Stephen McGarry, B.A., M.A., J.D., and LL.M. (Taxation), founded World Services Group (WSG), a multidisciplinary network, in 2002. As president, he grew it to 150 firms that have 21,000 professionals in 600 offices in more than 100 countries. In 1989 McGarry founded Lex Mundi, the world’s largest law firm network. As president, he grew it to 160 law firms that today have 21,000 attorneys in 600 offices in 100-plus countries. These two networks represent 2 percent of all the lawyers on earth. In 1995, he founded HG.org, one of the first legal websites. Today, it is among the world’s largest sites with more than five million pages and 900,000 users each month who download almost two million pages. McGarry is admitted by exam to the bars of Minnesota, Texas, and Louisiana. In 2002, American Lawyer Media (ALM) published McGarry’s treatise on Multidisciplinary Practices. McGarry has authored numerous articles on associations and international business transactions.

Introduction

All businesses comprise a pool of financial and human capital that creates a product or performs a service. This capital can be configured in an unlimited number of ways to achieve specific objectives for the service provider or manufacturer. With professional services, objectives are achieved via a controlled entity, such as an accounting or law firm, and membership in an association of independent service providers. These associations are commonly referred to as professional services networks or associations.

Law firm organizations are defined by elements of purpose, structure, and process.[1] The purpose of a network is different from that of a company or professional firm in that it is limited to specific activities that will benefit its members and enhance its performance. Within the network, they can operate to pursue their interests. These interests can include referrals, joint venturing, access to expertise, developing regional expertise, publishing articles for clients, branding, technical information exchange, market positioning, pro bono services, and more.

Beyond the objective of a law firm network is the need to create a framework with the potential to allow the members to expand their services. The network’s structure reflects the activities it seeks to promote and the underlying cultures of the members. The scope of these interests is defined not by the members, but by the network. Therefore, each network must be different.

One of the major factors influencing the need for networks is the globalization of the economy. Supply and demand are no longer local. The price of commodities is affected by a number of uncontrollable factors such as the weather halfway across the world or by demand in developing countries. In a market where production takes place wherever utilization of assets and human resources occur most effectively, professional services providers need to represent their clients globally. Networks are the only practical method to accomplish these objectives.

A network is more than a support organization or collaborative framework in which the members can meet clients’ needs. It is an entity entrusted with a common corporate identity. Though the network and not the members own the logo and brand, the network name can establish and represent a standard required of all its members. Consequently, membership in the network creates a global corporate identity. The goal of this identity is network participation that will ultimately translate into business for the individual independent members.

From a theoretical point of view, networks are an effective model and a powerful system of enhancing services. The members and the networks are different parts of the resource equation for providing members seamless and high-quality local and global services. There is no real limit to what can be accomplished through a network when the network and its membership work together. This collaboration is at the heart of the network.

Why Do Firms Join?

When asked why they joined, members usually state tangible reasons: to receive referrals from other members; to have reliable firms to which they can refer; to maintain independence; to meet clients’ needs; to retain existing clients by being able to provide services in other states or countries; and to use the membership to obtain new clients in their market.

They also join for intangible reasons. In today’s world, change is both constant and accelerating. Therefore, having access to other members can be important. A network helps to reduce the degree of uncertainty by bringing together a greater number of specialized resources to work on a problem. In addition to facilitating the exchange of knowledge that can reduce risks in firm operations, network memberships also reduce possible loss through burden sharing. Membership is a proactive way to profit from change and, at the same time, conserve resources. Membership can enhance the prestige of the member by being associated with prestigious firms that the client already uses.

Networks achieve these objectives in a way that is very different from corporate structures in which executives have command and control. Networks emphasize reputations, commitments, and trust of each member.[2] In networks, there is collaboration between members and the network’s staff. Personal motivations move the network development forward.[3] However, personal motivations can also impede forward momentum. 

Law Firm Networks – History

There were two distinct and different reasons for networks developing in the legal profession. The first was internationalization, which became globalization.[4] Law firms simply needed international connections. The second was the expansion of a number of large United States firms who pushed to become “national.” Smaller firms or firms with a niche practice required this same expertise in other states.

