Author: cmec

Why lawyers are “asleep at the switch” – comments on Jordan Furlong’s article & the real source of law firm success

On By cmecIn Business & EconomyLeave a comment

Jordan Furlong has written a very insightful article (http://www.law21.ca/2013/05/design-your-own-law-firm-a-law21-survey/) that is well worth reading because he summarises quantitative evidence that too many lawyers are ignoring the new realities of their markets, to their cost.

My experience of working in law firms over 20 years and subsequently running three law firms has given me some insights into why this is the case.  Why do many partners pay only lip service to the need for client service when the future success of their firm relies on real action being taken?  

I believe there are at least three reasons:

  • The short term focus on revenues
  • The structure of law firms
  • Competition

The focus on Revenues

Few law firm managers would disagree that the reality for most partners and most teams is that their primary goal is increased revenues. That may seem harsh, but an observation of individuals is backed up by what is presented at legal conferences the world over: it’s all about the money. Even the idea that the billable hour is the wrong way to charge clients is sold to lawyers on the basis that firms that ‘value bill’ will generate increased revenues.  

The old professionalism of being a trusted adviser, part of the fabric of a civil society, has almost been lost.  I can think of a handful of lawyers who practice with the interests of their clients as their central calling, but they are the exceptions. Most lawyers have succumbed to the siren call of the modern world – make money – and it is hard to criticise this decision in a cynical world where our skills are often called upon to help others make money, oppress their relatives and exaggerate claims. 

Further, in the “old days”, remembered by those who were partners in the eighties, in many jurisdictions the legal monopoly on conveyancing, and the extraordinarily high fees for conveyancing work, gave lawyers a subsidy that enabled them to pursue justice on behalf of clients and still make seriously high incomes.  Thus property owners, not litigants, subsidised legal incomes and the notion of a civil society guarded by lawyers.  The reforms, to what were perhaps rightly perceived as legal “rorts”, have had unintended consequences.

The structure of law firms

One problem facing those who wish to focus on client service and bring about change in their firms is that it is difficult to be a lawyer and to simultaneously run a firm, and yet most firms are run by practicing lawyers.

The law firm CEO/GM job is known to be a challenging one because your board of directors and your shareholders are also your department heads.  If you are a managing partner, your predecessor is often there to help, but most changes are not what he or she would have done…The lines of authority are insufficiently clear and so leadership, a prerequisite for change, is diluted to the point of impotence.  Hence most law firms are managed rather than led.

Even at a micro level, for example when a managing partner seeks to assist another partner who has dropped the ball on a client or a matter, it can be a source of embarrassment to all concerned, with a grave risk that relationships will be damaged.  Client service is therefore left to the professionalism of individuals rather than being a firm wide issue that can be the foundation of a brand promise.

Until recently the water has been very warm and comfortable for most senior lawyers, but the struggle for senior partnership or to build a profitable practice has been so gruelling that many of those who get there have run out of energy. In larger firms they lack the training, the experience and the time for either management or leadership.  In smaller firms they have the experience of management, often learning the hard way as they built their firms,  but with so much competition it is difficult to become sufficiently profitable to work on the business rather than just in it.

The fact that there are some brilliant law firm leaders is more a testament to their intellect and capacity for hard work than it is a confirmation that the right attitudes and business structures are present. To have those capabilities and also to be a leader capable of inspiring tired senior partners to make potentially expensive changes to work practices before they retire is, in almost all cases, a bridge too far. Hence the appearance of rigidity in the profession and the risk of the warm bath of partnership turning into a cooking pot.

It is easy to criticize senior lawyers, but most large businesses have a momentum and an access to capital that make it easier for senior management to concentrate on management and leadership. Momentum is more difficult to achieve in law firms because we are engaged in piece-work, paid per job.

Lawyers necessarily have a job by job focus, and most jobs are hard work.  Our reputation with our client often depends on how well we managed their last case, and in litigation and negotiation we are in direct conflict with the other side, usually another very smart hard-working person.  On average, we lose fifty percent of the time, which is draining, and of course rather than getting sympathy from our clients, we are usually called upon to empathise with them, if not defend our own performance and our right to be paid.  It’s not surprising that eventually money becomes the main compensation for many lawyers.

