Law Firm Clients as Drivers
of Law Firm Change
 

Petter Gottschalk
Norwegian School of Management
Norway
petter.gottschalk@bi.no 
 

Abstract

This paper reports results from a survey of law firm clients in Norway. Clients' trust and confidence in law firms was measured, as well as clients' satisfaction with law firm work. The extent of information technology use in the cooperation between client and law firm was not very great. Only end-user tools such as e-mail, word processing, spreadsheet and presentation software were used extensively in client-firm cooperation. Emerging technologies such as extranets and expert systems were hardly in use. Hence, there is no empirical evidence yet of law firm clients as drivers of law firm change in Norway.

This is a Refereed article published on 22 March 2002

Citation: Gottschalk P, 'Law Firm Clients as Drivers of Law Firm Change', The Journal of Information, Law and Technology (JILT) 2002 (1) <http://elj.warwick.ac.uk/jilt/02-1/gottschalk.html>. New citation: <http://www2.warwick.ac.uk/fac/soc/law/elj/jilt/2002_1/gottschalk/>

This paper reports results from a survey of law firm clients in Norway. First, changes in information technology, changes in client companies and changes in law firms are discussed. Then, survey results are presented. Finally, the case of Thommessen Krefting Greve Lund is presented, as this was the law firm with the most clients in the survey (Gottschalk, 2002).

Law firm clients are now expecting law firms to use information technology. Law firms in Japan are facing the broader organizational changes brought about the increased use of information networks by their clients ( Nottage, 1998). Du Pont made Detroit law firm Dickinson Wright provide quick access to information.

Terrett (2000) expects that the transformation of law firms is likely to be wholly positive as far as the clients is concerned. There will be more legal information more widely available, and that information will be available more quickly and efficiently than before. Susskind (2000) expects that both clients and lawyers will be better off - the client will have access to better legal information, and the lawyer will find clients needing more legal services.

2. Changes in Information Technology

Becker (2001 ) argues that clients no longer need big, expensive firms to conduct ambitious research projects speedily and comprehensively. Powerful Internet-based research facilities make it unnecessary for clients in the US to engage prestigious Washington, DC, firms to help them find out what is happening in federal regulatory agencies and on Capitol Hill. E-mail and virtual workrooms have reduced the cost and time needed to transmit information and to conduct business. Furthermore, the Internet is likely to intensify competition among law firms by making prices more transparent. Only firms that are distinctive and offer a high degree of expertise will escape the ensuing downward pressure on fees (Becker et al, 2001, p.46):

According to Jones (2000), for law firms that have already embraced knowledge management, the next wave will likely include a stronger focus on client-facing extranets and the development of expert systems. Extranets are essential for ensuring lasting relationships with clients, not only because they increase a client's access to their counsel but because the firm 'gets linked tightly with the client that they'll never let go'. Expert systems are showing huge potential efficiency returns and hold promise for much of the transactional work-tax matters, real estate closings, financial closings - that make up the bulk of legal services.

Susskind ( 2000) has suggested three generations of websites by law firms. The third and final generation is the most significant and useful. These are sites that offer services. These may be client relationship systems or online legal services. In either event, the common theme is that they go much further than simply providing bodies of relatively unanalyzed information. Instead, they provide more distilled and tailored services, suited to particular users' particular needs.

One kind of legal website is eJur. A corporate account is established on the eJur network by a law firm and may be accessed by logging in with the firm's unique password. Once logged in, law firm lawyers can use eJur's services to manage their practice and to collaborate with others, even those who are not subscribers. In order to facilitate secure and effective collaboration, eJur allows its subscribers to include others who are not subscribers, such as clients and expert witnesses, to use the eJur system.

According to Mountain (2001), the UK law firm Clifford Chance is currently leading a movement to establish a set of industry-wide law firm IT standards for extranets. Like e-mail, extranets will eventually become an invisible part of the technology infrastructure and will not form a basis of competitive advantage. Legal web advisors, on the other hand, offer interactive legal advice delivered via extranets using artificial intelligence. Legal web advisors use artificial intelligence (AI) in a more cost-effective and pragmatic fashion than did the systems of fifteen years ago. For example, they do not attempt to work independently of lawyer input. Lawyers and knowledge engineers work together to describe the order in which information is obtained and used to determine a solution.

The AI software leads the client from one question to another using a decision tree system. This type of system uses a sequence of decisions based on user input to classify the problem before moving through nodes and sub nodes to the problem solution. Once the client has completed the path and has answered all the relevant questions, the software produces output. This output is not in the form of a legal opinion; instead, it is in the form of 'You need to do A, B, C, D, and E.' It is more similar to the advice a lawyer gives to a friend at a party than it is to traditional legal advice. It provides 90 percent of the answer in situations where the client doesn't care about the other 10 percent and is not willing to pay for it (Mountain, 2001).

Susskind (2000) identified the disruptive potential of the Internet on legal practice. He predicts that the electronic creation and transmission of digitally stored information will be at the heart of the future of law. He believes that law gradually will be transformed from an advisory service to an information service as lawyers package their conventional work product in electronic form.

In contrast to the reactive advice they receive today, clients will receive proactive and more generic legal advice. This advice will not be completely customized but will be 'good enough' to meet client needs and far cheaper than one-on-one legal advice. This proactive advice will reach the 'latent legal market' of people who are unable to benefit from the legal input they require because conventional legal services are too expensive or impractical in the circumstances. Low-end legal advice will become a low-cost high-volume commodity and only specialist lawyers will continue to advise in person. Legal publishers or large accounting firms may 'muscle in' on providing legal information services, blurring the line between legal advice and legal publishing and taking over much of the market for legal services from lawyers. The movement toward client facing software (software which addresses the needs of clients as opposed to the needs of lawyers) will shift billing practices away from hourly rate billing and toward value-based and project billing (Mountain, 2001).

