Why the Cloud is the New Electricity–and What it Means to Lawyers

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Transcript

Digital Detectives

Why the Cloud is the New Electricity–and What it Means to Lawyers

12/05/2019

 

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Intro: Welcome to Digital Detectives, reports from the battlefront. We will discuss computer forensics, electronic discovery and information security issues and what’s really happening in the trenches; not theory, but practical information that you can use in your law practice, right here on the Legal Talk Network.

 

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Sharon D. Nelson: Welcome to the 109th Edition of Digital Detectives. We are glad to have you with us. I am Sharon Nelson, President of Sensei Enterprises, a digital forensics, cybersecurity, and information technology firm in Fairfax, Virginia.

 

John W. Simek: And I am John Simek, Vice President of Sensei Enterprises. Today on Digital Detectives our topic is, ‘Why the Cloud is the New Electricity–and What it Means to Lawyers’.

 

Sharon D. Nelson: Before we get started, I would like to thank our sponsor. Thank you to our sponsor Logikcull, instant discovery software for modern legal teams. Logikcull offers perfectly predictable pricing at just $250 per matter per month. Create your free account at anytime at logikcull.com/ltn.

 

John W. Simek: Today our guest is Andy Wilson, the Cofounder & CEO of Logikcull, which he founded in 2004. Along with his Cofounder Sheng Yang, Andy transformed the company from a traditional, expensive eDiscovery services vendor into an affordable, automated and self-service cloud solution in 2013.

 

Andy lives in Northern California with his wife and three children. He is a big dog lover and known to sport red tennis shoes for pretty much any occasion.

 

Great to have you with us Andy.

 

Andy Wilson: That’s correct. I am happy to be here, John and Sharon.

 

Sharon D. Nelson: Well, we miss those red sneakers. Well, we talked just a little bit offline before we got to this podcast, so Andy’s first — the topic he wanted to discuss first was what are the similarities between the electrical revolution and the cloud revolution, and I don’t have an idea in the world what you intend to say, but go for it Andy.

 

Andy Wilson: Sure. Well, it’s the early innings here for the cloud, but the electricity revolution in 1800s and what we are seeing with the cloud and the digital revolution in 2000s share a lot of commonality.

 

If you think about it, electricity is always on demand, it’s self-service, it’s accessible from anywhere, location independent, scalable, priced on a consumption basis, and so is the cloud. And when electricity went mainstream, a lot of innovation happened. The things that we all rely on today, like this podcast technology, is probably largely due to the advent of electricity and the consumerization of that.

 

But it wasn’t always that way. Back in late 1800s, electricity was something only the wealthy could afford. It was complex. It was expensive. It would break all the time. Thomas Edison’s first power generator is just one example. In today’s dollars it would have cost roughly $7.5 million to build and it could only service about 80 customers, which is unsustainable, and I think you would agree.

 

So if you think about like the cloud and how does that relate, well, pre-cloud software used to be incredibly expensive. You had to buy it and install it, millions of dollars in enterprise software kind of thing, and hire a lot of people to maintain it, but now through cloud and the automation the cloud brings, these services are cheaper and cheaper and cheaper, which is fueling more and more innovation.

 

John W. Simek: So Andy, is that where you see the impact on the legal profession from the cloud, that whole innovation thing?

 

Andy Wilson: Yeah, absolutely. As technology becomes cheaper, innovation goes up. It’s easier and cheaper than ever before to start a business. There are services out there like Amazon Web Services that if you want to build a software company, you could do that. But you could also start a law firm in the cloud. You don’t need to acquire a lot of the technical expertise, like back office stuff, you don’t need to install a lot of heavy equipments. You can sign up for a suite of tools for a couple of hundred dollars a month and have a fully functioning legal practice in the cloud within 24 hours.

 

So yeah, it’s having a pretty big impact.

 

Sharon D. Nelson: I like that concept and I do think that the cloud has led to just incredible amounts of innovation, but how do you explain the fact that some lawyers are still so reluctant to move to the cloud with all the opportunity it offers?

 

(00:05:06)

 

John W. Simek: I have got my opinion.

 

Andy Wilson: What do you mean, lawyers are first movers in that, they are early adopters.

 

I mean lawyers — like, at the end of the day, I think the main function of lawyers is to reduce risk and anything that is perceived to be risky or they know little about that can be risky, they are going to be a little cautious with that.