Competition

Competition doesn’t just drive prices down; it makes marketing and growth more difficult, expensive and risky. Those who succeed are either very exceptional or they have sacrificed other important areas of their life.

Where there is the potential for momentum, such as in conveyancing and defendant insurance work, price competition is genuine and margins are much lower than in commercial work, again making it difficult to achieve or sustain momentum and to think beyond the next tender.  Extracting profits every year, as drawings, with minimal reinvestment is also a contributor to poor financial performance in subsequent years.

Very successful firms have often created some kind of reputational or brand advantage, such that either price or volume are much higher than competitors’, and this gives them the momentum, profits and energy to manage better. Many exhibit discipline over drawings, a task made easier when salaried partners are paid to do legal work, rather than to bring in clients, because this keeps salaried partners remuneration down.   It’s a benevolent cycle that contrasts with the vicious cycle that so many firms are now finding themselves in.

I think this is a major difference between law firms and accounting firms; accounting firms enjoy repeating instructions as they manage compliance year after year for the same clients. Small law firms are small businesses, and suffer from the same problems as other small businesses: Undercapitalisation, distracted management and proportionately expensive marketing. But let’s not forget that most small business fail. So far few law firms have failed, but very many partners in small firms are seriously underpaid compared to the effort they put in on many fronts. Hence the focus on revenues.

Solutions?

I used to think the solution lay with technology, and there are many case studies in which law firms have vigorously adopted technology and have generated substantial momentum and profits. However, I would now argue that the real source of these firms’ successes is that they had the leadership, acumen and discipline to adopt and implement a well thought out business plan, and that their successful use of technology is a result of those attributes rather than of the technology itself.

I also used to think that access to capital would be a differentiator that would allow a firm to grow and prosper, but experience has shown that the cultural attributes of senior lawyers are almost always too ingrained to allow a different approach to their business: capital invested is extracted as drawings at the earliest opportunity and spent on lifestyle, property and/or children.  Few lawyers have enough faith in their business to invest in it. Most want to get as much cash out as possible. 

Few lawyers understand that high hourly rates and a compliant public are a diminishing resource.  The social capital of lawyers is like Australia’s mineral wealth – indubitably a blessing, but also breeder of complacence and structural weakness.  That complacence is undermining our fitness to occupy the civic leadership roles we all value and, whether we recognize it or not, are paid to fulfill.   

In the long run, unless we can rediscover our role as guardians of civil society, by acting more honorably than other business people, by providing some advice at no cost, by making simple services available at a fair price and by treating our staff as fellow professionals rather than as billing machines, we will not retain our privileges. Of course many lawyers know and act on this. But it is rarely reflected in the culture of our law firms because they are subject to the economic imperatives of competition and the prevailing culture of “more”.

Two images from pop culture come to mind. One, in the movie Troy, Menelaus complains to Hector when Paris cowers at his feet, avoiding death: “This is not royalty!”, he exclaims. Over charging, whether by “value” billing or exaggerated time sheets is not professionalism. Clients know, even when they say nothing. Two, Jerry Maquire is fired when he proposes fewer clients, better service. How many smart young lawyers have left the profession because they are not prepared to adopt the distorting and depressing culture of the billable time budget? How costly, to families and to firms, has the depression of the remainder been?

I know the difficulties of trying change law firm culture. Even from the top it is almost impossible: I have seen the economic imperatives force decisions that no partner wanted to make, but which most partners felt they had to support.

Every law firm is different, and each needs to spend time looking at its business through prisms other than per partner profitability. Each and every firm needs to support the higher aspirations most lawyers have deep in their souls, and to ensure their firm contributes to the standing of lawyers as professionals.

The transition from profession to business has long hurt small firms and has now gone so far that it is starting to hurt the businesses even of “big law”.  We are being eaten by our own greed and blindness. Let’s open our eyes and think about what is enough.