Mountain (2001) finds that lawyer reaction to disruptive technologies is retreat. Legal web advisors are disruptive technologies that introduce a new value proposition for the law firm client. The value proposition of a typical law firm is based on full and customized service, limited availability, reactivity, and unpredictable and high fees based on time spent. Legal web advisors offer a new value proposition based on self-service that is not fully customized but very often good enough, available twenty-four hours every day, proactive risk reduction and low fixed fees earned while the lawyer sleeps. Lawyers typically respond to disruptive products such as 'make your own will' kits by arguing that legal self-help is not cost-effective and that there is no substitute for a good lawyer. In addition, they retreat up market where the margins are better, abandoning their lower tier clients and leaving the commoditized work to other, less prestigious work. In the short run, this strategy appears to be vindicated. However, some of the best law firms in the world are already using legal web advisors to commoditize what once was high value work.

What large law firms may not realize is that the technology of web advisors has opened up the legal field to competitors that are not law firms. For example, legal web advisors are already starting to be used by consulting firms and large corporate clients. As long as these web advisors provide advice that can be relied upon to reasonable degree, clients are not bothered by the fact that there is no law firm behind them. Clients can always hire a lawyer to clear up any uncertainties that arise out of the online advice they receive (Mountain, 2001).

It is interesting that most online legal services products to date have originated in the UK and Australia and not in the United States. Perhaps it is because of the introduction of multidisciplinary practices (MDPs) in those two countries. This factor has led to greater technology-based competition and has put pressure on their firms to innovate. Meanwhile, the American Bar Association's decision to disallow MDPs has shielded US firms from competition by the Big Five accounting firms and has blunted technology-based competition among the law firms. Mountain (2001) finds that accounting firms do not share the law firms' cultural resistance to new technologies. Just as they have not hesitated to commoditize their consulting practices, they will not hesitate to commoditize their legal practices if MDPs become legal in the US. The accounting firms are beginning to offer online MDPs that offer one-stop shopping for entrepreneurial clients based on needs rather than on categories of professions.

According to Mountain (2001), small law firms do not have the resources to develop their own legal web advisors. Their best bet is to link up with the dot-coms to allow clients to assemble their own documents online, while at the same time strengthening their interpersonal relationships with clients and experimenting with alternative billing methods. Eventually, they may be able to refer their clients to independent online advisory services on an application service provider (ASP) basis.

The Internet allows clients to access freshly updated online legal advice from anywhere at any time. Because of this disruptive potential, to focus on the current lack of correlation between law firm technology capabilities and profitability is shortsighted (Mountain, 2001). With the emergence of the World Wide Web, it is possible for clients to gain access to increasingly sophisticated online facilities (Susskind, 2000).

Hokkanen (2000) finds that the legal knowledge management world can (and should) overlap a lot with the new Internet models of business because the legal business model is knowledge-based. While the Internet model is concerned with innovation in the offerings to new clients and the creation of new value chains to external customers, the knowledge management model is concerned with innovation in internal processes. When considering client-centric extranets and legal e-business opportunities, it is clear that the two worlds actually converge.

The London-based law firm Linklaters and Alliance introduced its 'Blue Flag' service in 1996. Blue Flag is a legal risk management service designed to provide commoditized legal advice on European financial and banking regulatory issues (hence the name Blue Flag). This service is designed to appeal to those concerned with legal compliance working in fund management, securities houses, investment and commercial banks and provides step-by-step legal advice on tap to subscribers for a fixed annual fee. Not surprisingly, having established the service, Linklaters have now extended it to cover other (non-European) jurisdictions where they have expertise. The benefits to clients of this Blue Flag type of system are clear.

3. Changes in Client Companies

Client companies in Japan are now expecting law firms to use information technology (Nottage, 1998). Law firms in Japan are having to face the broader organizational changes brought about the increased use of information networks by their clients, a general trend observed already in the early 1990s. As the head of Sanyo Electric's Legal Department put it recently, `the time has come when we can no longer talk of legal work without the Internet' - or, indeed, his company's growing intranet.

Up to now, the work of Japan's practicing attorneys (bengoshi) has been even more reactive than that criticized by Susskind (2000), focusing on dispute resolution and representation of parties in court proceedings. However, there are signs - admittedly based on survey data dating mainly from the late 1980s, the height of Japan's economic boom - that even they are turning more to transactional work and `preventive lawyering' (yobo hogaku). This requires more the skills of the `legal information engineer', and the development of networked computing in Japan (particularly among corporate clients) will require bengoshi to develop these skills while providing them too with the necessary technological infrastructure (Nottage, 1998).

In addition, a range of other `lawyer-substitutes' provide services related at least in part to legal matters, including tax attorneys (zeirishi), patent attorneys (benrishi), administrative scriveners (gyosei shoshi), judicial scriveners (gyosei shoshi, dealing with company documents and so on) and many others. Much of their work may still be reactive, but it is less so that that of bengoshi. And increasing network computing should also allow more ready interaction between these professionals and bengoshi (Nottage, 1998).

Also client companies in the US are now expecting law firms to use information technology (www.destinationcrm.com). A few years back, E.I. Du Pont de Nemour began a dramatic reduction in the ranks of the company's outside legal counsel. Today, the chemical giant has fewer than 40 firms on its roster, down from more than 350 in 1992. Among DuPont's caveats for the short-listed law firms ? aside from specific areas of legal expertise ? were provisions mandating fixed-fee arrangements for some matters and electronic connections between the company and the firm. Detroit law firm Dickinson Wright not only made the grade, it got the message. DuPont wanted its legal advisors to get more efficient through the establishment of knowledge bases ? to get flexible in the way that knowledge was packaged and applied, and to get wired for quick access from inside and outside the firm.

Terrett (2000) expects that the transformation of law firms is likely to be wholly positive as far as the clients is concerned. There will be more legal information more widely available, and that information will be available more quickly and efficiently than before. The key question is whether legal e-commerce in the form of extranets offering the sum of many lawyers' expertise and experience will replace traditional legal services or whether they will be considered as additional services to complement the existing methods of legal practice. Susskind (2000) suggests the existence of 'the latent legal market'. The theory is that both clients and lawyers will be better off - the client will have access to better legal information and the lawyer will find clients needing more legal services. Anecdotal evidence from the Blue Flag experiment suggests that the number of referrals has increased greatly as a result of this service.

