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Speaker 1: Welcome to a special edition of Fear and Greed. Q

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Speaker 1: and A. I'm Sean Aylmer. We've been working with legal

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Speaker 1: tech group CLEO at its Innovate Legal twenty twenty five

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Speaker 1: conference held earlier this week. The summit focused on practical

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Speaker 1: innovation in the legal industry, focusing on bold ideas and

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Speaker 1: insights for the rapidly evolving profession. As part of the conference,

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Speaker 1: I interviewed CLEO founder Jack Newton and founder of Scalable

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Speaker 1: Law Carolee Fontanelli about the importance of data portability and

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Speaker 1: the need for law firms to work with partners that

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Speaker 1: allow them access to their data and information. The following

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Speaker 1: discussion is a recording of that session.

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Speaker 2: Good afternoon, everyone, Welcome to this special recording of Fear

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Speaker 2: and Greed at Cleo's Innovate Legal twenty twenty five VET.

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Speaker 2: We're appening up today's discussion with some breaking news for EXCU.

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Speaker 2: I think CLEO has today launched research that reveals an

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Speaker 2: alarming trend in the Australian legal sector, a situation we're

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Speaker 2: calling the data lockin crisis. On our panel today we

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Speaker 2: have CLEO CEO and founder Jack Newton and Carly Fontanelle,

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Speaker 2: founder and director at a Scalable Law Let's jump into it,

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Speaker 2: the data jack. One in three Australian law firms face

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Speaker 2: an average cost of twenty five thousand dollars and month

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Speaker 2: long delays just to access their own data when leaving

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Speaker 2: a vendor, which really surprised me that that could actually

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Speaker 2: be the truth of the matter. What's the truth scale

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Speaker 2: of this data lock in crisis? Why is it so

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Speaker 2: prevalent right now in legal tech?

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Speaker 3: Well?

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Speaker 4: As the data highlights, this isn't an isolated issue. It's

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Speaker 4: a pervasive problem. And especially in the context of legal data,

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Speaker 4: this is ultimately data that belongs to the end client

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Speaker 4: who is having legal services delivered to them, and so

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Speaker 4: any vendor trying to create friction around exporting that data

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Speaker 4: is ultimately undermining that the clients writes that data and

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Speaker 4: obviously the law firms flexibility in choosing the system that

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Speaker 4: they choose to host that data in as well. So

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Speaker 4: we at CLEO have a philosophy and approach where data

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Speaker 4: portability is fundamental and we believe that a law firm

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Speaker 4: should be able to export data out of CLEO at

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Speaker 4: free will in open formats that can be imported into

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Speaker 4: other systems at a time of their choosing, And the

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Speaker 4: way you want to create recurring clients that choose to

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Speaker 4: renew with you every every month is by delivering a

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Speaker 4: terrific product in a terrific service, not by creating friction

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Speaker 4: around exporting your data and trying to get data.

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Speaker 3: Out of a system.

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Speaker 4: And that, frankly is the way I think every software

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Speaker 4: provider should should operate, because creating data lock in just

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Speaker 4: creates a ton of negative downstream impacts both for law

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Speaker 4: firms and for clients.

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Speaker 1: How didn't we arrive here? Why are we in this

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Speaker 1: situation now?

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Speaker 3: Well?

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Speaker 4: I think it's frankly the result of some companies taking

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Speaker 4: a very short term orientation and perspective on how they

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Speaker 4: approach business. And the right long term approach I think

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Speaker 4: for the industry is to create data portability and to

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Speaker 4: have a common set of standards for data portability that

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Speaker 4: allows data to freely.

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Speaker 3: Interchange between systems.

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Speaker 4: And again, law firms requirements may change from time to time.

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Speaker 4: They may have their practice evolve or change in no

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Speaker 4: way that would make one system a better choice for

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Speaker 4: them today that maybe wasn't the right choice for them

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Speaker 4: three or four years ago, And as a software provider,

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Speaker 4: I think ultimately it's incumbent on you to create that

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Speaker 4: flexibility for your clients to choose whatever system they want

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Speaker 4: to use, and that.

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Speaker 3: Will go both ways.

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Speaker 4: By the way, You'll have people that end up choosing

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Speaker 4: your system as the destination of choice for their data

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Speaker 4: and will bring their data to your system. And ultimately,

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Speaker 4: I think it's better for the industry as a whole

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Speaker 4: to be cooperative and to offer free and easy data

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Speaker 4: exchange between products and as much data portability as possible

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Speaker 4: as opposed to, like I said at the beginning, a

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Speaker 4: more short term orientation that again is maybe maximizing in

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Speaker 4: the short term, which is saying we're going to lock

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Speaker 4: your data in, We're going to create a ton of

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Speaker 4: friction to get your data out of our platform.