At the same time, both lawyers and legal regulators need to recognise that professionalism is not compatible with unrestrained competition: in a dog eat dog world it is the meanest dog that prospers, but only for a while. Teaching law cannot continue to be a cash cow for universities and entry to the profession needs to be restricted to those who can demonstrate their suitability as professionals. To some extent the market will drive this reform, as seen by the recent decision of Allens to reduce the number of graduates it is willing to take on and train.

All of these elements need to come together in a reinvention of what it means to be a lawyer.  We need to regain the support of the public by behaving honourably, we need to reduce the number of law students being trained, and we need to reclaim the idea that law is a calling for a public purpose.

ABA Legal Tech Conference – Chicago – April 2013

On By cmecIn Law & Legal Profession, UncategorizedLeave a comment

ABA Legal Tech Conference – Chicago – April 2013

Introduction

Two themes dominated this year’s conference: cloud computing and disruption of the legal profession.

Cloud computing

There were about 111 exhibitors at the conference, of which at least 61 overtly represented themselves as having a cloud-based or Internet component. Cloud was central to the differentiation message of most legal IT businesses, indicating that it is now mainstream.

Most of the interest seemed to centre on the smaller and more innovative IT product and service providers, especially those focussed on Workflow, Document Automation and Document Management.  The major sponsors of the show, Lexis Nexis and Thomson Reuters received much less interest despite the size and central location of their stands.

Interestingly, one area we expected would be popular, on-line marketing, did not garner much attention either. Our business, BHL Software, has been experimenting with on-line legal marketing via the GoodLawyers initiative, but the large US businesses in this area, Avvo and Lawyer.com, did not appear to be very popular. This echoes our experience with GoodLawyers: while we put a lot of time into it and generated interest and referrals, we could not find a business model that paid.

The on-line practice management systems, Amicus, Action Step, Clio, My Case, Rocket Matter (not to be confused with Rocket Lawyer) and Tabs3 were interesting because they generally offered simpler interfaces and less functionality than their “land based” counterparts. This simplicity is an appealing advantage compared to current systems, although the weakness of pure cloud-based systems seems to be a lack of consulting and integration services, as seen in the Salesforce.com experience.

For new firms, it makes sense to begin with an on-line PMS, noting that the low cost of about $40 per user per month will multiply as the firm grows, and that in the US, “practice management system” often means just time and billing or just matter management, with accounting software being a separate purchase. In Australia we tend to provide a complete system, in our opinion a better solution, although Leap has done well in smaller firms with its combination of matter management and MYOB accounting.

In our view, a hybrid system is the ideal solution as it permits simplicity in on-line components, including smartphone and tablet access, combined with required complexity in Windows-based components. In this model, data can be stored in a private cloud or on local servers, controlled by a firm’s contract or in-house IT staff. This is the BHL offering and some other land-based vendors are taking the same approach.

Disruption

Technology appears to be a driver of change in the legal profession. A technology conference naturally attributes changes in the profession to the development of new technologies and the refinement of established systems, but as lawyers we should understand the distinction between correlation and causation.  In our view, the reasons for the apparent changes to the profession are deeper than the automation of tasks, they reach into the significant social changes technology (including the Internet, social media and smartphones) and the deregulation of tertiary education are bringing about.

Since about 2008 there has been a lot of fear entering the legal profession, echoing some of the attitudes of the recession of 1992, when conveyancing was first deregulated.  That fear naturally centres on several pivots:

  • the preference most firms have for lawyers in their thirties and forties, and the difficulties lawyers younger or older than that have in finding good jobs
  • the difficulties many larger firms have in maintaining growth in fee rates and indeed in fees
  • the difficulties many smaller firms face in finding sufficient work and in getting paid
  • the alleged oversupply of lawyers
  • the concern that on-line, do-it-yourself lawyering will take away bread and butter work
  • the reduction of personal injury work because of regulatory changes and the concentration of work in specialist firms, for example Slater & Gordon and Maurice Blackburn
  • the rise of other well-funded specialist firms offering fixed fee or specialist services

All of this feeds the sense that law is ceasing to be the preserve of an educated, ethical elite and is instead becoming an industrialised business like any other, in which service providers are the employees of professionally run and externally funded corporations.

