As I like to do each year, I’d like to share my reflections on the past year, assess the market predictions I made a year ago, and make some new predictions for the year ahead.
We were inspired by our customers’ achievements last year, including:
- Mary Shen O’Carroll, Head of Legal Operations at Google, was named Legal Department Operations Director of the Year in the LegalTech News 2016 Innovation Awards.
- NetApp was named Legal Department of the Year: Data Security and Legal Operations by The Recorder.
- NetApp was named In-House Innovator of the Year in the 2016 Innovation Awards by LegalTech News.
- VMware won an FT Innovative Lawyers Award for In-house Legal Team Innovation.
- VMware’s Dawn Smith and Craig Norris won In-House Impact Awards from The Recorder.
- O’Melveny & Myers won an FT Innovative Lawyers Award for Innovation in the business of law: Strategy and changing behaviors.
- Gowling WLG won an FT Innovative Lawyers Award in Europe for Innovation in driving value for clients and was a shortlist finalist for another FT Innovative Lawyers Award in North America .
- Intel was named Legal Department of the Year for Product Counseling and Regulatory Compliance by The Recorder.
- King & Wood Mallesons was named Best law firm (revenue over $200m) in the Client Choice Awards, Financial Review (Australia) and Beaton Research + Consulting.
- Clayton Utz was named Best Australian Capital Territory Firm in the Client Choice Awards, Financial Review (Australia) and Beaton Research + Consulting.
2016 was also an exciting year for Elevate honors and recognition:
- Inc. magazine ranked Elevate No. 53 on the Inc. 5000 list of fastest growing private companies based in the United States. At No. 53, we fell within the top 2 percent of the list overall. By sector, we were also the No. 6 Top Business Products and Services company.
- The Los Angeles Business Journal ranked Elevate the No. 24 fastest growing private company on their annual Top 100 list (which ranks companies headquartered in the greater Los Angeles area). This was the second year in a row that we ranked in the top quarter of the list, making us one of only three companies on the 2016 list to rank in the top 25 for two consecutive years.
- Chambers & Partners ranked Elevate among the top global legal service providers for the second year in a row.
- Elevate was ranked among the Global Outsourcing 100 by the IAOP (International Association of Outsourcing Professionals), with special honors in the categories of:
- Customer References
- Revenue Growth
- Employee Growth
- Number of Countries Worldwide
We also contributed to two notable books about the future of law firms and legal departments:
- Remaking Law Firms: Why & How by George Beaton and Imme Kaschner
- Liquid Legal: Transforming Legal into a Business Savvy, Information Enabled, and Performance Driven Industry, edited by Kai Jacob, Dierk Schindler, and Roger Strathausen and published by Springer
Operationally, we moved and expanded our Phoenix and New Delhi facilities to support further growth, and we also added a location in Silicon Valley for the US-based software engineering team that joined us through our acquisition of Legal OnRamp, expanding the capabilities of our software products team.
Our global headcount grew to almost 500 Associates, with lawyers, technologists, process specialists, project managers and legal operations consultants in the US, Canada, UK, Continental Europe, India, Philippines and Australia. We continued to grow our leadership and team of subject matter experts, including:
- Matt Todd, Managing Director, Legal Business Solutions – previously Global Head of Legal Business Solutions for JPMorgan Chase
- Paul Lippe, Advisory Board – previously founder and CEO of OnRamp Systems
- Tom Birdseye, Director, Legal Business Solutions – previously Global Head of Change at Freshfields Bruckhaus Deringer
- Ashley Suedkamp, Director, Legal Services – previously leading a major legal transformation program for Barclays
- Kumar Gogineni, VP of Engineering – previously VP of Engineering at Enlytics, a big data analytics SaaS company
For another consecutive year, we experienced rapid growth, closing another profitable year in 2016 with revenue of over $29 million (a 35% increase from $21.5 million in 2015) and finishing Q4 2016 at an annualized run rate of roughly $34 million. We continue to be management owned and controlled (with no outside institutional capital), with no debt, $3 million cash, and a $5 million receivables-backed line of credit to fund further growth.
We continued to grow our relationships with anchor clients as we added new business in 2016, with both law firms and corporate legal departments representing global financial services, technology, life sciences, energy and manufacturing sectors.
Use of our Cael suite of apps for managing and performing legal work accelerated. Many more law firms implemented our project management software, Cael LPM. Following the acquisition of OnRamp Systems, Inc., we launched Cael ContractRamp for contract lifecycle management and Cael DealRamp for M&A data room collaboration. We also launched two new products: Cael BillPrep to streamline law firm billing compliance to meet outside counsel guidelines and Cael Verify to verify statements and facts in market-sensitive documents.