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Speaker 3: But the negative downstream effects that.

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Speaker 4: Has and the amount of trust it undermines in software

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Speaker 4: vendors more broadly, I think pays a very negative deviat

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Speaker 4: over the long term.

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Speaker 2: Currently you've lived this is that correct? Maybe you can

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Speaker 2: take us back to that moment when you discovered that

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Speaker 2: those acids that you own weren't yours, or they were yours,

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Speaker 2: but you couldn't get to.

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Speaker 5: Them yes, So we were with the same company since

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Speaker 5: two thousand and nine. I didn't know anyone at the

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Speaker 5: company except they would call at renewal about a month

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Speaker 5: out to make sure that we were locked in for

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Speaker 5: another three years. And over time that started to wear

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Speaker 5: pretty thin thin with me, and around twenty sixteen, I thought,

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Speaker 5: I've got to get into a different practice management software.

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Speaker 5: But there's for a small law firm, there's a fear

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Speaker 5: about what the hassle is going to be, how much

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Speaker 5: that cost is going to be, and of course there's

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Speaker 5: murmurings in the industry and we know that this is

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Speaker 5: what happens, and it makes it super expensive for a

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Speaker 5: small to medium sized firm to actually make the change.

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Speaker 5: And I didn't see that there was a vendor in

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Speaker 5: the market that was particularly any better or different until

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Speaker 5: I went to Cleocon in twenty twenty four and twenty

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Speaker 5: twenty two in Nashville and I met the team at

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Speaker 5: CLEO and CLEO at the time wasn't properly down in

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Speaker 5: Australia yet, but I was very excited to learn that

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Speaker 5: it was coming to Australia and that they weren't locking

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Speaker 5: you in, which made a huge difference because what it

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Speaker 5: means is that, you know, as a scaling firm, you know,

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Speaker 5: you might have a team of fifteen that might drop

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Speaker 5: down to a team of thirteen, and then you've got

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Speaker 5: two licenses sitting there, for example. So it's not just

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Speaker 5: that you're locked into that product, you're actually locked into

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Speaker 5: licenses as well, and it makes it really unscalable. They're

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Speaker 5: not prepared to work with you as your firm grows,

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Speaker 5: and because firms don't grow on a straight up trajectory

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Speaker 5: like we hoped they would, they grow and ebbs and flows.

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Speaker 1: So were you.

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Speaker 2: Aware of it the whole time that you were with

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Speaker 2: this other firm? That was something you should have done

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Speaker 2: something about, But whether you were running the business, whether

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Speaker 2: you were growing the business, sometimes it's.

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Speaker 1: Just too hard.

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Speaker 5: I don't think in two thousand and nine. You know,

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Speaker 5: practice management softwarees have evolved a lot since then, but

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Speaker 5: I don't think it was something we were aware when

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Speaker 5: we first signed up with them. But it certainly became,

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Speaker 5: you know, you became aware that your data was going

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Speaker 5: to be very difficult to extract or very expensive to extract.

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Speaker 5: And just to be clear, it's it's not your the

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Speaker 5: data you're you're allowed to take your the data. You're

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Speaker 5: not allowed to take the documents. So that's what became

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Speaker 5: very difficult to get out. And as a law firm.

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Speaker 1: You can't.

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Speaker 5: So you know, you have the option of leaving the

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Speaker 5: documents in that practice management software and paying the fee

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Speaker 5: for the next seven years until your documents expire. But

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Speaker 5: then you've got two systems, and I know firms that

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Speaker 5: are doing that and it's just very awkward. Or you

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Speaker 5: can pay them a whole lot of money to get

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Speaker 5: your data. There are other options, but it's risky and difficult, a.

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Speaker 1: Familiar story, Jack.

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Speaker 3: Yeah.

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Speaker 4: We we've surveyed. We surveyed over one thousand lawyers on

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Speaker 4: this specific issue, and seventy one percent of the lawyers

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Speaker 4: we surveyed had experienced this kind of data hostage situation.

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Speaker 4: And you know that that's just a crazy statistic in

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Speaker 4: my mind. You know, there's a clear super majority of

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Speaker 4: lawyers that have experienced this in some way, shape or form.

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Speaker 3: We so we see this really.

