Corporate Legal In-sourcing and Knowledge Management- Part 1

April 29, 2013

Recent studies and research have shown the unprecedented growth and shifting of corporate legal work from outside counsel back to in-house. While the idea of cutting costs by reducing fees to outside counsel, is certainly not a new one, this particular shift is different- according to the researchers. If correct, this research raises several important issues: 1) What evidence do we have that there is a new trend? 2) What makes this trend different than the past? 3) Why is it happening now? 4) How can corporate legal departments handle the additional workload? 4) How does this impact Knowledge Management – specifically, can the corporate legal department easily, quickly and effectively find, understand and use the desired information on a subject that they collected and worked with in the past? Or do they have to keep re-inventing the wheel?  

Here are some e answers to these questions. Ben W. Heineman Jr. former General Counsel at General Electric, cites two important trends in a recent Harvard Business Review blog post:

1. “The general counsel, not the senior partner in the law firm, is now often the go-to counselor for the CEO and the board on law, ethics, public policy, corporate citizenship, and country and geopolitical risk.”[1]

2. “There has thus been a related, dramatic shift in power from outside private firms to inside law departments.”[2]

The Altman Weil 2012 Chief Legal Officer Survey adds additional fuel to the argument by asking over   200 Chief Legal Officers what they have done in the last 12 months to control costs – their highest management priority as reported in the 2011 Survey.  According to the survey, 47% of law departments shifted work from law firms to in-house lawyer staff; and, 36% reduced the total amount of work sent to outside counsel[3]. In 2012, 38% of law departments report that they plan to increase their in-house lawyer workforce in the next 12 months, while at the same time, 39% of law departments decreased their outside counsel budget in 2012, compared to 34% that increased it. [4]This is the first time in three years that the survey has found more departments decreasing than increasing their law firm spend[5]. Clearly, these figures show that this change is tangible and is already occurring.  

I’ll examine such issues as “why now”, what are the “change drivers” and how KM is involved in this equation in my future blogs. Stay tuned.


[1]Heineman, Ben. W. “ The Rise of the General Counsel”, Harvard Business Review Blog, September 27, 2012 http://blogs.hbr.org/cs/2012/09/the_rise_of_the_general_counsel.html

 

[2] Ibid

 

[3] www.altmanweil.com/CLO2012   p.3  © 2012 Altman Weil, Inc. 2012 Chief Legal Officer Survey

 

[4] Ibid

 

[5] ibid


Bloomberg Law Showcases BNA Acquisition with New Tax Practice Center

January 16, 2013

Bloomberg Law announced yesterday the launch of its new Tax Practice Center that features unlimited access to an integrated suite of primary and secondary law sources. While this roll out lacks the drama and sexiness of some of Bloomberg Law’s previous announcements- namely the BNA acquisition and the DLA Piper deal, it is not without significance. Here are some reasons why I think it is significant:

  • Market Timing –The release coincides with the recent “fiscal cliff” drama, new tax legislation, debt ceiling issues, the “surprise” payroll tax controversy and speculation about a possible Tax Code overhaul this year-the first since 1986. This is a critical time, not just for tax practitioners, but for the public as well.
  • It showcases the BNA acquisition -The Tax Practice Center features unlimited access to Bloomberg BNA’s Daily Tax Report® and an extensive library of transaction and topic-specific Tax Management Portfolios, which contain practical guidance written by leading practitioners and academics. Portfolios are clearly linked to primary resources including Internal Revenue Code, Public Laws and Treasury Regulations. Tax practitioners can find important documents using Portfolio numbers with easy “Go To” search functionality. The Tax practice Center not only raises the visibility of the BNA acquisition, but it also affords Bloomberg Law the opportunity to increase its return on the investment.
  • It highlights Bloomberg Law’s unique integration of content-The Tax Practice Center features an enhanced Internal Revenue Code (featuring Bloomberg BNA editors’ notes), relevant practice tools and working papers; and integrates news, analysis, other primary sources and business information to give practitioners a fuller analysis. Also, as part of the Tax Practice Center, subscribers can quickly and easily access other content such as: dockets, analysis and treatises, Practising Law Institute (PLI) treatises, model tax agreements and clauses with DealMaker Document Search, and practitioners have access to tax forms from the IRS
  • It reinforces the “perception of value”- In my earlier blogs, I emphasized that Bloomberg Law needed to add content in order to be competitive with both LexisNexis and Westlaw. Bloomberg Law has steadily added content to its initial product– at no additional cost to its subscribers. This gives subscribers the comfort in knowing that their investment is actually gaining value during the initial subscription period.