 

That said, I have seen some pretty interesting trends. We have close to 2,000 customers worldwide and the vast majority of them are these small offices. They are a lot more willing to adopt technology. It’s usually the larger law firms that are more reluctant to change and invest in the cloud.

 

John W. Simek: So that’s like it’s hard to turn the big ship, is that what you mean?

 

Andy Wilson: Yeah, I guess. I mean once you have built up your cost structure, you have a little bit of innovator’s dilemma, maybe you have spent millions of dollars on people and product and process and now there is something in the market that you could get the exact same results for pennies on the dollar, it’s kind of harder to reinvent yourself once that structure has been set up.

 

John W. Simek: Well, Andy, you run this eDiscovery company, so tell us a little bit about some of the implications; we are shoving all this data up in the cloud, I mean there’s got to be some implications there?

 

Andy Wilson: Yeah, a ton. I mean that’s just kind of the data reality we all live in, we are all getting more emails, more text messages, people are using Slack to communicate instead of email or in conjunction with. The cloud has just exploded the amount of data of course, but also where data can exist, which for legal teams that are required to assist with this data is a bit of a nightmare, because the thing that hasn’t changed for them is the deadlines, and the deadlines do not care about data.

 

So you have this almost exponential divide that’s growing between the signal and the noise, right, and the noise being all this extra data that’s getting pushed or created into the cloud and the signal being what’s relevant to the matter at hand, it’s just getting harder and harder to cut through that noise because of the cloud.

 

This is fundamentally why we built our product, because that’s why it’s called Logikcull by the way, cull, the job of discovery is not to review all this junk; the job is to actually find the signal, but in today’s world you have to make it easy to go through this junk as fast as possible, i.e., cull it, that’s what our product does.

 

John W. Simek: I have got to ask this question Andy. Have you developed the Find All Evidence button yet?

 

Andy Wilson: No, I wish we could, but if you think about it, it’s actually the opposite problem. It’s the inverse, right, it’s find all the junk, because the junk is much easier to find than the evidence, because the evidence is usually bespoke to the matter at hand, but the junk almost is a constant; the spam, emails, the LISTSERV, the receipts, those kind of things are a lot easier to find than the actual evidence.

 

So if you can get rid of the junk, i.e., cull it, which in most cases is over 90% of data is irrelevant in any discovery matter, the evidence present itself.

 

Sharon D. Nelson: Well, that’s true, but how do you or how do companies, let’s just talk generically, I mean how do you logically do the culling so that you are left with the signal?

 

Andy Wilson: Well, so I can mainly just talk about like the way that we approach the problem. Think about other products or services that you use where you have to sift through large amounts of inventory.

 

Let’s use two examples. Amazon with products, there’s over a billion products in Amazon Digital Warehouse and LinkedIn People Search, which has over a hundred million people in that database. It’s really hard to find that one person if you are looking at it from like a haystack perspective, but what these two companies have done incredibly well with is they created a categorization model using metadata about those products and people.

 

So Amazon essentially turned on the light switch in the warehouse so that you could see what’s inside of all those boxes by automatically categorizing things by, as you mentioned earlier, shoes of a certain color; show me all the red shoes, and Prime only, because I don’t want to pay shipping, like those things.

 

The same thing with people, show me all the people that went to Virginia Tech, that graduated in this year, that are in this field, that’s three clicks or less.

 

(00:09:54)

 

Well, we took that exact same model and applied it to data. So if you can categorize all the data automatically into these logical, pun intended, bucket, then you can make it really easy for people to poke through it, and that’s how it works. So once you can do that, you can easily see there are huge sets of information that are irrelevant to your matter and when you find those, you click a button and they go away.

 

Sharon D. Nelson: Well, I know one reason why lawyers are not moving to the cloud is because they are worried about the security of their data and this is sort of — it’s a tandem subject for us here, but what should they do to make sure that their data is secure? What kind of questions do they need to ask?

 

Andy Wilson: Well, ironically, I guess that most of the cloud providers that are coming to their door are orders of magnitude more secure than the way that they are handling data. There’s been a couple of studies that have been put out around law firm cybersecurity risk and 80% of Am Law 100 law firms have already been hacked; you probably heard of some of the biggest ones, DLA Piper was shut down for an entire week.