Conclusion

In the past, law has attracted conservatives, people who prefer the status quo and who want to be pillars of their communities. And that has been a good thing.

Increasingly law is attracting and rewarding entrepreneurs, depriving conservatives of control and pushing them into jobs.

Those now in their forties may be the last generation of lawyers who will inherit rather than buy the dominant brands, although the large pool of young talent may enable the largest firms (in American parlance “Big Law”), to continue to recruit the most privileged and the most connected, if not the best and the brightest.

The problem for smaller firms is that the large remaining pool of talent is their competition, not their source of potential recruits. Large corporates will continue to use Big Law, but small firms must usually service small businesses and individuals, facing competition from DIY websites, “Tesco-law” (in fact Co-op law), and a very large number of other small law firms.

The good news is that both small businesses and individuals will continue to require Trusted Advisors. Once you have acquired a law degree and a practising certificate, there are an increasing number of services available to reduce the barriers to private practice. Web-based marketing is increasingly difficult to game, and transparent social marketing will make it easier for clients to find the best lawyer for their budget and needs. If you are that lawyer, if you are a valued advisor, then it is likely you will do well; the cream usually rises to the top. And there are still opportunities for entrepreneurial lawyers who want to use innovation to create the new future.

Christopher Eddison-Cogan is a partner of Barringer Leather Lawyers, a director of BHL Software Pty Ltd and a member of the IT Committee of the Law Society of NSW.

Welcome for The Hon KR Handley to GoodLawyers Meeting

On By cmecIn Law & Legal ProfessionLeave a comment

It is a great pleasure to welcome this evening the Honourable K R Handley AO QC to address us on Developments in Proprietary and Promissory Estoppel.

His Honour has had a distinguished career, first as a barrister in NSW, for thirty years, then as a judge of the NSW Court of Appeal , for twenty three years.

In 2001 His Honour sat, in the face of significant physical risk, as one of the judges of the Fiji Court of Appeal which determined that the 1997 Constitution of Fiji remained in force following the coup d’état in that country.

His Honour spent some of his youth in Fiji, was educated at Beecroft Grammar School, at Cranbrook School and at the University of Sydney, and has had a lifelong association with the Anglican Church.  He has been a president of the Council of Cranbrook School and a Chancellor of the Anglican Diocese of Sydney.

I don’t just mention these achievements  as a way of paying tribute to a distinguished guest, but also as an observation that His Honour worked hard as a young man to make the most of the opportunities created by previous generations of distinguished men and women, and then in his turn excelled, continued working very hard, and contributed to the continuation and development of the institutions he knew and valued:  The schoolboy became a school board member and president, the congregant became a Chancellor, and the law student became a lawyer and a senior judge.

This is an inspiring story, one that must encourage all of us to examine our own lives and to see how we can better contribute to the institutions, communities and families that have nourished us.

I hope that His Honour’s presence here this evening is a confirmation of the worth of the aims of this fledgling association, as we seek to promote the practice of law as a profession and not just a business, and as we seek to support each other as part of a community of professionals.

Ladies and gentlemen, please welcome the Honourable Ken Handley.

GoodLawyers – Branding for Lawyers and the Internet – 14 March 2012

On By cmecIn Business & Economy, Legal TechnologyLeave a comment

Thank you all for coming this evening, and a special thank you to those Partner Members who have understood our vision and who are supporting us while we build a membership, build a profile and start to refer some additional legal work into the group.

In a moment I’ll introduce our guest speaker for this evening, Ian Chipchase, but first I’d like to say a few words on how we believe GoodLawyers can help build members practices and what we are doing to achieve that.
Last month I talked about brands and what I think is the opportunity for GoodLawyers both in the on-line world and in the real world.

