While it can be said that many extranets are generally over-hyped and under-delivered, that lawyers tend to be myopic in their view of clients and that in-house counsel are generally overwhelmed with the amount of information they receive from their outside law firms, when armed with good information, these realities can be mitigated.

After coming off a successful implementation of an extranet at Foley & Lardner, when I came to Sheppard, Mullin, Richter & Hampton, LLP, I was eager to see what was in place for extranets.  Sheppard Mullin is based in Los Angeles, with over 450 lawyers spanning nine offices on both coasts.  The firm is equally vested in both litigation and transactional work with 12 practices groups, providing our clients a wide range of legal services.

Like some firms, we had invested lightly in extranet technology, using a third party to host extranet sites.  We had a handful of sites that had been used over the past few years, but they didn't offer much in the way of a true matter management system, and very few people used it or knew about it at the firm.  It was my goal to get something in place the lawyers would view as a key tool to generate new business and something the clients would value highly.

When I first approached the firm's executive committee about making a significant investment in extranets, they were skeptical, citing that very few clients had asked for them and that the existing tool was barely used.  Fortunately our executive director and the practice group leader of the business trial group both understood the value and need to offer a more feature-rich extranet to our lawyers and clients.  With their support, I was able to get the committee to approve a new extranet.

To better understand what our clients were looking for regarding extranets, we looked for research and statistics that showed what corporate counsel were seeking.  We referred to several studies, including the BTI study from 2002 titled "Client Opportunities and Impacts of Information Technology for Law Firms," which outlined the features most desired by in-house counsel.  Although a little dated, the report is the only one of its kind and gave us some insight to help us formulate our extranet strategy.  The survey, based on 100 open-ended, unprompted interviews with corporate counsel at Fortune 1000 companies reports:  "83 percent of clients see value in extranets, and 49 percent still want an extranet with their outside law firm and don't have one."  So if clients find value and want them, why are so many without?  When we asked our clients, they wanted one system that housed every matter we had with them.  Based on that feedback, we wanted a system that would provide the features of a transactional deal room along with the tools to handle large litigation reviews all in the same system.

More specifically, clients wanted a system that would essentially act as a complete matter management system for the matters they had with us.  Based on our conversations with clients and data from various surveys, clients wanted the following key elements:

Centralized Information and Data Management:  litigation documentation, case management (PM), document management, discovery documentation, matter detail, patent/trademark management and contract terms.

Key Corporate Information:  comprehensive searching, corporate structure, shareholder information and annual meeting management.

Tracking and Reporting:  litigation outcome tracking, invoice and budget tracking, SEC filing information, regulatory filings, docket/calendar items and status reports.

Policies and Procedures:  privacy guidelines, tax regulations, employee benefits information, purchasing guidelines, HR forms and FAQs.

Managing Outside Counsel:  outside law firms, attorneys, deliverables and deadlines.

Compliance and Reporting Assistance:  government submittals, permitting assistance and compliance assistance.

Information and Data Storage:  production data, safety records management, permit cost data and medical and insurance claims.

Operations Information Tracking:  employee/labor law tracking, conflict tracking, environmental incident tracking and safety/health incident tracking.

This seemed like a pretty tall order, and while we weren't sure we could address all of these needs with one system, it became clear in our conversations with clients that we couldn't provide disparate systems to handle these functions separately.  The challenge was to find a system that would give us the flexibility to start by providing core "practice templates" to meet the baseline needs of our users, but also provide for the ability to expand and customize the system to handle the more specific and unique needs of individual clients.

We evaluated many of the popular off-the-shelf extranet offerings.  Most of these tools were geared toward providing a "deal room" for transactional document sharing or a place to store hundreds of thousands of documents for a litigation review.  We needed one solution that would provide the features of both types of products but "under one roof," and also give us the flexibility to customize the system as our use of extranets matured.

We looked at what was available in the marketplace, and while there are many fine products out there, we elected to have a system custom-built to meet our needs and those of our clients.

Very few lawyers think about the cumulative work in-house counsel outsource to their law firm, not to mention their competitors, instead focusing on only the handful of matters they have directly with the client.  This is important to understand for two reasons:  You have to view an extranet from the client's perspective, which means you don't just post the one or two large matters that the lead partner has; you post everything your firm handles for the client.  And if you adopt this view, your extranet will make your more commodity-like practices less susceptible to being shifted to another firm.

Positioning your extranet in this way creates the mentality that it's a routine aspect of how you do business with your clients; it's not the exception, it's the rule.  More importantly, you'll actually be providing something which your clients will use and from which they will benefit.