Internationalization of the legal profession began much later than in accounting firms.[5] There was no real need because, unlike the accounting firms that conducted worldwide audits, law firms in each country were equipped to deal with client matters. This changed in 1949 when Baker McKenzie began to expand to non-United States markets to assist U.S. clients trying to expand overseas following WWII.[6] The first step was establishing correspondent relationships with firms outside of the United States. This was necessary in that many countries would not permit a law firm to operate without a local name.[7]

The Need for Global Networks[8]

Internationalization was slow to start because the legal profession was much more restrictive than accounting in allowing foreign firms to enter and practice in their countries. There were rules requiring that the names of the partners be present in the name of the firm. As a firm expanded, it began to use its name when possible in as many countries as commercially feasible. The purpose was the same as in accounting: establish a brand and attract clients to it. The downsides were that the legal profession looked down at the Baker McKenzie model and its own competition pejoratively characterized Baker McKenzie as a franchise.[9] The forces of the international community converged in the late 1980s. American and English firms began establishing branches in the primary commercial centers. This niche competition in local markets had the immediate effect of forcing local firms to evaluate alternative ways of providing services to their international clients.

Law firms, like the accounting firms, were looking for niche markets. The difference was that U.S. law firms focused internationally on a niche market. In the 1970s, niche markets focused on serving financial services and then branched out to clients in manufacturing.[10] The result today is that more than 100 United States law firms have offices outside of the country.[11] However, the reality is that internationalization is very limited among U.S. law firms — among the largest 100, the average has five overseas offices.[12]

The New York and London firms that opened offices at first generally did not practice local law, so the regional firms were protected and received referrals on local matters. This also changed as the number of branches increased and the firms indigenized. With the advent of legal advertising, U.S. firms gained the opportunity to market their services in the U.S. and, as a result, indirectly began to market themselves in each of the countries where they had offices. Local bars to which attorneys received their licenses had severe restriction on their own firms that were not lifted until very much later.[13] For example, local partners and associates were required to be citizens and to be admitted to the bar where they practiced. Naturally, when foreign firms began to meet these criteria, local firms became concerned. The result was a need for local firms to band together, and networks became tools to compete against the much larger intruders to address this expansion. In fact, the first network of local firms came about primarily as a result of the invasion by London and New York firms.

Networks can be evaluated at different by the level of organization and activities pursued by the network. There are four levels. In the legal profession, there are no Level 4 networks unless you count the large international firms now organized as Swiss vereins as networks. A case can be made for this development.

Level 1 international networks, called clubs, generally consist of 10 firms in different countries.[14] The typical format consists of holding several meetings a year among managing partners to discuss management and market-related issues. Secrecy shrouded the networks because the members feared losing business from other firms if they knew of these networks.[15] On the other hand, many did not hesitate to advertise to their clients that they had foreign connections and correspondents. Today the clubs are commonly known as “best friend’s networks.” Examples include Leading Counsel Network[16] and Slaughter and May.[17]

Level 2 networks began in the 1980s when the Level 1 clubs evolved into networks. By that time, networks were not as secretive and even published directories, materials, and brochures.[18] The members met annually, and some networks focused on specific practices, such as litigation,[19] while others were more generic. Because networks were not thought of as franchises or strategic models, the membership selection process was not particularly rigorous.[20] Many of the networks that were innovators in the 1980s reached Level 2 and had no intent to develop beyond this level. This is evidenced by the fact that their membership over several decades has not increased, their websites contain no information, their governance depends on the same individuals, and their operations are limited.

Level 3 networks began in 1989 when Lex Mundi was formed.[21] It was the first network that required each member to be one of the largest and most established firms in a state or country. Unlike a Level 2 network where all activities are internal, 50 percent of its activities were external.[22] The list of internal and external activities reflected approximately 30 different items. Another difference existed in Lex Mundi’s operations: It was a network organized around a home office with staff, rather than a staff being assembled after the network was established. Finally, Lex Mundi set itself apart by using collaborative efforts among its personnel, board, councils, and members to achieve the objectives. In essence, Lex Mundi operated as a business that provided members with many alternatives to expand their resources. While different from the accounting network, the concept was that of an entity which provided services to members and should also have an established brand.