Terrett (2000 ) presents the following scenario. An in-house lawyer works in a large corporate organization. The company is considering a purchase of a major overseas rival. The lawyer in question has been asked to present a paper to the board on the legal implications of this move. In-house lawyers, being generalists rather than specialists, might be tempted to instruct a firm of respected lawyers to be certain that they have all of the pertinent issues covered. However, they are also likely to be concerned about the resultant bill. Thus, they turn to Blue Flag. Here they can search for relevant information in the knowledge that a highly reputable firm of solicitors has produced it, they can print it out and present it to the Board and file it as though it were any other piece of legal advice. The task is completed more quickly and at no additional cost to the company. It is hardly surprising that the service is proving so successful.

Corporate clients could pose a threat by adopting legal web advisors for their own use, training in-house lawyers to keep the systems up-to-date, and thereby minimizing their need for routine legal advice. Already, General Electric has developed a Virtual Patent Advisor for its own use, working in tandem with Jnana Technologies Corporation. This tool probes an engineer with questions about an invention; searches patent databases worldwide for similar inventions, and then generate a report that allows patent counsel to assess the risks of violating an existing patent with that invention (Mountain, 2001).

O'Connor (2000) finds that most professional service firms such as law firms still bill principally on a time and materials basis. Although clients are demanding fixed price bids and not-to-exceed estimates; and competition ('beauty contests'), are thriving; many firms have not fully embraced new billing models. Old school lawyers believe efficiency results in lower revenues.

When m-commerce puts law firms' retail outlets in the clients' hands, then billing models have to change. M-commerce allows firms to reach clients directly regardless of their location. M-commerce is being driven by client demand for wireless devices and the desire to be connected to information and services available through the Internet from anywhere and at any time.

4. Changes in Law Firms

According to Becker (2001), competition among law firms is also intensifying. As clients reward firms that have distinctive depth and breath of expertise in their most valuable practices, the firms must be more and more willing to pay a premium to attract and retain partners in those specialties.

Becker (2001) finds that more senior lawyers are going in-house to assume increasingly influential positions and to escape the pressures of client development and the tyranny of the billable hour.

According to Jones (2000), senior partners are the ones who have the most to gain if their firms are able to leverage intellectual assets in ways that keep lucrative clients on board and draw in new ones through new services and efficiencies. One measure of senior management's receptivity to knowledge management can be found in its commitment to technology in general, and in its commitment to communication with clients using technology in particular.

According to Edwards and Mahling (1997, p.158), the market for providing sophisticated legal services in the 1990s in the United States is intensively competitive:

Managing and using information and knowledge efficiently and productively are core competencies for lawyers. The law is a highly information-oriented profession. A 1992 report of a task force of the American Bar Association, the leading professional association for lawyers, for example, identified a number of 'fundamental lawyering skills'. Among these fundamental skills are several requiring the collection, processing, storage and retrieval of information, including legal research and investigation, factual investigation, legal analysis, problem solving and the organization and management of legal tasks.

United States lawyers, however, have been slow to adopt electronic technologies for managing the information, which is critical to their work. A prominent litigator wasy saying that:

According to Montana (2000), the established legal field finds itself under siege nowadays. Arbitrators, accounting firms, consultants, and many others are chipping into law's traditional bailiwick, offering services that are in direct competition with traditional legal firms, thereby eroding their client base. Although the legal establishment has had success in keeping these parties from encroaching on its turf, this is changing. Changes in the regulatory climate, based on the exploding costs of using the legal system, permit new service providers into previously forbidden territory. Such providers will also be consumers of new information services. The new competitors seem to be more technology-oriented than established law firms.

Law firm lawyers have administrative, declarative, procedural and analytical knowledge. While any law firm certainly needs to maintain efficient administrative records, there does not appear to be any significant possibility of gaining strategic advantage in the firm's core competency of providing sound legal advice to its clients by using these records. The detailed administrative knowledge they contain is essential to operation of the practice, but does not really contribute to the substantive content. Declarative, procedural and analytical knowledge offer significantly greater possibilities of creating strategic value to law firm clients. Edwards and Mahling (1997, p.161) tell the following story:

The relevant declarative knowledge was an understanding of several related state and federal laws and agency regulations governing liability for environmental contamination. The relevant procedural knowledge in part was knowing how to transfer the environmental licenses and permits used by a given business to a new owner and how to transfer the real estate as an asset. The relevant analytical knowledge was understanding what risks the buyer of a contaminated property faced (legal and financial) and what contractual protections could reasonably be given to the buyer by the seller.

Liability for environmental contamination was a new and rapidly developing area of the law. The procedural and analytical knowledge applicable to liability for environmental contamination did not exist in a publicly available form which was readily accessible. It took time for the government agencies administering the law to write and issue detailed regulations. During this period, the only procedural information available often consisted of informal discussions with agency employees about a specific transaction. These discussions were not publicly available to anyone not directly involved in the transaction.

Similarly, there was an even longer period in which analytical knowledge developed. It took several years for buyers to realize that the new laws meant that they could be held responsible in certain circumstances for pollution existing on the property when they bought it, particularly since the contamination was usually unknown to both buyer and seller. It took even longer for attorneys to work out reasonable expectations for contractual protections for both buyers and sellers.

The custom among attorneys experienced in negotiating transactions had been to protect a buyer of a business against specified risks via 'representations' in the contract (i.e; warranties of quality), with 'indemnities', or promises to repay losses the buyer suffered, offered for any breach of the warranty. One obvious question to be worked out was, which losses would be repaid if an environmental warranty were breached. It took time to think through an understanding of the many sorts of losses that could happen: the direct cost of cleanup, the buyer's lost profits if the cleanup disrupted production, the probable decline in market value of a property even after it had been cleaned up. Sellers balked at giving unlimited promises to repay unknown amounts of money, so negotiations usually ensued over which risks the buyer would be protected against and what time and dollar limitations would be applied.

