The Changing Legal Technology Landscape

We have been witnessing a dramatic, largely digitally-driven business transformation, affecting many industries over the last decade. The term most often used to describe this phenomenon is “digital transformation,” even though non-digital business structural changes most often accompany it. 

Digitization and datafication are key elements in this kind of transformation. We have seen the impact of this phenomenon most clearly in the retail industry, where giants of yesteryear like Sears and Borders have fallen to more digitally agile contenders like Amazon, who have changed the retail landscape fundamentally. The impact of digital transformation on the legal profession and function has been less dramatic, but after spending a week at LegalWeek20 in NYC in February, it is clear that change is coming to the enterprise-focused legal profession as well.

The emerging changes in the Legal Industry can be characterized along the following five dimensions:

• The changing relationship between Corporate General Counsel and outside counsel
• The changing legal services model
• The growing impact of the data deluge
• The evolving legal technology landscape
• The increasing importance of data security and privacy

The growing tension and disconnect between corporate general counsel and outside law firms

Experts suggest that the disruptive changes in the legal industry began after the 2008 downturn when companies started demanding more from their outside counsel. Today’s law firms find themselves under greater pressure from clients who demand value, efficiency, and transparency in a way that was uncommon ten years ago. The past decade has seen General Counsels (GCs), demanding more for less, but it has also seen a growing awareness that return on investment (ROI) is more important than just the cost.

The shift that began a decade ago, also began the gradual death of the traditional approach to legal billing, the venerated billable hour. Previously, outside counsel time was literally equivalent to money. Lawyers had little incentive to be more efficient and saw no reason to spend non-billable time exploring and deploying new technologies to make themselves more efficient. This traditional approach is changing now, as firms can no longer rely solely on their legal expertise; today, they must increasingly focus on how they deliver that expertise, which calls for increased use of technology and benefits early adopters of disruptive technologies. Legal services have been a buyers’ market for the past decade and corporate law departments now like to see clearly defined value and efficiency.

All this is happening against a backdrop of changing buyer behaviors accelerated by rapid globalization across the whole professional services market. The corporate legal department has historically often been viewed as “deal killers,” but the modern legal department is now often a much more engaged internal business partner in emerging corporate initiatives. Modern legal departments have increasingly shifted their approach to manage the specific changes created by digitalization — today, corporate legal counsel engages with more stakeholders, interacts with more speed and iteration, and are accustomed to the increased technical and collaborative nature of digital work, in addition to handling new information-related risks. The increasingly technologically aware workforce is upping its expectations in terms of the use of technology and effective, rapid communication between service providers and clients.

Technology is changing the general counsel’s role, and law firms need to react to remain competitive. The time has come to embrace emerging technologies that provide clients with efficient solutions to manage and service their current and future needs. Client expectations are changing, technology is having an increasing impact, and new, low-cost legal service competitors are emerging to take a slice of the market. What was already a buyer’s market is becoming more so, with increasingly powerful in-house legal departments stoking up the market for alternative legal service providers (ALSPs).

Some GCs and consultants have even developed tests to measure their outside law firms on how efficiently they perform with commonly used productivity tools and measure competence with widely used technology. These tests reward efficiency, which goes against the yardstick that old-style lawyers have traditionally used to value their work: time. Firms whose working cultures do not evolve to service current market needs efficiently, are likely an endangered species. Law firms need to deliver better quality service, and they need to do it cheaper and faster, which demands more automation and competence with technology. Clients are now much less tolerant of old-style lawyers who resist or refuse to use technology that enables expedited and efficient work production.

In his book “The End of Lawyers?” author and legal tech expert Richard Susskind writes: “It is not easy to convince a group of millionaires [Old Partners at Law Firms]... that their business model [the billable hour] is wrong.”

Law departments are now at what Judith Flournoy, CIO at international law firm Kelley Drye & Warren terms “an inflection point,” where they are likely to have to accelerate their uptake of technological innovations to stay competitive. Competence with analytics, collaboration and office productivity software is increasingly a base requirement for the client today.

The changing legal services market

As the needs of GCs change, we see corporate law departments are in-sourcing more legal work, using more tools and technology that reduces the need for outside counsel, and are using more boutique law firms and quasi legal-service providers (Alternate Legal Service Providers - ALSP).

