The practice of enterprise corporate law still involves spending a lot of money on expensive people who charge by the hour to move documents from Point A to Point B. This must be a ripe market for technology innovators, right?
Not so fast.
Recently, I took a look at where the money would come from in the new phase of legal technology development (there were some fantastic comments there, too).
I argued that it wouldn’t come just from law firms because they are not as able to pass costs through to clients and they have show little ability or interest in innovating much themselves.
The better Legal Process Outsourcing companies, on the other hand, intuitively understand technology and how it can benefit clients and their bottom lines.
Bruce MacEwen recently spotted an WSJ op-ed piece penned by entrepreneur and VC Marc Andreessen. Mr. Andreessen thinks software is only beginning to make an impact on various industries and Bruce posits that the legal industry will not be immune.
I often find myself agreeing with the man behind the veil at Adam Smith, Esq. But know this: legal software (and legal apps as delivered over the web via software-as-a-service) are not easy to develop in a way that works and sells. I’ll cover the selling part Wednesday.
So why is developing new and valuable legal software not easy?
Here are my top seven reasons:
1. Lawyers aren’t great at defining the problem. I think less than 10% of outside counsel really understand their clients enough to clearly detail what a software developer should focus on when building an initial feature set for a new solution. This is one reason why a lot of legal software is either a faster way of doing something that might not need to be done at all or just a web-based version of X that really isn’t anything new at all.
2. Law firms weren’t built to solve problems fast. Not much more to say here, move along.
3. Legal IT groups are often more service-oriented. IT groups in law firms are sometime under-staffed or at least under-appreciated. They can act as gatekeepers telling people what they can and cannot use, and have a hard time just clearing out service tickets. It’s almost impossible for them to wear a developer hat as well. To be even more fair, they often get little time with senior partners or other key staff who are closest to the client and could offer them insight they don’t get sitting in a secure room with a Halon tank over their heads.
4. The legal industry under-utilizes low-cost options. One entrepreneur tells his company to handle software needs in a three-step process: (a) look for free options; (b) look for cheap, off-the-shelf options and only then consider (c) building or buying enterprise-grade as a last resort. There are some situations where lawyers could easily use a combination of free or low-cost solutions to get 80%+ of functionality. One off the top of my head is a combination of Google Docs and Skype for a roll-your-own collaboration/project management tool. It’s about $50 per user per year.
5. Some developers confuse needs with wants. This often happens when someone from outside the legal industry focuses on it and says “Wow, this is totally inefficient, and ripe for disruption.” They gleefully compile a long list of needs, and then develop a complicated solution that’s hard for Legal Luddites to use or even understand. Then they wonder why the solution doesn’t get traction. This dovetails with the selling challenge I’ll cover next time. It is very hard to get customers to focus on theoretical needs in this economy. And the wants of a law firm are part of the problem in the first place (see #2).
6. Some developers underestimate the pull of inertia in the legal space. This may be the understatement of the century. The La Brea Tar Pits are fast compared to the law. You see this when you talk to a large law firm or corporate legal department and expect their use of technology will match their public image. Often, the opposite is the case. They are still running Windows XP and viewing Outlook as the way to manage your agenda via a three-year-old BlackBerry. Long lead times on procurement cycles means that by the time something is spec’d out, bid out, developed and delivered, other market participants have gone through 3 versions of something better.
7. IT in corporations is not typically Legal IT. I can’t let the in-house contingent totally off the hook. Only the largest companies have IT groups inside legal or dedicated to the law department. What this means is that larger enterprise needs often predominate with IT and getting the attention of people with some development skill or industry knowledge can be difficult or well nigh impossible.
On Wednesday we will look at the sales cycle of legal software and related tech applications. It’s a necessary step before anything gets installed and rolled out. And it’s not easy.
(Here’s a view of legal software development in the early days; hard to tell whether it’s the customer or the developer in the pit. Actually, it may be an entrepreneur calling out to a VC: “Come on in to the legal market. The water’s fine.”)