As I said last month, we have always thought that a brand name is missing in law, especially in the SME sector. The large firms deal with the top 500 companies, but where do the owners and managers of small and medium enterprises go? How do they find a good lawyer? The answer, according to lawyers, is word of mouth, but clients have often said ‘trial and error’.

It is the difference between those two perspectives, between word of mouth and trial and error which goes to the very heart of what a brand is all about. A brand appears to be about advertising and logos, but in fact it is a signal that denotes a connection between expectations and results. If we want to be successful as lawyers, our signals must consistently match our performance. The main purpose of GoodLawyers is to match clients to quality legal services so that each transaction, each relationship, fulfils the brand promise.

I think that most lawyers are only correct in nominating word of mouth as more important to their marketing efforts than branded law because there is no branded law firm in their space.

But that is changing, and a big driver of change, is Google, and Google is not only important for Family Lawyers, Personal Injury, Crime and Estate work (what we call personal law), it is important for corporate lawyers as well because following any kind of word of mouth recommendation or response to a tender, potential clients will Google you.

As you know, GoodLawyers has a three pronged strategy for helping to build members practices:
1. Encouraging inter-member referrals so that you get more of the work you like in exchange for the work you don’t like. The currency model to replace the barter model most firms use.
2. Raising the profile of members on the Internet so that the increasing proportion of work being researched via the web is captured.
3. Inviting corporate counsel and senior business people into our groups and to these meetings so that we are a source of legal expertise for them.

It is number two I want to talk about this evening because inter-member referrals are now a matter for you, you are here meeting each other now, I expect most of you will meet each other another three or four times this year, and you are free to bring guests to these meetings, so that ball is very much in your court. We are aware that there is some risk for you in bringing colleagues and clients to these meetings because they might meet someone and send work to them that they might have sent to you, but that is why we are restricting membership within specialisations, and we think that for confident members with strong relationships there is much more to gain than there is to lose. But of course that is a matter for each of you.

In relation to the Internet, and especially Google, I will just throw some statistics at you before showing you on screen what we are aiming to achieve.

Let me give you four numbers:

It is said that 90% of people locate internet resources via search and that Google has a 75% share of that.
84% of searchers look no further than the second page, and 65% of people never click on sponsored links.

Being on the first page of the organic search results is therefore what we are aiming for, and we believe that will become increasingly important for lawyers, especially those practicing in what we might call personal law.

Two more numbers:

Around 15% of all sales are now said to be completed online, and internet sales are slated to be 40% of all purchases by 2020.

In our view some of these numbers can be deceptive because they depend on factors such as on-line grocery shopping, banking and loan arranging, travel purchases and the like, but I think we all agree that Internet based research has become very important to most purchasing decisions and legal services either are, or will be, no different.
Nevertheless it is not easy to gain a page one listing on Google, and it is expensive to run sponsored links and on-line advertising. We have experimented with advertising on LinkedIn, but our goal is to gain a high Google ranking without ‘gaming’ Google, that is without any kind of cheating.

Google’s agenda is to provide quality search results so that people keep using Google and advertisers keep paying for sponsored links. Advertisers compete with each other in an on-line bidding war for effective search terms, while websites seek to create sites that rank on Google.

Ultimately, Google is refining the effectiveness of its search algorithms so that it displays the websites users are looking for. It can be gamed, but not for long. Therefore, our strategy has to be to create the website, and therefore the service, that end-users are looking for. We believe that legal clients want and need experienced and ethical lawyers, and in important matters they need specialists. To be effective, our website has to reflect who you are, what you know and how we work.

Key words are part of this, and so are external links, so we are starting to build content, and we are starting to ask members and sponsors for links from their personal profile pages.

The content we have built looks like this, and it has been moderately effective, but we have now commissioned an SEO company to write 25 articles for us each month, orientated around planned key words, specifically in the areas of personal law and employment law. It would be a great help if members can suggest the titles of articles, write articles on their expertise and suggest changes to the existing articles. We realise that this could be a big time commitment, but we don’t want to be a burden on any one member, we want to leverage the benefits of a large community so that by each member making a small contribution, perhaps an article or suggestion every month or two, the whole site will gain the ranking we need.