 Look for Bloomberg Law to continue to add content. Meanwhile, I’d love to hear feedback from Tax Practice Center users.


Some Sobering Questions About County Law Libraries- Part 1

October 2, 2012

As the financial plight of county law libraries throughout the country continues to worsen, some vital questions immediately come to mind: 1) Do we still need county libraries in their present form? 2) If so, can we adequately fund them? 3) If we still need these kinds of libraries, but can’t afford the cost of maintaining them in their present form, what form should they take on?

While this blog cannot pretend to address all the issues in sufficient depth, my goal is to pose some provocative questions that will stimulate dialog and hopefully lead to some workable answers. Part 1 of the blog will serve as an introduction, with subsequent parts discussing funding and form in more depth.

A good starting point for discussion is the question of why county law libraries exist in the first place. The quick and easy answer is because they were created by statute in several jurisdictions beginning in the late 19th century. Essentially these types of libraries shared 4 traits: 1) they made their services and resources available to the bench, the bar, government  officials, and the public, 2)for the most part, they were funded by a portion of the civil filing fees that were collected by the county where they were located, 3)they were governed by a Board of Trustees, consisting of a pre-set number of judicial and/or county appointees, and 4) state legislation that created them often imposed upon the county where the library was located, an unfunded mandate to provide facilities and maintenance for these libraries.

Times and conditions have changed since the founding of county law libraries more than a century ago. The Internet and online revolutions have placed up to the minute information at attorneys’ fingertips, reducing the need for print resources and brick and mortar structures, except in cases of rare and historic materials. Attorney usage has declined, while the self- represented population has grown. Facilities that were once “state of the art” 30 and 40 years ago have deteriorated. Parking for libraries located in some urban centers and court houses range from insufficient to impossible. Populations have shifted further away from traditional branch locations.

Yet, arguably the greatest threat is the uncertainty of their primary funding. The Florida legislature took away civil filing fees from their county libraries in 2004 as part of the revision to court funding. While California libraries have been able to retain these fees, they have been subjected to both a moratorium on increases and a decline in revenue – despite increases in operational costs. These cuts have resulted in furloughs and staff and materials reductions in several libraries across the country. Given this scenario, it is hard not to question the state of county law libraries in their present form – and more importantly how theses libraries can be adequately funded under present conditions. Stay tuned for more in my next installment.


Bloomberg Law CEO Appointment Casts Spotlight on BNA Merger

September 4, 2012

Bloomberg today announced that Greg McCaffery has been named Chief Executive Officer of Bloomberg Law. He replaces Larry D. Thompson, who is retiring after less than 2 years with the organization.  McCaffery most recently served as CEO and President of Bloomberg BNA, a wholly-owned subsidiary of Bloomberg.  Bloomberg acquired BNA, the legal and regulatory publishing company, on September 30, 2011.