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Speaker 4: As a as a crisis, and it's it's one that

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Speaker 4: is creating an unreasonable amount of headache and friction for

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Speaker 4: law firms and for clients alike.

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Speaker 3: And again, I think it would be one thing if you.

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Speaker 4: Said this is an isolated issue that that impacts you know,

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Speaker 4: a very small minority of law firms or small minority

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Speaker 4: of of lawyers, or if there's a very small minority

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Speaker 4: of software providers that were engaging in these pretty clear

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Speaker 4: customer hostile tactics.

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Speaker 3: But it's common practice, and I think what is truly.

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Speaker 4: Insane to me is that it's become almost normalized when

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Speaker 4: when I do think it's a fundamental right of lawyers

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Speaker 4: and law firms to have access to this data on

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Speaker 4: an unfettered basis and to have the right to be

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Speaker 4: able to port that data to an alternative provider if

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Speaker 4: that's the choice they make.

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Speaker 2: I mean, I'm sure one hundred percent of the lawyers

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Speaker 2: in this room understand this fully, But in the broad

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Speaker 2: world out there, do all lawyers understand what you're talking

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Speaker 2: about data portability?

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Speaker 4: Well, again, in this survey, we saw that there's actually

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Speaker 4: pretty good understanding of what data portability means. Eighty four

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Speaker 4: percent of the lawyers we surveyed understood the concept of

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Speaker 4: data portability and what that meant for their software applications.

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Speaker 4: But what was very interesting, and I think again, there's

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Speaker 4: a lack of transparency around this on software providers parts.

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Speaker 4: Only fifty two percent of the lawyers we surveyed were

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Speaker 4: able to actually identify whether their current software provider would

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Speaker 4: enable that data portability should they need it. And again

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Speaker 4: it's something that very few software providers advertise or having

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Speaker 4: their support documents or have outlined in any kind of

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Speaker 4: frequently asked questions document.

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Speaker 3: It's something that you might have.

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Speaker 4: To ask very specifically what the export and data portability

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Speaker 4: capabilities are. And then even then you need to make

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Speaker 4: sure that you can actually test that data portability, because again,

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Speaker 4: you might just have a salesperson telling you what you

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Speaker 4: want to hear and say, oh, of course you can

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Speaker 4: export your data.

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Speaker 3: But as I'm sure you.

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Speaker 4: Found out, you often don't truly find out how portable

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Speaker 4: that data is until you get down to the brass

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Speaker 4: tax of actually having to undertake that data export. And

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Speaker 4: we've even seen situations where the data starts out being.

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Speaker 3: Portable, the provider notices.

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Speaker 4: That the data is being exported and then actively injects

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Speaker 4: itself to limit the data export rate or to otherwise

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Speaker 4: create barriers around a data exports. It's really almost a

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Speaker 4: very deliberate effort to keep the data captive and in

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Speaker 4: turn to keep the customer captive.

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Speaker 2: And if I'm I mean everything I've heard today, if

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Speaker 2: I'm a law firm and I want to innovate and

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Speaker 2: i want to change with the.

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Speaker 1: Times, then I'm running into a roadblock brought up front.

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Speaker 3: That's right.

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Speaker 4: There's structural roadblocks and very deliberate efforts to create friction

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Speaker 4: around customer movement and to essentially entrap customers in their

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Speaker 4: current solution. And this is such a stark problem that

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Speaker 4: there have been class action lawsuits filed against some of

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Speaker 4: these providers in a variety of different jurisdictions around both

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Speaker 4: abusive contract practices as well as overly restrictive data portability capabilities.

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Speaker 1: Currently. So what did you do tell us the rest

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Speaker 1: of the story.

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Speaker 5: Well, the first thing that we did was I made

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Speaker 5: sure that I put in my diary when my license

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Speaker 5: was going to be expiring, so that I knew that

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Speaker 5: we were coming up to that time. And so twelve

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Speaker 5: months out we started planning, which I think is so

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Speaker 5: important and just a message for everyone. Anyone who wants

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Speaker 5: to move to Clio, you want to make sure that

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Speaker 5: you've got a really long runway, don't leave it till

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Speaker 5: like two months out. It's just not enough time. Our

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Speaker 5: firm had fifteen licenses, and we got a migration specialist

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Speaker 5: to help us, David from New Law. He's here today.