Our SEO team will research and identify keywords for us, but any anecdotes you have about how people have found you would be appreciated.

Remember, every time we gain a referral we are gaining a following and building a brand. Every time a member get an external matter, they are that much more likely to refer another matter to a member. Securing personal law work helps the corporate lawyers as much as the personal lawyers because the personal lawyers are less likely to try to do the corporate work themselves.

In relation to links, we would be pleased if every member displays the GoodLawyers logo on their personal profile pages, on their own site and elsewhere if possible, such that there is a link from the logo back to the GoodLawyers site. That will greatly assist our rankings as well, leading to more work. Please let me know if you would like to help with this and I will have our technical people liaise with your technical people.

Next month I will talk about corporate law and traditional advertising designed to create a profile in the business communities, but now let me introduce Ian Chipchase to you. Ian is a respected partner with Stacks Goudkamp, he practices personal injury law in Martin Place and he is going to give us a case study so that he talk about the interdisciplinary nature of his practice.

GoodLawyers and the Branding of Lawyers – 8 February 2012

On By cmecIn Business & Economy, Legal TechnologyLeave a comment

Thank you all for coming this evening. In a moment I’ll introduce our guest speaker, but first I’d like to say a few words on how GoodLawyers got started, where we are now, and where we are going.

It has taken quite a few years to gestate the idea and to refine the model for GoodLawyers, a process that is still continuing.

I worked at Slater & Gordon in the early 2000s, not as a lawyer but running a large project, and I was impressed with how they were able to brand “Mum & Dad” litigation.

Clearly a brand name is missing in law, especially in the SME sector. The large firms deal with the top 500 companies, but where do the owners and managers of small and medium enterprises go? How do they find a good lawyer? The answer, as all lawyers know, is word of mouth, but clients have said to me ‘trial and error’!
There is a big difference in those two perspectives, which go to the very heart of what a brand is all about.

Most lawyers are only correct in nominating word of mouth as more important to their marketing efforts than branded law because there is no branded law firm in their space. In recent years some mid-tier law firms have been trying to change that, and I think in the long run they will succeed.

Once that happens, once the value of a brand and systems becomes significant enough that external investors can take a position in a law firm without fear of the professionals setting up down the road, a situation Slaters has made a reality, then access to capital becomes increasingly important in the business of law, and it becomes more difficult for two or three good lawyers to set up a successful practice.

Part of the purpose of GoodLawyers is to ensure that as branded law firms get stronger, lawyers in smaller practices have a brand name through which they can promote their own specific abilities.
I do not think it is good thing if law becomes corporatized and the vast majority of lawyers have no choice but to become employees of brands and capital.

Legal process outsourcing is becoming more important and through the Doha Round of the World Trade Organisation (WTO) the Australian Government is pushing for reduced trade barriers in professional services. Already, managers of Australian law firms are being offered Australian-admitted lawyers for 20 days per month for $2,500 per month. That is a real threat to the future of some lawyers and law firms, and of course is an opportunity for others.

But branding is only one element of the genesis of GoodLawyers: We have also seen that collegiality is as important to people running smaller practices and there are many opportunities for cost cutting and the acquisition of quality services through collaboration.

For most of the twentieth century lawyers were able to concentrate on their legal skills, and the most effective marketing really was who you served with in the navy or who your father knew. Marketing is rarely part of the DNA of lawyers, and this is one area where small firms can band together to access professional expertise, especially in relation to web-based marketing which is still a black art, sometimes promoted by charlatans. This is part of the purpose of GoodLawyers, to provide the requisite expertise and to help distinguish to good guys from the others. It is related to, but separate from, the need for branding.

The web is currently good at helping customers to identify low cost goods and services, but in time it will get better at identifying high quality offerings, and eventually good value offerings. In the long run, there is no substitute for or short cut to being good at what you do, in the sense of delivering the service the client demands, but in the short term there is a real risk that the firms who spend the most money on advertising will secure the most clients, leaving other firms behind.