 

And one in four law firms, which 80% of law firms are fewer than 10 attorneys, have been breached, but they probably don’t know it because they don’t have the technology to even detect an intrusion.

 

Whereas a cloud service, what a cloud is offering is trust, like hey, listen, trust us to host your data because we have a team of engineers that are monitoring for detection, we have a software enabled that’s monitoring for intrusion detection, we have encryption at rest, we have SOC 2 Type 2 certifications, we have all these things. But fundamentally what they are selling is trust, and there’s ways to verify that trust if you are a law firm.

 

Most of these companies are going to have a security page where they list all their certifications, you can ask for copies of their SOC 2 Type 2, which is a big difference than a Type 1 certification, not just what Amazon provides. You can’t get by with that. I wouldn’t trust that, because obviously Amazon’s data center is SOC 2 Type 2 certified, amongst other things, but maybe the vendor selling the services hasn’t actually achieved a level of SOC 2 certification on their own, which is a red flag. So you can test that.

 

If you want to — if you are spending a lot of money in these cloud services, you can hire 10 testers, almost like white hat hackers, where they will try and penetrate the production environment of this cloud service. I wouldn’t recommend that for anything. If you are not going to spend $100,000 or more a year in these services, you probably can’t afford that.

 

But just by asking basic questions around encryption and those types of things and then getting the documentation behind that, you can learn a lot.

 

Sharon D. Nelson: Sound advice.

 

John W. Simek: Well, before we move on to our next segment, let’s take a quick commercial break.

 

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Sharon D. Nelson: 10 years ago eDiscovery meant lawyers packed into a basement, fumbling with complex slow software, wondering where their lives had gone wrong. Today not much has changed, that’s why Logikcull is putting an end to eDiscovery. Logikcull is simple, powerful, instant discovery software, designed to make you hate document review list. Create a free account today by yourself with no human interaction at logikcull.com/ltn, that’s logikcull.com/ltn.

 

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Sharon D. Nelson: Welcome back to Digital Detectives on the Legal Talk Network. Today our topic is ‘Why the Cloud is the New Electricity–and What it Means to Lawyers’. Our guest is Andy Wilson, the Cofounder and CEO of Logikcull, which he founded in 2004. Along with his Cofounder Sheng Yang, Andy transformed the company from a traditional expensive eDiscovery services vendor into an affordable, automated and self-service cloud solution in 2013.

 

John W. Simek: Well, Andy, there’s this kind of new thing that’s out there called the Internet and I know it goes everywhere and nobody really is sure where the heck it really is, but they are not really sure where the cloud is either. Should law firms really care about the actual geographic location of where their data resides?

 

Andy Wilson: I mean yes and no, I guess it kind of depends. If you are in the United States, again, the vast majority of law firms are pretty small, 80% of all firms are fewer than 10 attorneys. So you are probably servicing clients down the street versus international juggernauts, the ExxonMobils of the world. I mean you might, maybe that’s your client, good for you.

 

(00:14:58)

 

So most likely you don’t need to necessarily care about that, it’s something that if you are curious about it, it’s pretty easy one to answer. Most of the cloud services for the legal tech ecosystem are built-in Amazon Web Services, which has a worldwide data center footprint, but doesn’t necessarily mean that they offer their service in one or more locations more often than I, it’s probably just in the US because it’s not a trivial thing to spin up another instance of your software and another geography as an example.

 

So, it depends, if you’re working for international customers that have very sensitive data requirements, like the EU as an example, you look at certain banks, you might want to dig into that. In the future, a lot of these cloud services are naturally going to need to cope with this almost digital geography problem, by allowing their customers to store the data wherever they see fit, because if you think about the cloud it is another layer of abstraction, it’s almost like an operating system, and with operating systems, you should be able to move the data wherever you want.

 

Sharon D. Nelson: Yeah, we’re seeing that a lot that clouds are allowing you to choose. So for instance for a long time now, Clio, the case management system, which is a Canadian company, has allowed you to choose whether you want your data in Canada or in the United States and what we generally advise, folks, is it’s the devil you know, I mean, if you don’t understand cross-border data issues, why would you want your data outside the United States because you’re going to have to pay if there’s a cross-border issue. So, generally they want to keep it here I think. Do you agree with that?

 

Andy Wilson: Yeah, yeah totally. And like I said, most often a non-issue, but it depends.