The traditional structure of partners effectively running the business, with some carefully supervised and limited support services, is outdated today. The General Counsel today can not only shift to another law firm, but could also work with small specialist boutique law firms, and global accounting firms who are increasing their involvement with legal services. The smaller firms tend to be much more innovative, specialized, tech-savvy, and run leaner practices enabled by technology; and thus are often more competitive than large firms. The growing importance and practice of technology-enabled collaboration allow these new service providers to deliver much more integrated, efficient services resulting in deeper client relationships.

The 2017 Litera Report on the State of the Legal Market states: “The potential impact of the Big Four accounting firms on the future market for law firm services cannot be overstated [for firms in jurisdictions where alternative business structures are permitted]. As the ALSP market evolves, the Big Four are likely to play an ever-expanding role.” The Alternative Legal Service Providers market revenue grew from $8.4 billion in 2015 to about $10.7 billion in 2017 and continues to grow rapidly.

ALSPs perform many of the tasks traditionally done by law firms, with the top five tasks identified in a Thomson Reuters survey as:

• Litigation and Investigation Support
• Legal Research
• Document Review
• eDiscovery, and
• Regulatory Risk and Compliance

Ron Friedmann, a partner at Fireman & Company, a legal industry-focused management consulting firm, believes firms need to leverage an ecosystem of players. He says many of the future lawyers will not be lawyers at all. According to Friedmann, “In ten to fifteen years, law firms will be a much smaller share of the total legal market.”

 The ongoing data explosion

The volume and complexity of data have always been a part of the landscape in the legal industry. What is changing is the deluge of data is coming at ever-increasing speeds, increasing variety, and formats, and is also increasingly global and multilingual. The impact of this data explosion is significant, and most legal teams will admit this increase in content is a major challenge facing the legal profession today.

In eDiscovery settings, this also means that the information triage process is more challenging and requires much more automation to handle data volume and variety and increase the capability to deal with much more multilingual data.

The modern enterprise is now much more rapidly and naturally global, and thus the modern legal department and outside counsel need to be able to process content and information-flows in multiple languages regularly. The variety and volumes of multilingual content that legal professionals need to process and monitor can include any of the following:

• International contract negotiations and disputes
• Patent-infringement litigation
• Human Resource communications in global enterprises
• Customer communications
• GDPR compliance-related monitoring and analysis
• Cross-border regulatory compliance monitoring
• FCPA compliance monitoring

The volumes of multilingual content can vary greatly, from very large volumes that might involve terabytes of documents in litigation related eDiscovery, to specialized monitoring of customer communications to ensure regulatory compliance, to smaller volumes of sensitive communications with global employees. Multilingual issues are especially present in cross-border partnerships and business dealings, which are now increasingly common across many industries. Being able to process and analyze large volumes of multilingual data is becoming an increasingly more important requirement.

 The emerging legal technology landscape

Law firms can help general counsel drive efficiencies in business decisions by working together to determine what technology is most beneficial. Firms need to start adopting a collaborative teamwork approach not only with general counsel but also by cooperating with alternative service providers and the Big Four as collaborative partners. The general counsel is also looking for outside counsel to adopt a more client-centric model.

As automation penetrates more deeply into legal practice, we see that the role of technology grows in scope and breadth. Tools can range from a variety of analytics and collaboration tools to structured document management tools, end-to-end litigation, and eDiscovery platforms. More recently, comprehensive information governance tools are emerging to handle the increasing datafication of the modern enterprise, and manage the growing compliance risks involved in conducting business with an increasing digital footprint.

Rather than simply upgrading existing technologies, the true transformation only comes when law firms adopt a robust IT strategy that overhauls their services completely. Automation also only makes sense if it delivers on providing high-quality work more efficiently and delivers predictable value to the client.

“After all, if you’re paying for a service and one supplier, says, ‘that will take two weeks, and we’ll charge you by the hour,’ and another says, ‘that will take us two days, and we’ll charge a fixed fee’—which would you choose?”

Legaltech, notes Richard Tromans, founder of Tromans Consulting, is a “very wide spectrum.” At one end, there is document assembly and robotic process automation, taking the grind out of standard, repetitive work while reducing the time taken to perform tasks, saving costs, removing errors, and improving compliance. This kind of automation falls into the category of optimization. At the other end is natural language processing, artificial intelligence, and virtual assistants, which offer the possibility of really revolutionizing the future of legal services — and opens the door to the prospect of robot lawyers.”

As the volumes of data climb, tools that help lawyers to extract relevance and identify core patterns that become increasingly important. The legal technology community needs to move beyond making vague claims of being AI-based, to showing clearly how machine learning and data-driven algorithms can assist in delivering higher value to an expanding variety of legal tasks and processes.