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Speaker 5: You definitely need that assistance if you have got as

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Speaker 5: much data and documents as we have. So we got

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Speaker 5: ourselves set up really nicely nearly a year out, and

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Speaker 5: then we started. We did the migration of the basic data,

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Speaker 5: which is the names, like how you open a matter,

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Speaker 5: basically all of that kind of thing. That was no issue,

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Speaker 5: and then we started migrating out some of the documents

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Speaker 5: and over a weekend, so you need to do it

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Speaker 5: while you're not in practice, and then our whole system

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Speaker 5: would shut down and we weren't allowed to access some

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Speaker 5: of our licenses, so we'd have to make a phone

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Speaker 5: call to get our system turned back on so that

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Speaker 5: we can practice law on Monday, and they would express that,

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Speaker 5: you know, we weren't to be extracting our documents more

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Speaker 5: than ninety nine documents at a time. My firm had

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Speaker 5: over five hundred thousand documents to extract, so it was

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Speaker 5: very very challenging, and we tried that again and again

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Speaker 5: and again and again and again. We would have to

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Speaker 5: make that phone call to try and get our license

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Speaker 5: back on track with them so that we could keep

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Speaker 5: practicing while we were trying to do the migration. It

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Speaker 5: got to a point that I looked at other options.

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Speaker 5: There are other options. You can extract ninety nine documents

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Speaker 5: at a time. I calculated that and worked out how

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Speaker 5: long that would physically take to do, and it was

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Speaker 5: actually ridiculous.

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Speaker 3: And I was.

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Speaker 1: So annoyed.

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Speaker 5: At what was happening that I thought I would rather

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Speaker 5: pay someone somewhere to do that for me than to

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Speaker 5: pay them to do a five minute job. And I

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Speaker 5: did look at that, but it's after calculating it, it

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Speaker 5: just wasn't practical. And it also left us at risk

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Speaker 5: because what if, in us doing that one hundred documents

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Speaker 5: at a time or ninety nine documents at a time,

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Speaker 5: we lost some documents or something like that, because that

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Speaker 5: could easily have because you're not doing it cleanly. But

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Speaker 5: we didn't have the opportunity to do that cleanly at all.

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Speaker 5: And so, with very griffied teeth, I signed a check

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Speaker 5: or paid the bill to get the documents extracted. Our

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Speaker 5: bill was not twenty five thousand, It was about sixteen thousand,

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Speaker 5: but yeah, just really quite mad about it.

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Speaker 1: So when you went to Clail, or you go to

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Speaker 1: any new legal tech vendor, what are the questions you're

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Speaker 1: asking now?

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Speaker 5: Then? Oh, absolutely, and not just with you know, like

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Speaker 5: your legal tech, but also things like running your Google ads.

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Speaker 5: I've been caught out on things like that as well.

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Speaker 5: Make sure it's yours and that you have, you know

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Speaker 5: the ability to do with it what you need to

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Speaker 5: in order to run your firm. And yeah, so that

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Speaker 5: was definitely something massively appealing about Cleo is that that's

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Speaker 5: made really clear, as well as the fact that you

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Speaker 5: can you know, you can leave any time you're not

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Speaker 5: held hostage. But it's such a great product, and you know,

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Speaker 5: the company itself has such an awesome culture and their

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Speaker 5: teams and also as customers that you're not wanting to

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Speaker 5: move on from them anyway.

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Speaker 2: So Jack bringing this together in terms of the industry

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Speaker 2: as a whole, what's the sort of standard that it

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Speaker 2: should have going forward?

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Speaker 4: Well, I think it sounds so straightforward, it should be obvious,

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Speaker 4: but it's not, unfortunately, But I think it's really clear

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Speaker 4: that the fundamental data ownership lies with the customer, not

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Speaker 4: the software provider. And that is your data, and you

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Speaker 4: have the right to that data on an unfettered, unrestricted,

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Speaker 4: governed basis, meaning that if you to extract all of

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Speaker 4: that data to do whatever you want with it, that

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Speaker 4: should be a fundamental right. And by the way, we

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Speaker 4: talked about this in the context of this conversation around

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Speaker 4: accessing the data in the context of needing it for

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Speaker 4: data portability to another software provider, but there are a

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Speaker 4: wide variety of other use cases that could make sense

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Speaker 4: for why you would want to do that. You may

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Speaker 4: want to export the data to train your own AI

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Speaker 4: model on that data. You may want to do some

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Speaker 4: sophisticated modeling or reporting on that data. You may want

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Speaker 4: to use that data in a wide variety of context

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Speaker 4: that extracting it in an open standard format that can

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Speaker 4: be parson interpreted by a wide variety of other software products,

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Speaker 4: again is something I think obviously should be the right

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Speaker 4: of the law firm that owns that data, especially in