What does this change mean?  I think it means several  things:

  1. It’s obviously a sign of recognition and approval from the Bloomberg’s upper echelon for McCaffery’s work in leading the smooth  integration of BNA into the Bloomberg portfolio. As I mentioned in my previous blogs, the BNA acquisition provided  Bloomberg Law with some much needed content, national respectability, and a shift in the corporate focus from its parent company’s  strong identification  with the New York financial market, to a more national one,  based in Washington, DC.  The acquisition also sent a loud message to Bloomberg Law’s  competitors- Lexis and Westlaw, that the upstart was unafraid to spend money to buy content.
  2. The departure of  Thompson after less than 2 years at the helm , and the rise of McCaffery during the same period, signals a “new phase” for Bloomberg Law. This theme was echoed by both McCaffery, and his boss, Beth Mazzeo, Bloomberg’s Global Head of Data Products and the leader of the company’s vertical businesses, in today’s announcement.
  3. Thompson and McCaffery seem to have different  backgrounds and different missions. Thompson was brought in the “grow” Bloomberg Law- including go-to-market, sales, content, data and relationships.  He arrived with  more than 25 years of experience as an executive in the legal publishing field, including 12 years with LexisNexis, where he rose to the position of Senior Vice President, Business Development, Strategy & Marketing and Global Chief Marketing Officer.  His move to Bloomberg  Law (along with Bloomberg Chairman Andreozzi ), was  considered a public relations coup for the new company, providing the upstart with both national exposure and name recognition – while taking a swipe at Lexis/Nexis. The addition of these 2 veterans was perceived as a marketing coup as well – giving Bloomberg much needed experience in its attempt to gain market share in an arena long dominated by Lexis and Westlaw.
  4. McCafferyhas a strong identification with BNA . He  began his career at there  in 1986 and held reporting and editing positions on several BNA publications  until 1990, when he was appointed to management. He became  President and Chief Operating Officer in April 2007. McCaffery was appointed President and Chief Executive Officer of Bloomberg BNA in January 2012. His new charge is also a bit different and ‘ low key” than Thompson’s- he will be  “responsible for  development and execution of strategy and management of day-to-day operations.

Look for Bloomberg  Law under McCaffery to  attempt to build  upon the “foundation ” that Thompson laid, as he did in his 26 year long successful run  with BNA – through solid management  and development of a top national sales team. Hopefully, he will have more than 2 years to accomplish this.


New Bloomberg Law- Jones Day Deal- What Are the Implications?

May 17, 2012

New Bloomberg Law- Jones Day Deal- What Are the Implications?  

 

Bloomberg Law announced today that it has signed an agreement with global law firm, Jones Day, to bring Bloomberg Law to the desktop of all 1,800 attorneys in Jones Day’s US offices. This deal follows on the heels of Bloomberg Law’s agreement with DLA Piper, and raises further implications for both Bloomberg, large law firms, and the publishing industry – particularly LexisNexis and Westlaw.

The immediate and obvious reaction to the news is that Bloomberg Law has responded to skeptics who viewed the DLA agreement as merely a fluke – a rare golden opportunity for two large players to strike a win-win deal. The Jones Day agreement silences some of these critics by clearly signaling that Bloomberg Law has the credibility, the intention and the ability to duplicate these huge deals with global law firms. Bloomberg law has demonstrated in a very short time, that they are serious players in a very competitive market dominated by Lexis and Westlaw, and that they intend to be around for a long time.

The Bloomberg Law- Jones Day agreement like the DLA-Bloomberg one was a relatively safe win-win for both parties, based upon the same assumptions.  I am presuming  that Jones Day has avoided any exclusive usage agreements with Bloomberg Law ,while still retaining its preferred database provider (either Lexis or Westlaw), enabling it to continue to have at least 2 database providers to meet its research needs. l doubt if they lost much (if anything), in terms of its resources in the change, and like DLA, they have at least three option to make up for any loss:  1) supplement its preferred vendor content with Bloomberg Law, 2) add additional or missing content from its preferred vendor (hopefully at very favorable rates), or 3) it can stay pat. As with the DLA agreement, there was no mention in this press release about either the length of the agreement or about the impact on Jones Day’s offices outside the US.

