Across the industry, many law firms are thinking about how to build or integrate technology to meet clients’ demands for more efficient work. Big Law is poised to be hard-hit by disruption from automation and artificial intelligence, a study published recently said.
In many cases, however, the impact will be less about automating away tasks than about augmenting workers’ productivity and effectiveness or transforming the definition of job roles altogether to capitalize on new technologies and new unit economics.
For example, when ATMs were introduced in the 1970s, there were widespread predictions that this technology would render the job of a bank teller partially obsolete. Bucking conventional wisdom, however, the number of bank tellers in the US increased during the 1970s and 1980s. The introduction of ATMs reduced the cost of operating a bank branch, allowing banks to open more branches. Although each branch had fewer tellers than before, the net effect was an increase in the total number of teller jobs. At the same time, the role of the bank teller evolved. Instead of just handling cash transactions, tellers started to take on more complex financial services, and correspondingly, the proportion of bank tellers with college degrees increased.
The case of ATMs and bank tellers is frequently cited to illustrate that the effect of automation on jobs might be more complex than a simple one-to-one replacement. While automation can eliminate specific tasks, it does not necessarily eliminate jobs. Instead, these transformations may lead to fundamental changes in unit economics, which may increase demand in hard-to predict ways.
Many firms are realizing that there are different avenues for providing outstanding client service that is not necessarily dependent on the billable hour.
Those who want to stay at pace with innovation in the legal industry are at a pivotal decision-making point: to build or buy.
The decision is high stakes; it means staying ahead of the technology boom, and — whether a firm chooses to build or buy — requires allocating significant resources. Firms need to consider the best way to leverage their knowledge, strengths, and resources not just for immediate success, but for the long term.
“The question of build vs buy is as old as time, and still has no correct answer,” said Kay Kim, Chief Practice Innovation Officer at Paul Hastings LLP. “Some firms are comfortable with building and have the resources, but legaltech vendors can save a lot of pain as long security requirements are met.”
Firms must ask themselves whether they want to staff and operate like a law firm or a software company. They may have an IT department, but building and running a software development team is a very different challenge. The “move fast” ethos of software companies is also very much at odds with a risk-averse law firm philosophy.
However, if commercialization is a key goal of developing the software and a firm has the resources to hire the right talent, then it makes sense to develop the capabilities to build and maintain it in-house.
Kay said she has found success when she has aimed for a middle ground. “Partner with an agile, specialized company that is open to having you influence their product roadmap and you get the best of both worlds,” she says. “The best vendors become true partners and see your feedback as a gift.”
Regardless of whether it's developed in-house or by a vendor, any new solution must enhance other tools and not create new problems — a vendor’s integration capabilities should be a deciding factor. IT needs to be a big part of the equation when it comes to product integration and data movement, and these teams need to have buy-in when finding external tools.
Security also needs to be a top consideration. “Have a checklist in order of importance,” says Kay. “Security is always number one. Law firms deal with sensitive client information every day and PII is widely defined. The operational implications and reputational risk of a data breach could undo an entire firm.” Usability is top of her list as well. “In order for people to actually adopt the tool, the user experience and interface must be easy, intuitive, modern, and clean.”
To work out whether building their own solution in-house is feasible or even possible, legal innovation teams need to ask:
- If we build it, will it stay up-to-date? And how much will it cost us to keep it up-to-date?
- Who is going to do all the refinement and prompting? Does that mean bringing in consultants or hiring new staff to handle that? How much will that cost?
- Even if we can do all the work internally, what happens if the team leader leaves the firm? Who is going to own this?
- In a busy legal innovation team, given that a vendor might have a solution for this need, then why not just buy it and focus on other tasks? Why go DIY when it’s not 100% necessary?
- What workflows and processes do we need to improve? Which of these must we prioritize and why?
- What specific client needs will the tech help our lawyers and staff meet more efficiently, and how?
- What are our measurable goals for the tech solution?
- How will technology help the firm increase profits?
Your attorneys and clients have work that needs to be performed, but does it matter whether it’s your system or someone else’s? If it matters that it’s your system, make sure you understand why. If you still answer “Yes, we need to own it”, then ask the practical questions of whether you can commit to building the software initially and then owning, managing, and maintaining it for many years to come.
Ultimately, the decision comes down to what type of innovation team the firm has and the level of buy-in and support from the partners. If they want to be entrepreneurial and experiment and invest, then you have a mandate. If they prefer to keep things simple and pared down to what is only necessary, then DIY is likely not going to happen.
Firms don’t need to always build or always buy. Both approaches work. Which one you select depends on the use case, appetite to spend of time and effort, willingness to take ownership, and desire to innovate on their own terms.
A short build vs buy case study: Goodwin Embark
Earlier this year, Goodwin announced the launch of Goodwin Embark, a co-branded investor onboarding platform powered by Passthrough.
Goodwin is a global law firm serving innovators and investors in a rapidly changing, technology-driven economy. Goodwin’s Private Investment Funds group supports over 1,000 investment managers around the world who raise funds ranging from less than $10 million to over $25 billion, including private equity, real estate, venture capital, infrastructure, fund-of-funds, credit/debt, impact, and responsible investing, emerging market, listed, and hedge funds.
The Knowledge Management team was tasked with finding an electronic sub doc solution and in early 2023, after evaluating the firm’s capabilities to build in-house, it landed on Passthrough as their preferred solution.
Since then, Goodwin fund clients have enjoyed the benefits of Passthrough's streamlined investor onboarding platform with an even faster route to market, proving that the decision to buy rather than build was unequivocally right for the firm.
The next logical step was to bring the investor experience completely under the Goodwin brand. With the launch of Goodwin Embark, Passthrough’s e-subscription process is now directly incorporated into Goodwin’s legal service offering.
“Following the success of our preferred vendor relationship with Passthrough launched early last year, it was an easy decision to take our collaboration to the next level and develop a co-branded solution for our funds practice and our clients,” says Mandee Gruen, Co-Chair of Goodwin’s Private Investment Funds practice. “Goodwin Embark combines all the benefits of Passthrough with an easier and faster onboarding process for our fund managers.”
Find out more about how to keep up with the legaltech boom with a partnership with Passthrough.
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