Other networks like TerraLex[23] and Meritas[24] soon followed with a similar business-based model. Their stated objective was to create a branded alternative to the large United States and English law firms that had expanded into their countries. These networks were not secret, and all of them have many of the features of Level 3 networks.

U.S. national networks also joined the revolution. The first was the American Law Firm Association, a network that focused primarily on insurance litigation.[25] The second was the State Capital Law Group, which began as a national network of firms dedicated to government affairs.[26] To qualify for membership, a former governor needed to work at the firm. Both of these networks became international and changed their names to ALFA and State Capital Global Legal Network, respectively.

The same national expansion occurred in other regions. For example, there are 80 European-centric networks. Some cover most of Europe, while others focus on a specific region like the Nordic or the CIS. In Canada, national firms have gradually opened offices in most provinces. However, there is a clear demarcation between the two approaches. Canadian firms that did not agree with this strategy joined the better-known networks.

Law firm networks are not all organized by law firms. Some, like the DuPont Legal Network for example, have been organized by corporations.[27] DuPont first established its network in 1992 to consolidate its outside counsel, then generated internal efficiencies by creating a network to which all of the outside counsels were also members.[28] Additionally, networks organized by corporations can exist for other purposes such as offering pro bono services. Thomson Reuters[29] has organized such a foundation that selects law firms that add prestige to its network for membership. It matches experienced firms to work together on projects. Participating firms find unique and priceless motivation through the opportunity to establish new contacts, who will in turn become paying clients, at no financial cost — simply by working on pro bono cases.

With more than 170 already in existence, law firm networks are here to stay. However, networks in the legal profession do not garner the same level of respect found in the field of accounting. One reason could be that the networks were simply a reaction to the initial globalization of large New York and London firms. Additionally, the large law firms have much bigger marketing budgets than networks. Perhaps legal networks remain tarnished because they originated as clubs or even franchises. However, in the light of day, it is now possible to argue that many of the elite law firms are themselves no more than networks.

The world is coming full circle.[30]

Gerry Riskin is a Canadian lawyer and business school graduate with a global reputation as an author, management consultant, and pioneer in the field of professional firm economics and marketing. After winning two Queen Elizabeth Scholarships, he began practicing law in 1973. In 1979, he became a partner with Emery Jamieson and then in 1984 the managing partner of Snyder & Company.

     In 1983, Gerry co-founded The Edge Group, which in January 2001 evolved into Edge International. Over the company’s history it has topped the list in a survey depicting the most popular marketing consultants by major U.S. firms and has been named one of the top three legal consultancies by U.S. managing partners.

     Gerry has served on the Conference Board of Canada, is a visiting fellow of The College of Law in London, a visiting professor at the University of Pretoria in South Africa, and is a fellow of the College of Law Practice Management.

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“We phoned you because we need help,” they’ll say. Those on the other end of this call are typically intelligent, caring lawyers involved in the leadership of their firm. They call with the optimism that maybe you can help. The caution they feel obliged to frequently offer is that the firm had a consultant before, and everyone hated her/him, so it is not clear that it would be safe to bring back another one. Often, I will get a pass because I am a former practicing lawyer and managing partner of an international firm. Maybe I will be safe, after all... It’s far from certain, but possibly worth exploring.

Planning

Many law firms don’t have a plan. Some think they have a plan, but if you ask them what it is, they don’t know. Jargon puts most firms off. If you mention “strategic planning,” many will tell you they tried that six years ago, and it was a complete failure. If we can get the jargon out of the discussion, we find that a firm typically has things it hopes to accomplish. If they believe that you can help them, they are willing to explore possibilities.

Planning is a process. Once the leadership has signed off on the process with the optimism that it will attain its objectives, people tend to cooperate to a significant degree because it seems useful enough, and we avoided calling it “strategic planning.”

Executing the Plan

Everything about a law firm rests upon it being able to achieve its objectives. Individual lawyers are focused on serving their clients; even quality non-billable initiatives take second or third place. Executing the plan is like going to the gym. “I bought the membership... Isn’t that good enough? ... What do you mean, I have to go there? Well, I was going to go, but a client called.”