We think that specialisation is generally a good indicator of quality, and that in the long run specialists will deliver the best value.

As I hope you all know, Goodlawyers therefore has a three part approach to generating increased revenues for Partner members:
1. We are encouraging members to refer work to each other, so that the lawyer who has most expertise in a matter gets that matter.
2. We will invest in on-line and traditional advertising to bring work to our members.
3. We will invite in-house counsel to these meetings so that they can meet and eventually instruct lawyers whom they might not usually meet, reducing some of the stranglehold large and mid-tier firms have on the mid-tier corporate work.

Clearly this dovetails with the development of the GoodLawyers business itself: Our first task is to acquire members, because without you we have very little to offer clients. We think that the ideal size of a group like this, the Sydney group, is about 100 partner members. That ought to see about 40 members at each meeting, assuming we have ten meetings a year and each member attends four meetings on average. Currently we have about 36 members, and another 100 people waiting for me to meet with them, so we are on the way.
Some people have asked what the benefit is of being a Partner level member rather than an Associate, which is free. The answer is that being an Associate is designed for more junior lawyers where their firm would not pay their subscription. It helps us to build the scale of the business quite quickly, but the risk is that there are only two Partner slots per area of expertise, and if someone else takes your slot, you will not receive many referrals. There are currently six or seven Associate members. Associates are obviously a good source of referrals and of expertise if a Partner retires and a slot become available.

Not all of our enquiries have turned into jobs, and we are investigating why that is. It may be that we will need to appoint “GP Lawyers”, people who are willing to talk to potential clients and to introduce them to Partner Members. Currently I am doing that by telephone, but my job is really to design processes so that we are scalable, so we can deal with a large number of enquiries and so we can filter out the real clients from those in search of attention or free legal advice.

I think that all of this, together with the establishment of groups in Brisbane, Melbourne and perhaps Adelaide, will take up most of the rest of this year.

I am happy to take questions later, but first I’ll introduce Leigh Adams, a Partner Member who is going to tell us about the Personal Property Securities Act 2009.

(Some of) what every lawyer needs to know about cloud computing

On By cmecIn Business & Economy, Legal TechnologyLeave a comment

Cloud computing generally refers to software and data accessed via the Internet.  It derives its name from diagrams used by IT professionals to designate another network, usually the public network, with a cloud symbol.   The term requires some precision because it is currently used to refer to several different types of data storage, application programs and even commercial arrangements. These include:

  1. Web-based email like Hotmail, Yahoo or Gmail that are alternatives to MS Exchange servers run by your firm.
  2. Applications like Facebook, LinkedIn and GoodLawyers.com.au that are not owned directly by their users and have no traditional software licensing equivalent.
  3. Accounting and other applications like Saasu.com and Xero.com that are equivalent to MYOB or Quicken, but are hosted by their developers on a ‘Software as Service’ model; that is, based on a monthly subscription rather than a software license.  Sometimes these applications include additional fees for additional storage.
  4. Third party hosted storage (disk space) like DropBox, iDrive or Amazon Web Services (AWS).  Google Docs offers both on-line storage space and an on-line word processor in one product.
  5. Third party servers (or slices of a server) rented by your firm from iiNet, AWS,  RackSpace et al.  These are often called Virtual Private Servers and provide a web hosting space or application host that your IT staff can manage directly.
  6. Off-site servers owned or leased by your own company from your IT service provider and managed by them.
  7. Virtual desktops running MS Word, Outlook and various accounting applications offered by Matrix Solutions or Optus.  The hosting provider licenses a set of applications from Microsoft and others (for example MYOB) and then rents the package, usually including some support for a monthly subscription.  The applications and data are hosted by the service provider at their premises or at those of a fourth party.