2016 Prediction Check
Let’s review my predictions from last year and see how accurate they were…
- I predicted that legal operations professionals would start to become the norm in Fortune 500 companies and that adoption of “Moneyball for Legal” would proliferate. We are seeing both of these predictions borne out among our customers. The 2016 Legal Department Insourcing and Efficiency Report by Thomson Reuters indicates that 21% of legal departments now have legal ops professionals acting as change agents, managing outside counsel, employing legal managed services providers, and identifying and deploying new technologies. The ACC reported in June that membership in their Legal Ops group grew “by 30% within the past year alone” and the inaugural CLOC Institute conference for sharing best practices and benchmarking, drew over 100 legal ops professionals and nearly 500 attendees altogether. These legal ops professionals are increasingly partnering with the procurement organization, bringing an analytic approach to managing legal spend.
- I predicted that contract lifecycle management (CLM) would become “the new document review,” in terms of legal department focus on operational effectiveness, cost-efficiency, and the proliferation of sophisticated technologies to support it. CLM tools are definitely reaching critical mass. Market leaders reported strong growth in 2016, and Apttus achieved a $1.3 billion valuation as it positions itself for an IPO in 2017. Likewise, providers of contract support continue to grow. Axiom announced large multi-year deals to support BT and Johnson & Johnson. CLM and contracts management were also a hot topic among legal ops leaders; at last year’s CLOC Institute, roughly 1 in 10 sessions were focused on CLM and contract management. The Lexis-Nexis In-House Advisory Board CLM case study from Vodafone highlighted the benefits to the business of better customer experience and accelerating revenue.
- I predicted that law firms would continue to innovate, and “Legal Service Delivery” would start to become defined as more than just “good lawyering.” Some firms have made strides, as evidenced by this year’s crop of law firms that won FT Innovative Lawyers Awards. Law firms continued to launch efficiency offerings, e.g. the Paul Hastings legal service center in Atlanta, the Osler Transaction Service Center in Ottawa to streamline due diligence and closings, the DLA and Dentons shared services centers in Warsaw and the Norton Rose shared service center in Manila. The Altman Weil 2016 Law Firms in Transition Report indicated that 93% of law firm leaders have identified the need to improve practice efficiency, but fewer than half the firms have done much about it. So there’s still a long way to go.
- I predicted that there would continue to be noise and hype about the possibilities for artificial intelligence, but that there would be relatively few case studies of real-world applications in legal by the end of 2016. This was largely true, with a raft of 2016 AI technology partnership announcements from law firms, such as DLA Piper, Clifford Chance, Freshfields, Addleshaw Goddard, and Dentons, etc. with Kira, RAVN, ROSS and the like. But there were relatively few significant deployments outside of M&A due diligence, contract abstraction and case law research. A tipping point for AI in legal was offered by UK courts joining the US and Ireland in encouraging the use of predictive coding. I stand by the statement I made last year that while AI may fall short of what many people predict for the next 5 years, in the next 10 years it will outpace what we can imagine.
- I predicted that there will be consolidation of legal service providers, as some entrepreneurs fatigue and some investors seek liquidity, which I think has proven largely true. A few examples:
- Elevate acquired OnRamp Systems.
- Mitratech acquired Viewabill.
- Consilio acquired Huron Legal (including Sky Analytics, which Huron acquired in early 2015).
- Integreon was sold to NewQuest Capital Partners.
- DTI acquired Epiq.
- kCura acquired Content Analyst.
- Axiom acquired Cognition LLP’s General Counsel business.
- Deloitte acquired Conduit Law.
Here are my predictions for the coming year:
- The Big 4 will make their presence increasingly felt in legal – especially by law firms.
- Law firms will compete and collaborate with non-law firm legal service providers – especially in response to the competitive threat from the Big 4. I’ve been wrong about this before.
- AI deployments in the niches I have described above will become commonplace, but I don’t expect law firms to identify new use cases or broadly embrace the efficiency AI offers. I expect to see legal departments experiment with AI, especially in contracts and litigation.
- Despite widespread lawyer numerophobia, legal analytics will proliferate. A few law firms will institutionalize their analytics capabilities as a differentiator. Corporate legal department legal ops and procurement professionals, who have been building up their datasets and refining their skills, will besiege law firm pricing with their analytics tools.
- Cloud computing will become increasingly seen as infosecure in legal. Yes, I know that we’ve heard that one before.
I realize that these predictions are made through the lens of how I personally see the legal market developing. I have the benefit of seeing Elevate’s ‘future forward’ work with over 50 Global 1000 corporate legal departments, and another 20 or so global law firms. Elevate has been quietly using AI since 2012 and we are building machine learning and analytics into all our products and services as a matter of course. Elevate invested in analytics people and tools very early on in our history, which offered an advantage in competing against much larger legal service provider brands. When we launched, we made a commitment to secure cloud computing for all our products. While I am optimistic about the benefits of AI, analytics and cloud in legal, I am realistic about the investment of time, money and talent required.
On that note, I’d like to end by thanking all our customers who have trusted us with your business. I also want to thank my talented, hardworking colleagues at Elevate who live our core values each and every day: “We deliver, we innovate, and we care.”
Founder and Executive Chairman
“I realize that these predictions are made through the lens of how I personally see the legal market developing. I have the benefit of seeing Elevate’s ‘future forward’ work with over 50 Global 1000 corporate legal departments, and another 20 or so global law firms.”