The increasing importance of data security and privacy

Data security involves both preventing malicious attacks and limiting accidental data loss. However, the distributed nature of technology, enhanced by cloud services, creates vulnerability with employees increasingly working from remote locations, making it harder to secure data.

As DLA Piper partner—and former US Department of Justice cybercrime coordinator—Ed McAndrew observed, “The best evidence is now held in mobile devices and the apps, social networks, and cloud services we utilize with those devices. Any investigator or litigator who ignores that evidence may be committing malpractice in many instances.”

Recent surveys by Gartner suggest that legal leaders have to start investing in digital skills and capabilities, reflecting the evolving role of the legal department as a strategic business partner. “How legal departments build capabilities to govern risk within digital initiatives matters more than the legal advice they provide” says Christina Hertzler, Practice Vice President, Gartner.

Striking a reasonable balance between security and convenience is a challenge faced by all law firms. As organizations change the way they operate, generate revenue, and create value for their customers, new compliance risks are emerging — presenting a challenge to compliance oversight, which must identify, assess, and mitigate risks like those tied to fundamentally new technologies (e.g., artificial intelligence) and processes.

GDPR, CCPA, and other privacy protection regulations will present special challenges for the modern enterprise. Thus, while digital transformation initiatives require active data harvesting to enable better personalization, this data acquisition effort also needs to respect the privacy rights of consumers and customers who may or may not be aware of the extent of the data collection activities. Debbie Reynolds noted the information governance requirements of these regulations at LegalWeek recently. “The new reality is that navigating the data privacy rights of individuals everywhere will be an operational necessity for businesses to thrive in the digital age,” she said.

Legal professionals will need to play a larger role in managing these new risks, which can be devastating and cost millions in reparations and negative consequences. Increasingly these threats originate in foreign countries and sometimes even with support from foreign governments.

Apart from the compliance risks that clients face, law firms themselves are sought-after targets as repositories of privileged data. Law firms are a top target among hackers because of the extensive high-value client information they possess. Hackers understand that law firms are a “one-stop-shop” for sensitive and proprietary corporate information, merger & acquisitions related data, and emerging intellectual property information.

Lawyers are failing on cybersecurity, according to the American Bar Association Legal Technology Resource Center’s ABA TechReport 2019. “The lack of effort on security has become a major cause for concern in the profession.”

As more rapidly flowing multilingual data becomes the norm in global enterprises, new data security risks emerge as employees start using public machine translation to translate privileged business content. The risk is high because publicly available tools are essentially frictionless and require little “buy-in” from users who don’t understand the data leakage implications as they pass privileged content through these systems. The rapid rate of increase in globalization has resulted in a substantial and ever-growing volume of multilingual information that needs to be translated instantly as a matter of ongoing business practice. Multilingual data will become much more pervasive over the coming future as the forces of globalization march onwards.

However, this situation evolves, it seems clear that robust machine translation solutions will be needed for any enterprise or law firm with global ambitions.

The Issue of Data Security and Machine Translation

As the world becomes more digital and the volume of mission-critical data flows continue to expand, it is becoming increasingly important for global enterprises to adapt to the rapid globalization, and the increasingly digital-first world we live in. As organizations change the way they operate, generate revenue and create value for their customers, new compliance risks are emerging — presenting a challenge to compliance, which must proactively monitor, identify, assess and mitigate risks like those tied to fundamentally new technologies and processes. Digital transformation is driven and enabled by data, and thus the value of data security and governance also rise in importance and organizational impact. At the WEF forum in Davos, CEOs have identified cybersecurity and data privacy as two of the most pressing issues of the day, and even regard breakdown with these issues as a general threat to enterprise, society, and government in general.

While C-level executives understand the need for cybersecurity as their organizations undergo digital transformation, they aren’t prioritizing it enough, according to a recent Deloitte report based on a survey of 500 executives. The report, “The Future of Cyber Survey 2019,” reveals that there is a disconnect between organizational aspirations for a “digital everywhere” future, and their actual cyber posture. Those surveyed view digital transformation as one of the most challenging aspects of cyber risk management, and yet indicated that less than 10% of cyber budgets are allocated to these digital transformation efforts. The report goes on to say that this larger cyber awareness is at the center of digital transformation. Understanding that is as transformative as cyber itself—and to be successful in this new era, organizations should embrace a “cyber everywhere” reality.