Client's Perspective
To understand the burden of many lawyers working in-house, it helps to understand what they are dealing with on a daily basis.  Statistics provided from the 2004 Corporate Legal Times Annual Report of Corporate Law Departments and BTI's study help make the point.  The mean number of lawyers working in-house is 13 and the mean number of support staff is 10.  Corporate counsel are facing increasing pressure to improve the performance of their departments, streamline the management of the function and reduce costs.  The pressure mounts in light of a projected 11 percent increase in Fortune 1000 clients' case load, which comes out to an average of 1,100 new cases per year or 84 matters per lawyer.  Outside counsel do little to help ease the administrative burden of managing the information associated with each matter.

We conducted an informal study of lawyers at our firm to determine the average number of e-mail messages generated per matter.  The average number was approximately 2,200.  In talking with my colleagues at other firms, this number did not seem out of line with what they anecdotally observed.

When you take these averages and put them together, each lawyer in-house receives roughly 184,000 e-mail messages a year, just from outside counsel, on these matters.  Factor in the voice mail, faxes and mail they receive daily, it's no wonder managing this correspondence for all their matters becomes an administrative nightmare.

Extranet to File
To address this pain point, we think of the extranet as a replacement for paper files, so the extranet is used as the "active file."  Clients welcome it because by putting everything for every matter on the extranet, we stop the barrage of e-mail, fax and mail, which they typically can't process, file or easily retrieve when they need it.  As Tim Epp, a partner at Sheppard Mullin and former General Counsel at Taylor Made Golf, put it, "because we operated with a small legal staff, we had no way to keep up with the huge amount of information I received from outside counsel, particularly related to litigation.  Having everything stored and organized for me would have been a huge time saver when I was in-house.  I'm glad we're able to provide this service to our client now."

We also use the extranet to house past deals, and, with the full-text searching capabilities, in-house counsel can quickly pull documents from old deals.  Clients not only use our extranet to house current matters, they also give us files from closed deals to put up for search and retrieval.

Results
After a five-month pilot, we went live in September of 2005.  There are over 200 clients, 350 matters and 1,800 people using the Sheppard Mullin extranet today.  We house litigation, corporate, finance, bankruptcy, labor, tax, real estate and IP matters for our clients.  The system is designed so that matters are managed and administrated in a decentralized fashion.  Client administrators (often secretaries) are trained and certified to be able to add new matters to the system, create new user accounts and apply security to matters, folders or individual items.  This, in addition to simply adding new documents, contacts, calendar items, etc., allows each client team to be highly responsive to the needs of their client, rather than having someone in IT be responsible for these administrative tasks and creating a bottleneck in the process.

The response and adoption of the extranet has been tremendous.  We average six new users per day, a new client is added every two days, and almost 100 items per day are added to the extranet.  Associates at the firm have also benefited from having the entire "file" available through the extranet and not having to search for paper files or bring everything home with them if they need to work late or over the weekend on a case. "The extranet is a great tool!  It has been incredibly convenient for me to have access to the major components of the case files that I have set up on the extranet, 24/7 from any location.  I absolutely plan to place all future case files on the Extranet," says Lara Mackey, associate at Sheppard Mullin.

Getting to this point was not easy.  In addition to having a very strong extranet platform, we were also fortunate to have a firmwide walk-up scanning system.  This made document scanning much easier and more convenient, a critical component to making paper files extranet-ready.  Having the day-to-day maintenance of the extranet managed directly by the team dealing with the client has also proven to be a huge factor in the adoption of the system.  The only thing we provision is adding a client to the extranet (which is a one-time process); once that's done all new matters, users and related content for the client are handled by the lawyer and his/her team.

We also invested a significant amount of time "selling" the concept of this system to the various practice groups within the firm.  This took the form of product demos during monthly practice group meetings, at annual practice group retreats and even at the annual partner retreat.  In addition, the marketing department created an attractive full-color brochure.  Our lawyers use them in client meetings and include them in their pitch materials.  To ensure a smooth presentation, we encourage lawyers to have us accompany them when showing the extranet to a client.

We were able to turn myopia into 20/20 vision for our lawyers and our clients with careful planning and the proper tools.

About our author . . .

Tom Baldwin serves as Chief Knowledge Officer at Sheppard Mullin Richter & Hampton, LLP and also consults to the in-house legal departments of the firm's clients.  Before joining Sheppard Mullin, Tom held a senior level position at Foley and Lardner.  Prior to that, he consulted for 7 years with law firms and corporate legal departments.  Tom was recently named 2005 Legal IT Innovator of the Year by the Legal IT Forum.  He can be reached at TBaldwin@sheppardmullin.com.