The implications for both large law firms and the legal publishing industry are what intrigue me the most about this event.  Steve Lastres and I have suggested in previous blogs that it is unlikely that a large law firm will bear the expense of having 3 large and costly legal research databases. Therefore, Bloomberg’s gain suggests that another database provider has lost Jones Day’s business. Was it LexisNexis, the presumed loser in the DLA deal? If so, a second high profile loss for Lexis would send a troubling message to their corporate headquarters.  If Westlaw was the loser this time, it would indicate that no online vendor is exempt from displacement in this economy, and it would further disarm the old assumption that mega firms need both Lexis and Westlaw to meet their research needs. Once this old adage is discredited, momentum for new database choices will shift to firms of all sizes.

As in the case of DLA, I believe that Jones Day got a very favorable pricing deal in exchange for enhancing Bloomberg Law’s credibility with mega firms – despite  Bloomberg Law’s reputation for being rigid on pricing and  refusing  to negotiate. For me, the reason for even getting Jones Day’s ear has to be attractive and transparent pricing. Why else would they even take the time to listen to Bloomberg’s sales pitch? As Don Jaycox, DLA Piper’s Chief Information Officer, said about his firm’s deal with Bloomberg Law, “Law firms need to cost effectively deliver great client service in a highly competitive environment….  Plus, Bloomberg’s inclusive pricing model helps us manage costs in a predictable way”. , Jones Day can piggy back on Jaycox’s statement to make a convincing case to its clients re: its innovation and cost-effectiveness. While predictable and inclusive pricing is certainly important to law firms – perhaps now more than ever, there are other factors that are important also. These other factors include  database content, ease of use and intuitiveness, innovation, and the ability to easily toggle back and forth between legal, news and business resources.

In addition to its inclusive pricing for legal news and business information, Bloomberg Law has a powerful and innovative new platform with unique resident information and pull-down menus that turn traditional search and focus research on its ear. For some at least, this approach is more intuitive than either Lexis or Westlaw. In addition, it has added content from respected partners like BNA and the Georgetown Legal Center.

Perhaps it’s time to see more innovation from LexisNexis and Westlaw – before Bloomberg Law leaves them in their tracks. This news will surely catch the attention of both major law firms and Bloomberg’s competitors- Lexis and Westlaw. Business as usual has come under fire once again.  What do you think?


TLO – In Intensive Care or On the Mend?

May 11, 2012

TLO explained this week’s massive layoff (2/3 of their staff of 2000 was “temporarily” laid off), with this brief and ambiguous statement: “Some projects had TLO off course from supporting our core research and investigational products which are growing nicely. The layoff was a necessary adjustment.”

Hmmm. What were the projects? Was it competing in the law firm sector? Which products are growing nicely? How can they continue to operate with just 1 office in Florida, a staff of maybe 50 people, less than 25,000 customers, no real marketing effort except for any remaining telemarketers at the home office, and a product they offer to law enforcement for free and sell to paying customers at $.25 per search? 

Founder Hank Asher named the company TLO (The Last One) – as in his last entrepreneurial effort. The massive layoff hints at a need for a fresh infusion of capital. With that in mind, what are the options? Asher was flush with $750 million from the sale of his previous venture to LexisNexis, yet how much (if any) of that was seed money for the TLO venture is unknown, as the company is privately held. How about a potential white knight? Asher has successfully sold his previous ventures, so who might be interested in partnering with TLO? I’d scratch LexisNexis, as it already owns Accurint (a variation on one of Asher’s previous products), and Thomson Reuters, as it already has its own CLEAR public records database.

How about Bloomberg Law? Bloomberg certainly possesses the necessary cash and has demonstrated a willingness to spend it on content from third-party sources. Yet I’m not sure TLO would be a good fit. Given Bloomberg’s recent high profile deals with BNA, the Georgetown Law Center and its contract with the giant law firm, DLA, TLO’s appeal to the lower end of the legal market seems out of synch.

What about the probability of new player entering the market to either partner with TLO or acquire it? There isn’t a need for another vendor except at the low end of the scale where TLO operated. The flip side of the argument is Bloomberg Law, who entered a tight legal database market where its competitors were firmly entrenched with sizeable market shares. Bloomberg dove in anyway, and started turning the sector on its ear. Yet for Bloomberg, the cost was heavy. It used its financial resources, name recognition, put its reputation on the line, gave up its trademark Ubiq terminals and built an innovative web platform, recruited big-name talent away from its competitors, bought third-party content and integrated it into its own database, and made big, high-profile deals, such as the one  with DLA.