Like any creative process, arriving at this understanding took time. In its earliest stages, it was a very private process. Because the issues were so new and because the transactions were private contract negotiations, only lawyers who had directly participated in such a transaction had access to analytical knowledge of the issues. Their knowledge was in their heads and in the contracts or memos they created to record the transaction. Because a negotiation was involved, the final drafts of the document would seldom reflect all of the issues considered, making it an incomplete repository of knowledge. Because the issue involved was only one of many involved in the overall transaction, the knowledge could only be retrieved from the transaction documents if they were indexed or if the attorney remembered that a particular transaction included an environmental indemnity issue.

As more and more companies participated in sales of property involving these issues, however, the amount of public information grew. Continuing legal education and other professional seminars and law journal articles were early forms in which the information gradually became public. Even later, books appeared which contained practice guide 'checklists' for handling transactions involving environmental contamination issues.

From a strategic value perspective, however, there was a period of several years when there was significant value to a client in having access to a lawyer's analytical knowledge of environmental contamination because so little information was available publicly on the negotiating issues involved. The knowledge's strategic value lay in its innovative quality.

A lawyer who was more familiar with the issues could do a more thorough and more efficient job of protecting the client's interest than one who started from scratch in understanding the situation. Access to analytical knowledge about what parties in similar negotiation positions had successfully argued was particularly useful to clients who were interested in completing transactions successfully without 'giving away the store' in terms of the deal. In other words, the lawyer who had this analytical knowledge could give the client more value by enabling the client to make a better financial deal. Because of what they already knew, they could also be more efficient in handling the transaction in fewer billable hours with less research time. To be useful, however, the knowledge had to be both 'current and accurate'.

Edwards and Mahling (1997) find that knowledge is dispersed among many different members of a law firm, and others outside the firm may contribute to knowledge. Much administrative knowledge is generated by the members of the firm as billing records for their services. Attorneys are the major source of analytical, declarative and procedural knowledge. Legal assistants have some declarative knowledge based on their experience. Declarative knowledge also can be found in publicly available sources intended for research purposes, primarily books, online subscription research sources, and CD-ROM resources.

The quantity of publicly available research materials for any given topic depends significantly on the size of the market for the information. The more specialized the legal area, the smaller the potential market for materials and the less that is usually widely available. Experienced legal assistants are usually an invaluable source of procedural knowledge, since much procedural work is delegated to them. Experienced legal secretaries may also have a significant amount of procedural knowledge for transactions they handle often. To some extent, legal assistants will also have analytical knowledge for subjects and clients with whom they work frequently.

According to Edwards and Mahling (1997), analytical knowledge is occasionally documented in client files through the 'memorandum to file' of an attorney's thought processes. More often it is reflected in the completed contract documents or other transaction documents by the inclusion of specific clauses dealing with a particular topic. The analytical knowledge reflected in completed documents is very often not explicit, in the sense that it is often not clear from the face of the document what analytical issues are dealt with in the document.

Edwards and Mahling (1997) find that knowledge is often shared on an informal basis in law firms. In an hourly billing system there is often little or no financial incentive to produce documentation, which cannot be billed directly to a client. If knowledge has been documented, it is contained in a mixture of paper and electronic formats and located in dispersed physical locations. For example, a large firm would customarily maintain computerized databases for key matters such as client contact data, but would usually generate paper invoices to clients. Work product documents typically are created in electronic form but are customarily stored in print format in client files. Attorney work product files are usually indexed by client name and matter name, but their contents are seldom indexed for subject matter in more than the most general way. 'Client X Acquisition of Fort Lauderdale, Florida Real Estate' would be a typical file name.

Edwards and Mahling (1997) find that access to the procedural and analytical knowledge embodied in client files is difficult at best for those not familiar with the files. The client files are often not indexed by subject matter, making it difficult to locate procedural or analytical knowledge on a particular topic if the contents of the file are not already familiar. Client files, which are indexed according to a subject-based system, may offer some help in searching for analytical knowledge.

Some knowledge raises issues of security and confidentiality (Edwards and Mahling 1997). While declarative knowledge is meant to be public and readily accessible to all, analytical and procedural knowledge within the firm can, however, raise issues of security and client confidentiality. Attorneys in the firm have professional ethical obligations to their clients to maintain the confidentiality of information furnished by the client. Hence, a law firm KMS must be able to extract the useful knowledge while preserving the confidentiality of client information.

According to Christian (2001), a survey, undertaken by The Lawyer magazine in the UK, into the use of IT by the UK's top 100 law firms has revealed some surprising gaps. Many firms still lack any form of case, document, knowledge or client relationship management software. Out of 58 responding firms, 22 firms had no knowledge management system (KMS), and 25 firms had no client relationship management (CRM) systems in place.

According to Galanter and Palay (1991), law firms, like many professional firms, employ a complex monitoring scheme to protect themselves from opportunistic associates. To assure the partners that they will receive the proper return on the investments they make - whether those investments are in client relationships, reputation, or the skills they impart to associates - the firm must induce associates not to grab or leave prematurely. The partner worries that the associate might walk off with the firm's clients or, often more realistically, depart with skills - or clients of his own, that the firm has paid the associate to develop. The partners want to ensure that the associate has an incentive to remain with the firm until it fully amortizes those investments.

One law firm strives to transform scattered file cabinets into an online knowledge-sharing system. The company is Dickstein Shapiro Morin & Oshinsky in Washington, DC, with 230 attorneys (CIO, 2001). The firm's IT department examined the way the company created and dispensed memos and letters to clients and co counsel. They tracked what documents went to which clients. The knowledge that occurs between the law firm lawyer and the law firm client was collected. A system records correspondence from an attorney to a client, allowing subsequent attorneys for the same client to review previous work. That meant all attorneys in the firm had access to the same information about a particular client rather than having it inhabit the brain of one or two people. E-mail is still not managed systematically: currently, users must manually add e-mail information to a knowledge store that's unique to each client in the system. The firm plans to build an enterprise information portal that will allow co counsel and clients to communicate with the attorneys.