 

John W. Simek: The great lawyer answered, they hate that depends.

 

Sharon D. Nelson: It’s a non-issue till it’s an issue, that’s the problem with that. Yeah, they don’t like that depends, but it’s what they say all the time by rote, that’s okay, I’ve got that down too. So in legal what areas are seeing the most impact from the cloud?

 

Andy Wilson: Well, wherever the biggest waste is, that’s one way to look at it, what can be automated? So obviously e-discovery I’m biased because I’m in that world all day. But there’s other areas too, contract analysis, M&A bill review, those things used to cost a fortune. I mean, they still do, but the cloud is eating away of that through automation.

 

You mentioned Clio just now, practice management software, that’s eating away at what consultants used to charge back-end IP consultants that kind of thing. So wherever the biggest inefficiencies are, the cloud and the services that are built there are going to attack, e-discovery is one of the biggest ones and that’s why you’re seeing a lot of money go into those kinds of companies.

 

Sharon D. Nelson: What is it doing precisely to the large e-discovery ecosystem?

 

Andy Wilson: It’s expanding it for one, like as an example our mission is to democratize discovery because we’ve always felt that it’s ridiculous that this thing is so expensive and inaccessible to a vast majority of people that actually need it. So let’s actually make it accessible everybody contouring the upside down.

 

So you actually — you see expansion into people that can now use it because it’s affordable and you also see contraction. So in the — let’s call the e-discovery vendor space. Historically, the way to get e-discovery done was by picking up the phone and calling a vendor and saying, hey, I’ve got this data, emails, whatever and I need to review it and produce it by two weeks from now, I don’t know. Can you help me? And so you’d shift the day at this vendor and they would put it to their process and their people and their software not that they built the software but probably license from some other technology provider, and then they do all the work for you. So, very manual tasks, very, very expensive. That fueled a lot of the $10 billion-plus e-discovery market today.

 

Well, what happens when 80 to 90% network is automated, that’s what’s happening in the cloud. So that’s where the contraction is happening, where now you don’t necessarily need to call that person every time because as it turns out, vast majority of matters that involve some kind of discovery are not huge about the farm cases. It’s not the stuff you read about in ‘The Wall Street Journal’, it’s a public records response or an internal investigation or an employment litigation and you’re dealing with maybe a couple of people’s data, not a huge set of data but it’s still cumbersome to go through and you don’t want to rely on somebody else to do that if you can use a service provider or an automated service to do it for you.

 

(00:19:56)

 

So I think that’s going to step — you’re going to see expansion in the market through people being able to adopt these tools they couldn’t before, and you’re also going to see contraction in the market from the automation.

 

John W. Simek: Andy, what are your thoughts about big law and the impact there?

 

Andy Wilson: I think the impact of big law could be substantial depending on where you’re getting your money from. I mean, historically things like document review were cash cows, you put ten associates on a document review charging $300-$400 an hour and you’re going to make a lot of money.

 

So what happens when that kind of pyramid business model gets disrupted through cloud automation where now one person can do the job of ten or a hundred people, that’s pretty problematic to deal with.

 

Now, there’s certain large law firms that are seeing this and they’re addressing it head on and changing their cost model and trying to align their prices with value delivered to their clients and not trying to turn over every stone or review every single document. But I would say that’s the exception not the norm. Most of the Am Law 250 I’m guessing maybe they don’t even see that this is a problem yet, but it will be before they know. A lot of these large document review type of cases will be automated by some way, shape or form, and that’s going to eat into their revenue model.

 

Sharon D. Nelson: I can already see the face plants taking place. Because you’re right, it has been a cash cow forever.

 

Let’s go in the other direction. Talk to me about the solo and small market, what’s going to happen to them? Where’s the impact for the solo and small market?

 

Andy Wilson: I think for the ones that see this as a huge opportunity to be bigger than they are virtually, I think they’re going to do incredibly well. It’s probably never been a better time to be a small law firm than it is today. Mainly due to the innovation that’s happening in the cloud, you don’t even need an office anymore, you can work wherever you want.

