGCs will need to engage law firms and outside counsel that are best qualified to address a specific matter in a specific country.

On the law firm side, they are less structured. Even though they have multiple departments in multiple countries, they really are a loose confederation of partners. From the law firm perspective, when they deal with a global GC, the global GC is actually looking for only one or two points of contact to be able to engage anyone of their offices in the world for any type of matters that they would have to deal with. Some of the law firms are ahead of the curve and have structured themselves to operate that way. Law firms are in a great catch-up mode, trying to structure themselves to operate as global service providers.

Please email the interviewee at jim.tallman@datacert.com with questions about this interview.