Mountain (2001) has addressed the question why law firms ought to invest in online legal services when studies to date show that there is no correlation between law firm technology and profitability. He argues that legal web advisors are a disruptive technology that law firm competitors, such as accounting firms, dot-coms, and corporate clients, are beginning to harness to erode law firm margins.

Mountain (2001) suggests that lawyers typically introduce new technologies when driven to do so by their clients, so they are relatively good at managing sustaining technologies. One example is the use of e-mail. Sending documents by e-mail is a client expectation but it is also an easy thing for a firm to do and does not radically change the value proposition for the client. It can be expected that the next evolutionary step, toward extranets, to be similarly implemented by lawyers through client pressure.

Linklaters was very fortunate to have already produced much of the content that makes up the site and have it readily available in electronic form. All that was required was a degree of innovative thinking about how the information could be delivered to clients, i.e. via the Web rather than CD-ROM or paper.

5. Corporate Clients in Norway

A survey of law firm clients was conducted in Norway in November 2001. The largest 100 companies were selected, and the chief legal officer (CLO) in each firm was chosen as respondent. It was possible to obtain CLO names in 82 companies, and these persons received a questionnaire in the mail. 38 questionnaires were returned, providing a response rate of 46 percent.

Galanter and Palay (1991) found that law firms represent large corporate organizations and that the client 'belongs to' the firm. This finding seems to be supported by the current research as all responding companies ticked one law firm in the questionnaire. The question in the questionnaire was 'Which law firm did your firm use the most in 2001?'. Among the 38 companies, the following 14 law firms were ticked (number of clients in parenthesis): Allen & Overy (1), Arntzen de Besche (1), Bugge Arentz-Hansen Rasmussen (3), Hjort (2), KPMG Law (1), Lindh Stabell Horten (1), Schj?dt (3), Selmer (1), Simonsen F?yen (1), Steenstrup Stordrange (1), Thommessen Krefting Greve Lund (9), Vogt & Wiig (1), Wiersholm Mellbye & Bech (6), and Wikborg, Rein & Co (6). One respondent did not tick any law firm.

Becker (2001) argued that powerful Internet-based research facilities make it unnecessary for clients to engage prestigious law firms as the ones above. According to this survey, large corporate clients in Norway are not at this stage. For example, the extent to which respondents used the Internet in legal work was only 1.7 on a scale from 1 (very little extent) to 6 (very great extent).

On a scale from 1 (never) to 6 (always), law firm clients were asked about the extent to which the company used information technology in its cooperation with their law firms. The average response was 3.5, indicating some use of IT. Specifically, scores were for use of IT to transfer information to the law firm 4.6, to receive information from the law firm 4.3, to code information received from the law firm 2.4, to code information transferred to the law firm 2.6, to access information from the law firm 3.2, and to access legal information from other sources 3.9.

Questions were asked about specific software and systems mentioned earlier in this chapter. For example, legal services using extranets is suggested to be an important future application of information technology. On a scale from 1 (to a little extent) to 6 (to a great extent), responding clients provided an average score of 1.4, indicating that there is currently little use of extranets. Among the 38 respondents, 25 companies gave a score of 1; while 8 companies gave a score of 2, and 3 companies gave a score of 3. Two companies did not respond to the question. This result could be interpreted as an early beginning of extranets, as a few law firm clients (3 out of 38) use law firms' legal services on the extranet to some extent (score 3). This finding seems to be in line with Jones (2000), who suggested that the next wave would likely include a stronger focus on client-facing extranets.

Jones (2000) also suggested that expert systems would be part of the next wave. On a scale from 1 (little extent) to 6 (great extent), responding law firm clients provided an average score of only 1.3. Among the 38 respondents, one client ticked 4, which may indicate that there is one case of artificial intelligence application in the form of an expert system.

Fourteen software and systems were listed in the questionnaire. The initial question was:

Based on the responses, the following ranking emerges (great extent 6 to little extent 1):

Based on this ranking and scores, there is no evidence that law firms have reached the third generation of web sites suggested by Susskind (2000).

Online legal services have emerged in Norway similar to eJur. Examples are JussNett, Jusstorget, and Internettadvokaten. These web sites have adopted Internet business models including knowledge management as suggested by Hokkanen (2000). Use of such web sites was not part of this study. However, there are no indications that large corporate clients have started using services from these web sites.

Questions were asked about confidence and satisfaction. On a scale from 1 (completely disagree) to 6 (completely agree), law firm clients' average response was 4.8 concerning confidence. This is not very high, as there is no agreement using this scale before the score passes 3.5. For example, 'we feel that we can make ourselves dependent on the law firm' received an average score of only 3.7, which seems to be saying that law firms only enjoy a very limited confidence from its corporate clients.

Satisfaction scores were at the same level, with an average of 4.8. The highest score was achieved for 'we are satisfied with work by the law firm' which received an average score of 5.2; second was 'the law firm has excellent procedural knowledge' with 4.9. Lowest score received 'law firm fees are justified by excellent work' with a score of 4.1.

Generally, people in Norway have an impression of high law firm fees. In this survey, law firm clients did not really complain, as 'law firm fees are justified by excellent work' received a score above 3.5. Ten out of thirty-eight law firm clients were dissatisfied as they gave this question a score of 1, 2 or 3.

According to Mountain (2001), the UK law firm Clifford Chance is leading a movement to establish a set of industry-wide law firm IT standards. Thommessen Krefting Greve Lund (TKGL) has taken on a similar role in Norway. Merete Jordal, chief knowledge officer (CKO) as well as chief information officer (CIO) in the law firm, has involved Christopher Helgeby at BA-HR, Rune Johansen at Sch?dt, and Hanne Elisabeth Str?m? at Wikborg, Rein & Co in this effort. One objective of the effort is to coordinate law firm requirements towards software vendors.