The good news is that if you have clarity as to the plan and leave the lights on (an expression I like to use with my clients, meaning that they remain aware of where they stand relative to what they want to achieve), you will find that they are very capable of executing the plan, much to the delight of everyone involved.

Accomplishments must be tracked. If you ask even the leadership team what they have achieved over the last year, there is an uncomfortable restlessness as they try to recall specifics.

Teams that keep a running inventory of achievements have much more self-respect and better internal communications. They also have objective improvements to report, like increased profitability.

 Leadership and Management Training

“I'll come to your weekend course if you can teach me to golf like Tiger Woods.” Leadership and management are about taking a group of people for whom you are responsible and making them better than they would have been without you. Yes, managing ferociously independent, critical, and analytical lawyers is worse than herding cats. (Patrick McKenna and I wrote the book “Herding Cats” a long time ago, and I’d be happy to send you a complimentary copy.) Notwithstanding the challenges, leaders who spend some time getting involved with those whom they lead can have a very positive impact on the outcome. In fact, I am aware of a global study that indicates that success is more dependent on the group leader than any other factor.

Training a leader over a weekend is inadequate; the process has to be ongoing for a period of time of a year to 18 months, and has to involve individual feedback based on ongoing performance as a leader.

Performance Enhancement

The managing partners’ lament, “You don’t tell them anything different from what I’ve been telling them for years, but for some reason they listen to you.” (This is where it really helps that I was a managing partner and can completely empathize.)

Performance enhancement fails in most firms because of the “knowing versus doing gap.” As lawyers, we are so cerebral that we think we can solve any problem with the powers of our minds. A delicious discussion is better than a medieval feast.

In order to dramatically enhance the performance of an individual, the individual needs to want to improve. I ask for firm leaders who are offering performance enhancement training to require an email application. It is a short email, and the elements are simple. “Tell me why you want assistance, what you hope to achieve from it, and what the firm will achieve from it. Please touch on your objectives as you answer these questions.”

Firm leaders make the frequent error of saying, “Sally or George really needs this kind of help... I am going to strongly encourage them.” Sally or George will succumb to the pressure and then sabotage the process so subtly that they don't even know they are doing so themselves. Those who show some internal motivation tend to perform magnificently. I can tell you anecdotally that not all, but many of the people who are helped in this way increase their performance to a degree that pleasantly surprises their firms. They also love the process, which is the polar opposite of sabotaging it.

The elements involved in helping an individual enhance performance include:

1) Reducing quantifiable objectives to writing;

2) Exploring whether they need to enhance their substantive expertise;

3) Determining by whom they wish to be better known and then enhance their reputation to those constituencies;

4) Broadening relationships with clients, especially business ones, with whom they have only one connection; and

5) Helping them present more effectively in all contexts including speaking, writing, responding to RFPs, using social media, and more effectively networking at social functions.

Mergers and Competitive Intelligence

“Should we remain local or regional, or should we merge internationally?” It kind of depends. Many firms need help in assessing their position in their respective marketplaces. Most do not have the tools of competitive intelligence or an understanding of the various contexts in which they are practicing and the options that may be available to them. Some of our most satisfying work is finding information relevant to competition, but also addressing appropriate candidates for lateral hire or merger. This is far too complex a subject to go into in any depth here. Suffice to say that some of my proudest moments are those where I have helped prevent a merger that would have been a disaster or prevented a lateral hire that was a poor choice.


Back to the Future

Working with the Florida State Bar and its task forces into the future has immersed me in the disruptive technologies and impact of social media on the legal profession. We have long had important traditions, but external changes are coming at us like bombs in a video game. I seek permission and often am allowed to offer some catalytic information about these changes in order to open the minds of those with whom I am working to get them thinking about how they might strategically prepare for a changing future.

The greatest challenge in advising law firm clients about the future and social media is that the changes are happening so fast. I keep finding myself saying, “Well, that was true two years ago...” For example, does each lawyer need to have a profile on LinkedIn? Five years ago, “no.” Two years ago, “maybe.” Now, “yes.”

We recently sent some information to some senior litigator clients on an Excel worksheet. We were politely reminded that Excel would be a little difficult for most of them, and we should use Word instead. In essence, we were reminded that many lawyers even in the most sophisticated firms are technologically illiterate. I am not making this up. The challenge, therefore, is to help lawyers in a gentle and empathetic way to see ahead of the bow of their ship so that they can contemplate their future transcending what most lawyers have on their minds today.

