Lexpert Magazine

LEXPERT MAGAZINE | JUNE 2017 51 platforms outsourcers do. "A client may only do five deals a year whereas the law firm should be doing 500," says Peters. "at scale should allow the law firm to deliver it in a more high-value way." Is there some concern that in-house departments will start cutting out their law firms and working with outsourcers directly? Anne Ristic, who oversees business planning as co-managing partner of Stikeman Elliott LLP's Toronto office, says it's an excellent question. "We all think about it and talk about it in the lingo of disruptors, but are these disruptors that will replace what we do and put us out of business or are they useful tools that help us do our work for our clients more easily and efficiently?" She takes the latter view, at least in the short term. "My hypothesis is that the world is always changing. ere's new stuff coming out all the time that does require that 'human ele- ment' trusted advisor, and that we should be focusing on that and trying to build the technology and outsourcing alternative staffing tools to free up more of our lawyer time to do those things." Stikeman uses outsourcing mainly on e-discovery, and it actually presents an opportunity for law firms to take back some of the work that has gone in-house." SWEENEY OF ZSA, who is a seasoned legal services market-watcher, sees Mc- Carthy's acquisition of Wortzmans as emblematic of the tremendous scramble occurring to win corporate work. Clients are now putting everything out for RFP, he says. "Law firms that have worked with a client for years and years are finding all of a sudden that there's a small piece of work — and they've got to bid for it?" Firms might not be happy about it, but they do what they have to because the stakes are so high. Much of the "sexy high- end legal work associated with huge deals is increasingly not being done in Canada." at's because a lot of the expansion of relies on looser business relationships (the "dating" model). e law firm tried a pilot project that used due diligence soware a few years ago and a number of clients didn't like the idea, so the firm abandoned it. But there have been some major changes in the technol- ogy, and it is running another due diligence pilot project this year. As self-learning AI systems are applied to outsourcing so- ware, the technology is becoming increas- ingly interesting. Matthew Peters of McCarthy Tétrault says that, at the end of the day, work like due diligence and contract management is not the kind of thing in-house departments really want to staff for anyway. "We're hav- ing more and more of those conversations with clients" and they want to free their people up to do higher-value work. "So this DIRECT TO THE SOURCE Law departments are eyeing their own outsourcing opportunities Law firms are not the only ones thinking about how to use outsourcers and new technology to make themselves more efficient. So are the lawyers who run in-house law departments. They too have an increasing number of options for things like document management and review, pretrial discovery, contract review and management and due diligence. Danny Ertel, a founding partner of Vantage Partners, a Boston-based legal consultancy, is asked whether he see this as a good thing or a bad thing. "An inevitable thing," he shoots back. In a piece published in the Harvard Law Review, Ertel and his partner argue that corporate legal departments that don't take advantage of automation and technology "are in danger of missing an important opportunity." They call it a "once-in-a-lifetime chance" to assign legal work to specialized providers rather than paying a substantial premium for "one-stop shopping" at a law firm. Ertel points out that it also frees up their own in-house lawyers to do higher-value work. While there are definitely things only a lawyer at a law firm can do, such as managing complex litigation, he says that "there are some things outsourcers do better," including document management, contract management and even early stage due diligence. Where it used to be that a company typically did not begin due diligence until it knew it wanted to make an acquisition, for example, "using a due-diligence outsourcer early can help the in-house legal department understand the quality of the seller's title, licenses, easements, and permits, and the legal and regulatory risks — which allows the law department to contribute to the strategic discussions rather than just executing." Some large corporate law departments have already started creating a function called legal operations, he says, which would consist of "a person or small team within the law department" to help contract with and manage third parties such as outsourcers or technology providers as well as law firms. As it becomes more common to cut out external lawyers — in favour of using some combination of new technology, automation and highly specialized outsourcers — the trend is bound to heap more strain on the traditional law-firm profitability model. That's inevitable as well. "While we're keeping it as a separate division with separate servers, the financials are all part of McCarthys. … [But Wortzmans] will absolutely work with and continue taking mandates from other law firms and working with clients directly." MATTHEW PETERS MCCARTHY TÉTRAULT LLP | OUTSOURCING |

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