Cybersecurity breakdowns and data breach statistics

Are these growing concerns about cybersecurity justified? It certainly seems so when we consider these facts:

• A global survey in 2018 by CyberEdge across 17 countries and 20 industries found that 78% of respondents had experienced a network breach.
• The ISACA survey  of cybersecurity professionals points out that it is increasingly difficult to recruit and retain technically adept cybersecurity professionals. They also found that 50% of cyber pros believe that most organizations underreport cybercrime even if they are required to report it, and 60% said they expected at least one attack within the next year.
• Radware estimates that an average cyber-attack in 2018 costs an enterprise around $1.67M. The costs can be significantly higher, e.g. a breach at Maersk is estimated to have cost around $250 - $300 million, because of the brand damage, loss of productivity, loss of profitability, falling stock prices, and other negative business impacts in the wake of the breach.
• Risk-Based Security reports that there were over 6500 data breaches and that more than 5 billion records were exposed in 2018. The situation is not better in 2019, and over 4 billion records were exposed in the first six months of 2019.
• An IBM Security study revealed that the financial impact of data breaches on organizations. According to this study, the cost of a data breach has risen 12% over the past 5 years and now costs $3.92 million on average. The average cost of a data breach in the U.S. is $8.19 million, more than double the worldwide average.

As would be expected, with Hacking as the top breach type, attacks originating outside of the organization were also the most common threat source. However misconfigured services, data handling mistakes and other inadvertent exposure by authorized persons, exposed far more records than malicious actors were able to steal.

 Data security and cybersecurity in the legal profession

Third-party professional services firms are often a target for malicious attacks because of the possibility of acquiring high-value information is high. Records show that law firms relationships with third-party vendors are a frequent point of exposure to cyber breaches and accidental leaks. Law.com obtained a list of more than 100 law firms that had reported data breaches and estimate that even more are falling victim to this problem, but simply don’t report it to avoid scaring clients and minimize potential reputational damage.

Austin Berglas, former head of the FBI’s cyber branch in New York and now global head of professional services at cybersecurity company BlueVoyant, said law firms are a top target among hackers because of the extensive high-value client information they possess. Hackers understand that law firms are a “one-stop-shop” for sensitive and proprietary corporate information, merger & acquisitions related data, and emerging intellectual property information.

As custodians of highly sensitive information, law firms are inviting targets for hackers.

The American Bar Association reported in 2018 that 23% of firms had reported a breach at some point, up from 14% in 2016. Six percent of those breaches resulted in the exposure of sensitive client data. Legal documents have to pass through many hands as a matter of course, reams of sensitive information pass through the hands of lawyers and paralegals, and then they go through the process of being reviewed and signed by clients, clerks, opposing counsels, and judges. When they finally get to the location where records are stored, they are often inadvertently exposed to others—even firm outsiders—who shouldn’t have access to them at all.

A Logicforce legal industry score for cybersecurity health among law firms have increased from 54% in 2018 to 60% in 2019, but this is still lower than many other sectors. Increasingly clients are also asking for audits to ensure that security practices are current and robust. A recent ABA Formal Opinion states: “Indeed, the data security threat is so high that law enforcement officials regularly divide business entities into two categories: those that have been hacked and those that will be.”

Lawyers are failing on cybersecurity, according to the American Bar Association Legal Technology Resource Center’s ABA TechReport 2019. “The lack of effort on security has become a major cause for concern in the profession.”

“A lot of firms have been hacked, and like most entities that are hacked, they don’t know that for some period of time. Sometimes, it may not be discovered for a minute or months and even years.” Vincent I. Polley, a lawyer, and co-author of a recent book on cybersecurity for the ABA.

As the volume of multilingual content explodes, a new risk emerges: public, “free” machine translation provided by large internet services firms who systematically harvest and store the data that passes through these “free” services.  With the significantly higher volumes of cross-border partnerships, globalization in general, and growth in international business, employee use of public MT has become a new source of confidential data leakage.

Public machine translation use and data security

In the modern era, it is estimated that on any given day, several trillion words are run through the many public machine translation options available across the internet today. This huge volume of translation is done largely by the average web consumer, but there is increasing evidence that a growing portion of this usage is emanating from the enterprise when urgent global customer, collaboration, and communication needs are involved. This happens because publicly available tools are essentially frictionless and require little “buy-in” from a user who doesn’t understand the data leakage implications.  The rapid rate of increase in globalization has resulted in a substantial and ever-growing volume of multilingual information that needs to be translated instantly as a matter of ongoing business practice. This is a significant risk for the global enterprise or law firm as this short video points out. Content transmitted for translation by users is clearly subject to terms of use agreements that entitle the MT provider to store, modify, reproduce, distribute, and create derivative works. At the very least this content is fodder for machine learning algorithms that could also potentially be hacked or expose data inadvertently.