 

If you’re doing these kind of document review like projects, you could have virtual staff all around the world charging a fraction of the fraction of, you know what, you expect to pay at a large law firm, and all the other tools that are being created to facilitate the functions of a law firm; matter management tools, e-billing, note-taking, I mean, you name it, like there’s so many tools that are cheap and available and fast and they’re probably in many ways much faster than what the larger competition has, because they are unfortunately in a position where they’ve invested so much dollars into the legacy systems and people where they’re kind of stuck. They have got this sunk cost fallacy problem, and the smaller firms are a lot more nimble and probably chip away at some of this lucrative work that used to go to the large law firms.

 

Sharon D. Nelson: Yeah, I think that’s really true, and even some of the folks in big law who kind of went out. We had a gentleman with big law who became kind of a big solo, if you will, and when he came to us he basically said, I’ve got this great house on a mountain. He said, you guys build me whatever I need for technology and I’m just going to live on the mountain and practice law, and that’s how they’re pretty good to us.

 

Andy Wilson: Perfect, yeah.

 

Sharon D. Nelson: And he had figured out really how to do what you’re saying, how to leverage the cloud in many ways, so that was great.

 

Andy Wilson: Yeah, I think when stories like that continue to get promoted, more people are going to take the risk, because lawyers benefit from not having — they don’t have non-competes, so if they leave this big firm and they happen to take their client with them, good luck, the big firms can’t really do much about that, and not in all cases of course, but that’s going to — if I can get more of the profits in my pocket and not have to distribute it across all the different partners, that sounds pretty good. And the cloud I think is enabling a lot.

 

Sharon D. Nelson: And to live on a mountain, that sounds pretty good to me too.

 

Andy Wilson: Yeah, live in the clouds, if you will.

 

John W. Simek: So, last one, Andy, get your crystal ball out and tell us a little bit about what you think is coming next for the cloud and legal?

 

Andy Wilson: I think it’s really early days. I think it’s very early days in the cloud, but one of the interesting things that I think is going to happen, as the cloud gets more adoption, in all areas, not just legal, you’re going to build up these big piles of data. And why is that important? Well, the bigger the pile the more insights you can glean from that pile.

 

So we all hear about AI today which is really just Machine Learning. Well, if you think about data as it relates to Machine Learning, data is essentially oxygen to a Machine Learning algorithm, and so the more oxygen you feed it the better it’s going to be.

 

(00:24:59)

 

So where the logical conclusion goes is, as these clouds get more-and-more adoption, you’re going to build up these data troves that you can sit Machine Learning algorithms on to do a lot more predictive modeling on behalf of customers.

 

Let’s take for example, discovery, which is that what I know, but this can be applied to pretty much anything. In the future you will have a model where the software will be so good that it can recommend which law firm — and if you’re a corporate client as an example or corporate customer, which law firm you should use for this specific type of matter based on historical data from your own use and the law firm’s use as well, aggregated across the Board?

 

So, I think you’re going to see a lot more. It’s kind of right. You asked me a prediction question, I’m basically telling you that’s going to be more prediction through the cloud, and that’s going to happen everywhere. Just more suggestion, more ways to just get out of the way so that lawyers can do their work for their clients better faster and hopefully cheaper to deliver better outcomes.

 

Sharon D. Nelson: Well, we sure want to thank you for being our guest today, Andy. We happily go back a long way and I think we’ve both always seen you as a kind of visionary for e-discovery, bit of a profit there and I know your expertise is sought after by many.

 

So we certainly appreciate this look at particularly the cloud and e-discovery, that’s very helpful for a lot of people who don’t really understand what e-discovery and the cloud have to do or some of the opportunities of the cloud.

 

And last but not least, I want to thank you for sponsoring our podcast. We appreciate Logikcull as a sponsor and so we were particularly tickled that it gave us a reason to circle back and have a good conversation with you. So thank you very much for being with us today.

 

Andy Wilson: Happy to be here. Thanks for having me.

 

John W. Simek: Well, that does it for this edition of Digital Detectives. And remember, you can subscribe to all the editions of this podcast at legaltalknetwork.com or in Apple Podcasts, and if you enjoyed our podcast, please rate us on Apple Podcasts.

 

Sharon D. Nelson: And you can find out more about Sensei’s digital forensics technology, and cybersecurity services at senseient.com.

 

We will see you next time on Digital Detectives.

 

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Outro: Thanks for listening to Digital Detectives on the Legal Talk Network. Check out some of our other podcasts on legaltalknetwork.com and in iTunes.

 

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