The Law Firms that Motivate Consultants

The most exciting law firms to work with have some or many of the following attributes: 1) they have leaders who are willing to lead and are not simply trying to avoid criticism from those who elected them; 2) they are imaginative, and delight in thinking of new practice areas and industry configurations aligned to the changing needs of their marketplaces; and 3) they try. It is impossible to help an athlete who remains slumped in a chair... The athlete has to try and try again and again. This affords a good consultant the opportunity to fine-tune the performance and help the athlete attain great results. Lawyers are athletes, too...

An Acknowledgment to the Sophisticated

Many of the largest firms in the world, including those founded in the United Kingdom, have extraordinary internal management resources and deploy them brilliantly. In fact, my own view is that it is because of them that the legal profession has to raise its game and become far more sophisticated in a great hurry. I have the privilege of serving some of these amazing firms, and I’m very grateful to them for allowing me to help, but also for what I learn from them in the process.

Tony Harriss is the Non Executive Director for Law Business Research. Formerly Non-Executive Director of Globe Business Media Group. Established in 1996, Globe is a business-to-business content and connections company, specializing in the legal and intellectual property markets worldwide. It produces market-leading information, data, networking, software, and marketing services for lawyers, C-suite executives, and HR professionals, and their organizations, globally.


 The author would like to thank Alex Morrall, a long-time peer in the legal media industry, and Carolyn Boyle, Globe’s editorial services director, for their invaluable input.

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The Evolution of Legal Publishing: Who Will Survive?

What does the future hold for the legal market and the legal publishing sector?

Will a Korean client 3D-print a chip holding all U.S. case law to plug directly into her neural pathway in a William Gibson-esque 2030?

Will a technology giant such as Google have applied artificial intelligence to merger control regulations worldwide, enabling companies to bypass both law firms and legal publishers?

Perhaps cohorts of micro-bloggers will replace the legal publishing behemoths by delivering niche content to defined audiences funded as law firm marketing exercises, or by micro-revenue streams from Taboola and Google ads?

The sharing economy may take hold, establishing one or many legal wikis that leave publishers disintermediated.

Will lawyers be automated out of existence? Or will it all still just be about getting the right content to the right people at the right time?

Technology — Friend or Foe?

With the application of technology, the publishing industry as a whole is undergoing its biggest revolution since Gutenberg. At the same time, technology, process engineering, and commercial pressures are changing the legal services market beyond recognition. Sitting at the nexus of these two industries, legal publishing has changed dramatically in the last decade and the pace of that change is only set to increase.

Legal publishing is just one trade vertical. Lessons learned in other sectors, such as medical or tax, will be transferred. Major technological developments in another area, when applied to law, may be more powerful than anything yet developed in the legal space.

Legal publishers used to sell textbooks or standard forms in loose-leaf volumes; now users complete online forms about transactions that generate a full suite of documents instantly, while algorithms compare documents in order to look for unusual language. Like many of their mainstream counterparts, legal publishers are reinventing themselves as media technology businesses.

A number of start-ups are challenging the existing models of both law firms and publishers. One of their key philosophies is that knowledge is a commodity, and that it is the management of knowledge — and in particular, the application of technology to it — that creates powerful digital products. As the big data explosion continues at an incredible pace, data scientists look set to be in huge demand at publishers as they present improved ways to analyze, visualize, and curate this endless stream of information.

The bountiful supply of (free) basic legal information and know-how is changing not only how lawyers consume information, but also what they consume.

Perhaps the biggest threat to some publishers comes from technologies that can process vast quantities of information and apply advanced technology to analyze and curate it. CodeX, the Stanford Center for Legal Informatics, is a good example of the kind of initiative that will drive change in the legal technology marketplace. As they put it: “What happens when you combine legal code and computer code?”[1] One business to have emerged from the stable is Ravel Law,[2] which illustrates how tech-powered disruptors can challenge the publishing incumbents. Seeing that cases themselves are just a commodity, Ravel applies analytics and visualizations to the connections between cases, facilitating a more intelligent approach to legal research. 