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Speaker 4: the context of legal data, where again it's not so

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Speaker 4: much the law firm that owns that data, but at

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Speaker 4: the end of the day, the client is the rightful

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Speaker 4: owner of that data, and the law firm and the

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Speaker 4: software provider in turn, are just stewards of that data

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Speaker 4: on behalf of the client and have fiduciary duties to

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Speaker 4: that client to be able to produce that data for

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Speaker 4: some fixed amount of time, often on the order of

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Speaker 4: seven years, so that data portability is absolutely essential. I

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Speaker 4: would like to see the emergence of a standard set

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Speaker 4: of document formats that are used for data portability and

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Speaker 4: a standard set of expectations, and maybe even a designation

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Speaker 4: that a software provider could show to indicate they subscribe

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Speaker 4: to a certain set of standards relating to data portability,

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Speaker 4: because again, this transparency around how portable your data is

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Speaker 4: is really tricky, and the best you can do, short

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Speaker 4: of a set of standards guaranteeing access to that data

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Speaker 4: is to actually test the data export capabilities. So this

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Speaker 4: is this is almost like entering a pre nup with

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Speaker 4: your software provider of choice, where I think part of

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Speaker 4: that that agreement needs to be you want either contractual

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Speaker 4: guarantees or technical guarantees that you can export your data.

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Speaker 4: And then you want, you know, as part of the

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Speaker 4: sign up process again ask for a demonstration of how

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Speaker 4: you can export your data and get it out of

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Speaker 4: that system. And and again I think that's that's where

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Speaker 4: you'll be able to separate the providers who truly are

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Speaker 4: committed to data portability from those that are are not,

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Speaker 4: because the ones that are not will tell you, well, well,

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Speaker 4: we'll cross that bridge when we come to it, and

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Speaker 4: we will get you your data. But it might be

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Speaker 4: a process versus a company that should just be able

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Speaker 4: to point you to a data export page on their

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Speaker 4: website that allows you to export your data on demand.

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Speaker 4: At Kleio, we even have of what we call a

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Speaker 4: Data s Grow service where our customers can point cleo

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Speaker 4: to an Amazon S three bucket and every night we

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Speaker 4: will replicate their data to that S three bucket to

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Speaker 4: guarantee them of an ongoing backup of their data in

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Speaker 4: a set of open data formats that again they can

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Speaker 4: use for any purpose they want. Now, short of companies

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Speaker 4: just self governing on this front, there are some promising

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Speaker 4: standards and expectations and laws being issued in a number

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Speaker 4: of jurisdictions. There's a set of new regulations emerging in

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Speaker 4: the EU that will demand data portability of software providers,

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Speaker 4: and in the space of thirty days, you'll be required

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Speaker 4: to produce a high fidelity export of client data by

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Speaker 4: twenty twenty seven. So above and beyond encouraging this good

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Speaker 4: behavior from software, provide to the extent you can influence

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Speaker 4: Australian legislation. I think there's a call to action for

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Speaker 4: the people in this room and the people listening to

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Speaker 4: this podcast to think about how can we influence a

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Speaker 4: regulatory landscape that will mandate this, Because again, I think

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Speaker 4: this is a set of fundamental rights that we all,

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Speaker 4: as consumers of these digital services, should have to access

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Speaker 4: our own data in a set of open formats that

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Speaker 4: allow us to back up that data, to leverage that

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Speaker 4: data for whatever purpose we want, or to leverage that

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Speaker 4: data into a new platform of our choice.

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Speaker 1: That's not just the legal issue either though, is it.

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Speaker 3: No.

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Speaker 4: No, I think it's exacerbated in the legal industry and

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Speaker 4: in particular in Australia when we look at these statistics

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Speaker 4: around the majority of people that have experienced friction around this,

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Speaker 4: I think we've got, unfortunately a marketplace here where these

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Speaker 4: customer hostile practices are the norm rather than the exception.

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Speaker 4: But I think this applies to our digital footprint overall.

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Speaker 3: We should have the right to access our data.

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Speaker 4: On whichever excuse me, whichever platform we happen to be utilizing,

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Speaker 4: and our legal software applications are just a subset of

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Speaker 4: those applications that we should have that expectation of.

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Speaker 1: That was CLEO founder Jack Newton and founder of Scalable

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Speaker 1: Law currently Fontanelle, in conversation at the CLEO Innovate Legal

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Speaker 1: twenty twenty five conference. You've been listening to a special

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Speaker 1: edition of Few and Greed Q and DAT