As in the UK and Australia, multidisciplinary practices exist in Norway. The only example of such practice is KPMG Law in this survey. Most other MDP's in Norway are subsidiaries of US professional firms that have been broken up into independent firms. For example, Arthur Andersen was broken up into Andersen Legal and Accenture consulting.

According to Montana (2000), the established legal field finds itself under siege nowadays. Arbitrators, accounting firms, consultants, and many others are chipping into law's traditional bailiwick. Although not part of this study, the author finds no support for this suggestion, based on anecdotal evidence from law firms in Norway.

O'Connor (2000) found that most professional service firms such as law firms still bill principally on a time and materials basis. This survey did not investigate this aspect, but the author has the impression that so is the case in Norway. Figures heard in Norway in 2001 ranged from 900 Norwegian kroner to 3000 Norwegian kroner per hour for lawyers' time. Typically, large corporate clients will pay a rate close to the latter figure (close to 350 US dollars per hour).

According to Jones (2000), senior partners are the ones who have the most to gain if their firms are able to leverage intellectual assets in ways that keep lucrative clients on board and draw in new ones through new services and efficiencies. Senior partners worry that excellent associates may leave the firm (Galanter and Palay, 1991); and law firms employ a complex monitoring scheme to protect themselves from opportunistic associates. Although not part of this survey, it is known to the author that this is the case in Norway. A typical law firm in Norway may pay associates one-tenth of what senior partners are making: while the associate makes 400.000 Norwegian kroner, the senior partner gets 4.000.000 Norwegian kroner. The monitoring scheme is to turn an excellent associate into law firm partner after a few years.

Edwards and Mahling (1997) make distinctions between administrative, declarative, procedural and analytical knowledge. The survey indicates that law firm clients are satisfied with all four knowledge categories in law firms. The question concerning administrative knowledge - 'the law firm is excellent at handling administrative matters' - received an average score of 4.4 on a scale from 1 (completely disagree) to 6 (completely agree). The question concerning declarative knowledge - 'the law firm has excellent declarative knowledge' - received an average score of 4.9, while the procedural question received 4.9, and the analytical question received 4.8. Law firm clients give their law firms the highest score for procedural knowledge (4.9) and the lowest score for administrative knowledge (4.4).

Mountain (2001) has addressed the question why law firms ought to invest in online legal services when studies to date show that there is no correlation between law firm technology and profitability. He suggests that they are facing the innovator's dilemma of disruptive technologies. The author's impression from law firms in Norway supports his suggestion. While online legal services such as JussNett, Jusstorget, and Internettadvokaten have emerged and started making money, the established law firms do not yet feel driven to it by their clients.

Mountain (2001) suggests that corporate clients could pose a threat by adopting online legal services for their own use, training in-house lawyers to keep the system up-to-date, and thereby minimizing their need for routine legal advice. Kongsberg Group, ranked 48 among Norway's largest corporation, is implementing the Lexdoor. Jan Westbye, CLO of Kongsberg Group, developed Lexdoor. Kongsberg Group employees in more than twenty different countries handling contracts will use the system in their legal work. The system is tested, and it enables a new way of working globally. Business benefits in terms of time and cost savings are expected.

Kongsberg Group has more than 4000 employees; 800 are outside Norway in more than twenty countries. Lexdoor is the website, while the system is called Legal Service Provider (LSP). Corporate management has tested the system for half a year.

According to Jan Westbye, Lexdoor is an interactive legal system where the client can use standard contracts, create his own or specific contracts from a number of legal clauses in the system or create own documents by a mix of standard clauses, new clauses or add clauses from the clients' existing contracts. The LSP system involves the user in an interactive part of the legal process. The result is a closer relationship between the client and the lawyers. Making contracts is about 80 - 90 percent standardized legal work, and involving the client in this process will release capacity within the legal department. The user has the possibility to interactively negotiate contracts using the Internet. The system is also designed for making global connections and mutual trade by interactive processes independent of the users' existing data platforms. The system is now designed for the English and Spanish languages.

Figure 1: Kongsberg Group has Implemented its own Legal Service Provider

The survey of law firm clients included questions concerning respondents. On average, responding CLOs had been lawyers for 13 years, and they had been with the firm for 12 years. On average, responding companies had 4305 employees.

In Table 1 detailed survey results are listed concerning confidence and trust that law firm clients have in their selected law firm. The scale went from 1 (completely disagree) to 6 (completely agree). Law firms achieve highest score for cooperation (we cooperate well with the law firm) and commitment (the law firm keeps to its commitments with us). Lowest score occurs for dependence (we feel that we can make ourselves dependent on the law firm).

Note: Scale from 1 (completely disagree) to 6 (completely agree).

Table 1: Clients' Confidence and Trust in Law Firms

Two questions in Table 1 were turned around on purpose to avoid automatic filling in of questionnaires. 'The law firm is predictable in its behavior' achieved a score of 5.2, while 'we trust the law firm' willingness to keep agreements with us' did score 5.0.

Table 1 has nine questions. From a theoretical and statistical point of view, these nine questions can be combined into one single measure of confidence. On average, law firm clients trust their law firms to some extent (4.8; where 1 is disagree and 6 agree).

Table 1 lists standard deviations. Respondents disagree among themselves the most concerning the question 'we doubt the law firm's willingness to keep agreements with us', because the standard deviation is 1.5. Results in Table 1 are illustrated graphically in Figure 2.

Figure 2: Graphic Illustration of Clients' Confidence and Trust in Law Firms

In Table 2, detailed survey results are listed concerning use of information technology. The scale went from 1 (never) to 6 (always). Law firm clients transfer information to law firms using information technology very often (4.6), and law firm clients receive information from law firms using information technology quite often (4.3).

Note: Scale from 1 (never) to 6 (always).

Table 2: IT Use

Table 2 has six questions. From a theoretical and statistical point of view, these six questions can be combined into one single measure of IT use. On average, information technology is used in client firms' cooperation with law firms to some extent (3.5; where 1 is never and 6 always).