Consider the following:

• At the SDL Connect 2019 conference recently, a speaker from a major US semiconductor company described the use of public MT at his company. When this activity was carefully monitored by IT management, they found that as much as 3 to 5 GB of enterprise content was being cut and pasted into public MT portals for translation on a daily basis. Further analysis of the content revealed that the material submitted for translation included future product plans, customer problem-related communications, sensitive HR issues, and other confidential business process content.
• In September 2017, the Norwegian news agency NRK reported data that they found that had been free translated on a site called Translate.Com that included “notices of dismissal, plans of workforce reductions and outsourcing, passwords, code information, and contracts”. This was yet another site that offered free translation, but reserved the right to examine the data submitted “to improve the service.” Subsequently, searches by Slator uncovered other highly sensitive data of both personal and corporate content.
• A recent report from the Australian Strategic Policy Institute (ASPI) makes some claims about how China uses state-owned companies, which provide machine translation services, to collect data on users outside China. The author, Samantha Hoffman, argues that the most valuable tools in China’s data-collection campaign are technologies that users engage with for their own benefit; machine translation services being a prime example. This is done through a company called GTCOM, which Hoffman said describes itself as a “cross-language big data” business, offers hardware and software translation tools that collect data — lots of data. She estimated that GTCOM, which works with both corporate and government clients, handles the equivalent of up to five trillion words of plain text per day, across 65 languages and in over 200 countries. GTCOM is a subsidiary of a Chinese state-owned enterprise that the Central Propaganda Department directly supervises, and thus data collection is presumed to be an active and ongoing process.

After taking a close look at the enterprise market needs and the current realities of machine translation use we can summarize the situation as follows:

• There is a growing need for always-available, and secure enterprise MT solutions to support the digitally-driven globalization that we see happening in so many industries today. In the absence of having such a secure solution available, we can expect that there will be substantial amounts of “rogue use” of public MT portals with resultant confidential data leakage risks.
• The risks of using public MT portals are now beginning to be understood. The risk is not just related to inadvertent data leakage but is also closely tied to the various data security and privacy risks presented by submitting confidential content into the data-grabbing, machine learning infrastructure, that underlie these “free” MT portals. There is a growing list of US companies already subjected to GDPR-related EU regulatory actions, including, Amazon, Apple, Facebook, Google, Netflix, Spotify and Twitter. Experts have stated that Chinese companies are likely to be the next wave of regulatory enforcement, and the violators' list is expected to grow. 
• The executive focus on digital transformation is likely to drive more attention to the concurrent cybersecurity implications of hyper-digitalization. Information Governance is likely to become much more of a mission-critical function as the digital footprint of the modern enterprise grows and becomes much more strategic.

 The legal market requirement: an end to end solution

Thus, we see today, having language-translation-at-scale capabilities have become imperative for the modern global enterprise.  The needs for translation can range from rapid translation of millions of documents in an eDiscovery or compliance scenario, to the very careful and specialized translation of critical contract and court-ready documentation on to an associate collaborating with colleagues from a foreign outpost. Daily communications in global matters are increasingly multilingual. Given the volume, variety, and velocity of the information that needs translation, legal professionals must consider translation solutions that involve both technology and human services. The requirements can vary greatly and can require different combinations of man-machine collaboration, that includes some or all of these different translation production models:

• MT-Only for very high volumes like in eDiscovery, and daily communications
• MT + Human Terminology Optimization
• MT + Post-Editing
• Specialized Expert Human Translation

Machine Translation: designed for the Enterprise

MT for the enterprise will need all of the following (and solutions are available from several MT vendors in the market). The author provides consulting services to select and develop optimal solutions :

• Guaranteed data security & privacy
• Flexible deployment options that include on-premise, cloud or a combination of both as dictated by usage needs
• Broad range of adaptation and customization capabilities so that MT systems can be optimized for each individual client
• Integration with primary enterprise IT infrastructure and software e.g. Office, Translation Management Systems, Relativity, and other eDiscovery platforms
• Rest API that allows connectivity to any proprietary systems that you may employ. 
• Broad range of expert consulting services both on the MT technology aspects and the linguistic issues
• Tightly integrated with professional human translation services to handle end-to-end translation requirements.

This is a post that was originally published on SDL.COM in a modified form with more detail on SDL MT technology.