User Experience

Customers experience powerful and evolving user interfaces every day. They shop online, read the news on a tablet, watch TED Talks, connect with others on LinkedIn, and use countless apps to solve small problems. All of these services combine a customizable experience with some degree of automatic tailoring. Customers are also experiencing the benefits of collaboration through wikis, forums, and listservs; Wikipedia seemed to replace the Encyclopedia Britannica as the default general knowledge bank almost overnight. Publishers will seek to leverage the potential of crowdsourcing opinions and information.

Users bring expectations from those experiences with them to legal publishing. Legal publishers will thus need to provide interactive, granular, and tailored experiences.

The effects of diversified distribution and content are also making themselves felt in the legal sector. Law firms large and small have seized on digital content marketing as the best way to promote themselves to clients and prospects. Blogging platforms, along with content discovery and enrichment tools, are enabling them to publish quickly and effectively on niche topics. Thus far, reliance on word of mouth and social media to grow audiences is limiting their reach, and they are still turning to publishers to tap their intended audience.

The larger publishers with more content and datasets of primary sources will respond with further attempts to become the place to do legal research, slicing and dicing, repurposing, and tailoring their content to meet the needs of as many niche audiences as possible.

But technology is a double-edged sword for publishing companies, representing as much threat as opportunity. The combination of more focused search and abundant free resources online means that, for many lawyers, Google is their starting point for research.

One of the best examples of a publishing model being blindsided by changes in the digital world is Martindale-Hubbell.

Factors Driving Change

·       Rapid change in the legal market. 

·       Continuing globalization of business and regulation. 

·       Big data explosion. 

·       Artificial intelligence and machine learning. 

·       Customer expectations driven by digital experiences. 

·        Increased and potential competition from outside the sector. 

Changes in the Legal Market

As discussed elsewhere in this book, the role of the lawyer is inexorably moving toward that of a business advisor, and further away from document processing and painstaking legal research. Likewise, the type of information and training that lawyers require will change. Law firms are under pressure to charge fees that reflect the value added and avoid reinventing the wheel.

As the disaggregation or unbundling of legal processes, long predicted by Professor Richard Susskind, becomes a reality, publishers are seeing clear opportunities to become integrated in that workflow and provide content at the point of need. Exactly how high up the value chain they sit will depend in large part on how successful they are in applying technology to their content.

One of the best examples of a publisher succeeding by playing a specific role at a key stage of the legal process workflow is Practical Law.[3] It identified major inefficiencies around the production and maintenance of what is essentially generic content, ranging from current awareness to standard contract templates.

By the turn of the millennium, U.K. business law firms had streamlined their processes by employing non-fee earning lawyers to work on their own knowledge management as professional support lawyers (PSLs). This was one of the early examples of firms breaking down their processes and identifying areas that could be handled more efficiently. Librarians and PSLs were charged with providing front-line lawyers with databanks of content that they could use in their practice. Fee earners were given basic resources to which they could apply their skill and experience to add value — for example, in negotiating an agreement rather than drafting it from scratch.

What Practical Law saw then was that there was little difference in much of the output of PSLs among firms. By hiring, replicating, and in some ways improving what these PSLs did, it was able to produce digital products that became integrated in clients’ workflow in a way that made them nearly indispensable.

Without the confluence of process reengineering and technological advances, this would not have been possible.

Publishers like Practical Law, which bring real efficiencies to the table, sit squarely with the growing band of disruptors that are helping to drive change in the legal market (e.g., new model law firms such as Axiom Law,[4] legal process outsourcers (LPOs), and the plethora of e-discovery providers).

As the legal market evolves and the players find their places on the value chain, there will inevitably be competitive tensions between publishers and their largest clients: law firms. Publishers providing powerful but easy-to-use research platforms or automated suites of contracts will rub up against law firms that have not yet embraced change and are focused on what they can do beyond the commoditized and vanilla. The relationships between publishers and LPOs will be interesting to watch as well. LPOs, while offering efficiencies in many areas over law firms or in-house legal teams, currently offer services to clients in some areas where a publisher would instinctively want to offer a product to a much larger set of clients at a lower rate.