In Table 3, detailed survey results are listed concerning satisfaction that law firm clients have with their selected law firm. The scale went from 1 (completely disagree) to 6 (completely agree). Law firms achieve highest score for work ('we are satisfied with work by the law firm').

Note: Scale from 1 (completely disagree) to 6 (completely agree).

Table 3: Clients' Satisfaction with Law Firms

Table 3 has ten questions. From a statistical point of view, these ten questions can be combined into one single measure of satisfaction. On average, law firm clients were satisfied with their law firms to some extent (4.8; where 1 is disagree and 6 agree). Results in Table 3 are illustrated as a graph in Figure 3.

Figure 3: Graphic Illustration of Clients' Satisfaction with Law Firms

In Table 4, detailed survey results are listed concerning use of software and systems. The scale went from 1 (to a little extent) to 6 (to a great extent). Electronic mail received the highest score (5.5), followed by word processing (5.3). At the bottom, we find law firm's online legal services on the extranet (1.4) and artificial intelligence such as expert systems (1.4). Results in Table 4 are graphically illustrated in Figure 4.

Note: Scale from 1 (to a little extent) to 6 (to a great extent).

Table 4: Software and Systems Use

Between the different variables in this survey, statistical analyses were performed. For example, relationships between variables were explored. Some significant relationships were found. For example, there was a significant positive relationship between the extent to which 'the firm is consistent in its behaviour' and the extent to which clients 'transfer information from the law firm' using information technology. This result can imply that a law firm has to show consistent behaviour before a client transfers information to the firm by electronic media.

Figure 4: Graphic Illustration of Software and Systems Use

5.1 Thommessen Krefting Greve Lund

Nine out of thirty-eight responding companies ticked that they were law firm clients of Thommessen Krefting Greve Lund (TKGL). On average in the TKGL sample, responding CLOs had been lawyers for 16 years (13 years in complete sample), and they had been with the firm for 11 years (same in complete sample). On average, responding companies had 11672 employees (4702 employees), indicating that TKGL was serving the larger companies in the survey.

In Table 5, detailed survey results are listed concerning confidence and trust that law firm clients have in their selected law firm. TKGL achieves higher score than the average in the survey for all questions on the list. The highest TKGL scores are concerned with reliability, cooperation and commitment as 'the law firm is reliable in its behavior', 'we cooperate well with the law firm', and 'the law firm keeps to its commitments with us'; all received an average score of 5.4. The average for all questions concerning confidence and trust is 5.1 for TKGL, while it is 4.7 for the complete sample.

Note: Scale from 1 (completely disagree) to 6 (completely agree).

Table 5: Clients' Confidence and Trust in TKGL

In Table 6, detailed survey results are listed concerning use of information technology. It is interesting to note that TKGL scores are below average scores on most questions. Only 'receive information from the law firm' and 'code information received from the law firm' has higher than average score. From earlier research and anecdotal evidence it is known that TKGL is a leading law firm in Norway in the area of IT use. This is confirmed here as the law firm uses IT to communicate information to its clients to a somewhat greater extent (4.7) than the average law firm (4.3). However, TKGL clients are below average in their use of IT. So, while TKGL is a relatively advanced IT user, their clients are not. Combined with previous studies of TKGL, there may seem that TKGL is too internally focused in the firm's approach to IT support for knowledge management.

Note: Scale from 1 (never) to 6 (always).

Table 6: IT use for TKGL

In Table 7, detailed survey results are listed concerning satisfaction that law firm clients have with their selected law firm. TKGL achieves higher scores for most items. TKGL achieves highest score for satisfaction as 'we are satisfied with work by the law firm' scored 5.2. The average for all questions concerning satisfaction is 4.9 for TKGL, while it is 4.8 for the complete sample.

Note: Scale from 1 (completely disagree) to 6 (completely agree).

Table 7: Clients' satisfaction with TKGL

In Table 8, detailed survey results are listed concerning use of software and systems. Two questions are particular importance for the future. First, many authors have suggested that artificial intelligence (e.g; expert systems) will become important in legal work in the future. Here, TKGL score (1.3) is even lower than the average (1.4). Second, extranets are believed to become important. Again, TKGL score (1.1) is even lower than the average (1.4).

Note: Scale from 1 (to a little extent) to 6 (to a great extent).

Table 8: Software and Systems Used with TKGL Clients

Results in Table 8 are illustrated in a graph in Figure 5. The first, darker line is for the complete sample of law firm clients. The graph illustrates how electronic mail and word processing dominate current use of IT. Furthermore, the graph shows that spreadsheet is the only system used significantly more with TKGL clients than with other clients.

Figure 5: Graph of Software and Systems Used with TKGL Clients

In the survey, six law firms had several of the responding law firm clients: Bugge Arentz-Hansen Rasmussen (BA-HR), Hjort, Schj?dt, TKGL, Wiersholm Mellbye Bech (Wiersholm), and Wikborg, Rein Co (WRCO). In Figure 6 these six major law firms in Norway are compared concerning clients' confidence and trust in them. Wikborg, Rein & Co achieved the highest confidence score, while Hjort received the lowest score.

Figure 6: Clients' Confidence in Major Law Firms

For the same six law firms, Figure 7 compares client satisfaction scores. Law firm Schj?dt received the highest score from its clients. Law firm Wiersholm Mellbye Bech got the lowest satisfaction score.

 Figure 7: Clients' Satisfaction with Major Law Firms

For the same six law firms, Figure 8 compares the extent of information technology use in the cooperation between law firms and clients. Here, law firm Hjort received the highest score from its clients, while Schj?dt received the lowest score from its clients.

Figure 8: Use of Information Technology in Communication with Law Firm Clients

Three main concepts are applied in this survey research: clients' confidence in law firms, clients' satisfaction with law firms, and clients' use of information technology in their cooperation with law firms. A graphical illustration of confidence and satisfaction is found in Figure 9, indicating that law firms Wikborg, Rein & Co and TKGL are found to be the best.