TLO, on the other hand, offers a vast database of records and a powerful search engine that allows the user to get surprisingly good search results with a minimal amount of information, as well as the ability to narrow results using features like a 5-year age range search or a search involving a subject’s connections with multiple cities. Its search interface mimics Accurint, and its Google maps and photos of real and personal property are often only Florida-specific. TLO still touts its ties to law enforcement and national security, rather than reinventing itself in a way that would be more appealing to a broader base, including corporations and law firms.

What was more troubling was their approach to undercut the competition with $.25 searches and $5 reports. The volume necessary to generate enough revenue to sustain the company boggles the mind.

Readers, what do you think? Is there something I’m missing? I’d love to hear your comments


TLO Online Investigative Service Lays off 2/3 of Its Staff While Seeking Venture Capital

May 8, 2012

I was following up on an information request yesterday to TLO VP Bill Parker for a blog that I was doing about the company, when he told me that the company had temporarily laid off 150 of its 200 employees- including him. TLO (which stands for “The Last One”- founder Hank Asher’s last entrepreneurial venture), was attempting to compete in a market dominated by such online giants as Lexis/Nexis and Thomson Reuters.  John Walsh of TV’s “America’s Most Wanted” fame and Hank Asher founded the small company in 2009, after Asher had sold his previous data-fusion investigative software products, and after his non-compete agreement with Lexis/Nexis had expired. Asher had sold Database Technologies to CheckPoint in 2000 for close to $500 Million and Seisint (which later became Accurint), to LexisNexis in 2004 for over $750 Million. In between, he reportedly received an $8 Million grant from the Department of Homeland Security for another one of his ventures, since his earlier work had focused on catching  child predators and 9/11 terrorists.

TLO. LLC is a small company located in Boca Raton, Florida with less than 25,000 subscribers that competed in the public records market dominated by larger and more familiar names such as LexisNexis’ Accurint and Thomson Reuter’s CLEAR.  TLO had maintained close ties with law enforcement agencies, and in fact,  offered its TLOxp software and vast database records to law enforcement entities in all 50 states for free. (This has probably helped Asher, since he had encountered privacy concerns about his data collection in the past, and maintained a Chief Privacy Officer on staff). TLO listed the legal, financial services, insurance, global risk, corporate security, collections, fraud and asset recovery, and private investigation industries as paying customers, but apparently it had not significantly penetrated these sectors to generate sufficient revenue.  Unlike, its competition, TLO didn’t have a large staff to market its product. This was curious, given its relatively low name recognition and market share. (Even a major player like Bloomberg, with its vast financial resources, knew that it needed to invest heavily in an effort to penetrate the legal database market dominated by such entrenched competitors as Lexis and Thomson). TLO had relied instead on its small team of telemarketers based at its Florida headquarters, and its pricing structure, which appealed to smaller law firms and solo practitioners that couldn’t afford expensive database contracts or costly pay-as –you-go searches.  

Some major questions remain for TLO:

  • Can they convince venture capitalists and potential clients that some neat features (powerful search engine, Google maps for property, mobile capabilities with Android and I-phones, photos of real and personal property), and low pricing –it costs only $.25 (yes – cents!) for a criminal background check or $5 for a full comprehensive report sway customers away from the competition?
  • Can TLO continue to severely undercut its competition (e.g. Accurint can charge $30-$60 for the same report) and still generate enough revenue to survive?
  • Will TLO merge or be taken over by a competitor? If so, by whom?
  • What will happen to TLO’s  vast database(estimated by some as “trillions” of records), containing information on  people, assets and liens, court filings, bankruptcies, dockets and judgments culled from public records, credit headers, commercial vendors, law enforcement agencies and even public information from social media sources- if the company fails?

Tune in for further developments on this breaking story.

 


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