The terminology ‘cloud computing’ is confusing because it blurs several important distinctions, some of which are technical while others are commercial or legal:

  1. Whether the software is licensed by your firm or your firm pays a time/user based subscription, or the software is ‘free’ or advertiser-supported, or a combination.   This affects your rights to use the software, and while in theory your access to data you own may be guaranteed under law, in practice the data may be useless without the application software.  For accounting data and business records, it is relevant that a company director is obliged to maintain proper records.
  2. Whether the equipment is owned by your firm, or leased, or your firm pays a time based fee, usually a monthly subscription.  Again, this might affect your ability to access data or to easily transfer to another provider.
  3. Whether the equipment is located at your premises or at a ‘server farm’.
  4. Whether the data is located in Australia or in another jurisdiction.

The number of permutations and variations on these themes is only going to increase, and with it the legal and commercial complexity of choosing between different options.

For lawyers, the decision of where to store data, whether made overtly or by default, may impact the ability of clients to access data even if a claim that data is privileged can be sustained.  This may expose lawyers to claims of negligence if these factors are not considered when setting up personal or office systems.

While it is easy to argue that well-managed off-site data is probably more secure than poorly managed on-site data, you may have little control over who accesses data stored at a remote location.

Well-managed on-site data is probably the most secure, but it is also the most expensive to manage because the cost of data management and security cannot be amortized across a number of people or businesses.

The greatest risk comes from poorly managed off-site data, especially data held overseas, but many applications do not give you the option of local data storage, or even local backup.  The recent Megaupload case in which Kim Dotcom was arrested by police in New Zealand on behalf of United States authorities, including the FBI, should be a reminder to all controllers of data that the security of data relies on those who have custody of data being ethically, technically and legally beyond reproach.  It is worth noting that while the majority of data stored by Megaupload was located in Hong Kong, the fact that the company leased some servers in Virginia was deemed to be a sufficient connection with the USA that the FBI was able to take control of all the data managed by Megaupload.

As usual, caveat emptor!

Christopher Eddison-Cogan is a partner at Barringer Leather Lawyers, a director of BHL Software Pty Ltd and a founder of GoodLawyers.com.au.  He is a member of the Law Society IT Committee for which this article was first prepared.

My second post

On By cmecIn Business & Economy, Legal Technology2 Comments

It’s taken me more than a year to do my second post – blogging seems so self-serving that I keep deleting what I write.  The last year has been very interesting; business conditions have been difficult and I have had a wide variety of clients and matters.  I claim to specialize in IT law, but much of my work has been acting for people – defending a client from their previous law firm, the usual debt recovery work, sales of businesses, employment law, family provision work, wills, probate, a divorce and even an assault case.

I went to California to find out about venture capital and the opportunities for Australian businesses in the United States, but I am pleased to report that there is now a healthy Angel Finance sector in Australia with well organised investors. When I started my first technology company more than 25 years ago there was no funding in Australia, but now, if you have a good business plan, there are opportunities to get it funded.

I also went to London to attend a conference on legal practice management.  The UK is introducing new regulations for law firms in October of this year.  Several of these changes have been operational in Australia for a while and it was interesting to see what the British thought in prospect about what we in Australia have experienced in retrospect.  There will be many changes in legal practice as technology and deregulation bring benefits for clients as well as for lawyers.  An Englishman, Richard Susskind was an early thinker in this area, and we started the goodlawyers.com.au website more than a year ago as an experiment in legal marketing.  Comments would be welcome.

My first post

On By cmecIn Uncategorized1 Comment

I have started writing comments on on-line articles and letters to the editors of newspapers, and since the comments have been favourably received and the letters have been published I will gather a few of my thoughts together in this blog.

Coincidentally, today is the fortieth anniversary of my first day at boarding school, which I think was the first Tuesday in September, 1969. I was seven, but one of my clearest memories is of walking up the stairs to the third floor, following two “masters” who were carrying my school trunk. I think it was Mr Gorringe the Science Master and Mr Welham, who taught Maths.

I enjoy thinking about the past, even the bad times, but I also set goals for the future and try to make the most of now.  Most people consider me to be optimistic, but living in Australia, a privileged person in a privileged community, I count my blessings every day.