Figure 9: Clients' Confidence in and Satisfation with Law Firms

Halldor Hustadnes, a journalist in the Norwegian financial times newspaper Dagens N?ringsliv got interested in figures 3.42 and 3.43. He interviewed the managing partners in WRCO and TKGL as these firms seem to be the 'winners' in figure 3.43. He published the following story in Dagens N?ringsliv on December 8, 2001:

Gottschalk thinks that the established law firms in Norway are falling behind concerning the Internet, email and other information technology. Gottschalk is a professor at the department of technology management.

He believes that the established law firms within the next four or five years will get tough competition from web lawyers such as jussnett.no, jusstorget.no and internettadvokaten.no.

'This is very nice', says partner Tom B. Knudsen in law firm Wikborg, Rein & Co. about his firm getting good grades concerning confidence and satisfaction from clients.

He says that he takes competition from web lawyers serious. 'But it is not the private client market that we address', says Leif Petter Madsen.

Managing partner J?rgen Lund at Thommessen Krefting Greve Lund is glad that his firm has high scores on confidence and satisfaction, but does not put much weight on such surveys. He does not look at competition from web lawyers very seriously.

When the use of IT is mapped with client satisfaction, Figure 10 is the result.

There is no positive relation between the extent of IT use and client satisfaction.

Figure 10: Clients' Satisfaction with Law Firms and Use of IT in the Cooperation

6. Impacts From IT on Client Satisfaction

It has been argued that information technology can have a positive impact on law firm clients' satisfaction with law firms. In Figure 11, a research model is presented. The research model links different aspects of IT use to client satisfaction. There are six potential predictors of client satisfaction, all of which concerned with the extent of use of information technology in the cooperation between client and law firm.

Figure 11: Research Model for IT in Law Firm Cooperation With its Clients

The complete set of six predictors had no significant impact on average client satisfaction. The regression equation, which can explain the relationship between predictors and satisfaction, was statistically not significant. However, several individual relationships were statistically significant:

We will now consider a total of four concepts: client satisfaction, client confidence, use of IT, and software and systems. Client satisfaction is defined as the dependent construct as illustrated in Figure 12. Client satisfaction items can be explained by use of IT (A), software and systems (B), and client confidence (C). Client confidence in turn can be explained by use of IT (D) and software and systems (E).

Figure 12: Research Model for Items to Explain Client Satisfaction

In Table 9, significant items explaining client satisfaction are listed. Based on the responding law firm clients in the survey, there are several items having a significant impact on client satisfaction. All impacts are positive, i.e; more of an item causes higher level of client satisfaction. The findings in column A are the same as those listed earlier.

Table 9: Significant Items Explaining Client Satisfaction

Relationships D and E in Figure 12 were also explored using statistical significance tests. Results are listed in Table 10.

Table 10: Significant Items Explaining Client Confidence

In summary, there are few indications that law firm clients' satisfaction with law firms, as illustrated in Table 10, is influenced by the use of information technology. The literature suggesting that this will indeed be the case in the future is overwhelming. Becker (2001), Hokkanen (2000), Jones (2000), Montana (2000), Mountain (2001), Susskind (2000), and Terrett (2000) all argue that information technology will transform law firms and the legal industry in the future. This survey identified few signs of such a transformation.

Notes and References

Becker, W M, Herman, M F, Samuelson, P A and Webb, A P (2001), 'Lawyers get Down to Business', The McKinsey Quarterly, 2001 (2), pp.45-55.

Christian, C (2001), 'London Insider: Gap in Top 100 IT Plans', Law Technology News, <http://www.law.com>.

CIO (2001), 'Knowledge Management: Collaborating for a Competitive Edge', CIO, <http://www.cio.com >.

Edwards, D L and Mahling, D E (1997), Toward Knowledge Management Systems in the Legal Domain, Proceedings of the International ACM SIGGROUP Conference on Supporting Group Work Group '97, USA: The Association of Computing Machinery ACM, pp.158?166.

Galanter, M and Palay, T (1991), Tournament of Lawyers, The Transformation of the Big Law Firm, USA, The University of Chicago Press.

Gottschalk, P (2002), Knowledge Management through Information Technology, Published by the Norwegian publishing house Fagbokforlaget, <http://www.fagbokforlaget.no>.

Hokkanen, J (2000), 'Knowledge Management as Internet Strategy', Law Technology News, <http://www.lawtechnews.com/may00/>.

Jones, E (2000), Remaking the Firm: How KM is Changing Legal Practice, Knowledge Management Magazine, <http://www.kmmag.com/>.

Montana, J C (2000), 'The Legal System and Knowledge Management', The Information Management Journal, July, pp.54-57.

Mountain, D (2001), 'Could New Technologies Cause Great Law Firms to Fail?', Journal of Information, Law & Technology, 2001 (1). < http://elj.warwick.ac.uk/jilt/01-1/mountain.html>

Nahapiet, J and Ghoshal, S (1998), Social Capital, Intellectual Capital, and the Organizational Advantage, Academy of Management Review, 23 (2), pp.242?266.

Nottage, L (1998), Cyberspace and the Future of Law, Legal Education and Practice in Japan, Journal of Current Legal Issues, < http://webjcli.ncl.ac.uk/1998/issue5/.

O'Connor, K (2000), How to Overcome the Cultural Barriers That Can Blockade Knowledge Management, Law Technology News, May, <http://www.lawtechnews.com>.

Susskind, R (2000), Transforming the Law, England, Oxford University Press.

Terrett, A (2000), The Internet ? Business Strategies for Law Firms, UK, Law Society Publishing.

Appendix

SURVEY OF LAW FIRM CLIENTS

What is your job title? ____________________________________________________

How many years have you been a lawyer? ____years

How many years have you been with the company? ____years

How many persons work in the company? ______persons

Which law firm did your firm use the most in 2001? Tick only one:

? Lindh Stabell Horten

? Schj?dt

? Thommessen Krefting Greve Lund

? Wiersholm, Mellbye & Bech

? Wikborg, Rein & Co.

? Other:_______________________________________________________________