Globalization

The continued globalization of international markets and business is another powerful force that is having a major impact on the legal market. In-house counsel at multinational firms must stay on top of an ever-multiplying set of laws and regulations in a growing number of countries. This increasingly complex and interconnected global regulatory environment has seen law firms forge alliances or open offices across the globe. Often deterred by the multitude of languages that prevent economies of scale, publishers have been slow to follow, covering developments in smaller jurisdictions at a relatively high level. This is something that technology will surely address in the foreseeable future. 

Revenue Models

With the exception of those focused on news and opinion journalism, legal publishers have not been beset by the challenges facing the wider newspaper and magazine industry as it grapples with declining advertising revenues and customers’ reluctance to go behind the paywall in a world where so much information online is free. Newspapers are focusing on high-quality, often long-form journalism to build loyalty with readers and convince them to use their credit cards. This is exactly the kind of content on which legal publishers have focused.

Those with a co-publishing, financed content model generally ensure that their projects are financially underwritten in advance. They may be free to air, require registration, or require a subscription fee from one or more classes of user, but branded content has long flourished in the legal sector and looks set to continue, especially given the importance of content marketing to law firms.

As publishing has moved online, expectations around advertising have changed greatly. No longer can publishers simply quote readership numbers based on a multiple applied print runs. Advertisers are seeking highly targeted opportunities and real-time analytics on usage. Those that fail to deliver will be left behind.

There is increased competition from outside the sector from the likes of LinkedIn and Google, which can target users in the way that previously only a trade publisher could.

Legal directories of one sort or another have long been a mainstay for many publishers. They continue to provide valuable intelligence to readers, and serve as both a marketing tool and a competitive benchmarking tool for firms. They are still driven by advertising; as of yet, no one has moved to fees based on the number or value of the introductions made.

Much of the innovation in this space will come from new market entrants, many of which bring with them “freemium” models. Just as with so many services outside the space, they work toward proof of concept and build user bases by offering a free service before introducing premium features.

Tailored Knowledge

In our lifetimes publishing will always be associated with books, but modern legal publishing is as much about data mining and digital analysis as it is about the printed page. Law libraries may still be filled with rows of weighty reference tomes, but lawyers now practice in the digital space.

The future of legal publishing is about streamlining the workflows of lawyers and law firms, giving them access to the latest legal data and market analyses on an individual basis. This will be delivered through the power of artificial intelligence to collate, curate, and learn, and from using the most authoritative sources. In addition, they will have the ability to create documentation on the fly — the contracts that underpin transactions or agreements needed to react to legal or market changes in real time, and the knowledge and training to do what it is they do. It is about the most efficient delivery of bespoke know-how for every lawyer.

Editors are now digital curators, knowledge professionals, leading teams of coders, and technologists, producing products more complex and more efficient than lawyers can create or supply. This is the value-add that the successful legal publishing industry must create. Merely cataloguing information is now the domain of the search engines; however, books will always be useful things against which to lean your tablet. 

Onward or Downward?

Those publishers with a blend of revenue streams from subscriptions and advertising — as well as, increasingly, software licensing — will have a more secure future. The holy grail of a high annual renewal rate, providing predictable revenues, will give publishers the best opportunities to invest in developing products that capitalize on the changes taking place and the technology available to them. While there is a risk that new technology from outside the legal sector may eat their lunch, the legal publishers of the future that successfully embed themselves in customers’ workflow through the intelligent application of technology to information will play a more valuable role in the legal services market.

One thing is certain in today’s technology-driven, more-with-less era of seemingly limitless free information: Those delivering legal content must demonstrate real, improved outcomes for customers or face extinction.

Oliver Yandle, CAE, of Chicago, Illinois is the forme  executive director of ALA. Oliver comes to ALA from the Commercial Law League of America in Chicago, Illinois where he served as executive vice president.

     Oliver’s law association experience includes holding the executive director position at the International Association of Defense Counsel, in Chicago, Illinois, and he served as an adjunct instructor of legal analysis and writing at the Washington College of Law at American University.
In addition to his legal experience, Oliver has had a long-standing career in association work, most recently having held the position of executive vice president for Commercial Law League of America. He has held senior director positions at SmithBucklin in Chicago, Illinois, at the International Bridge, Tunnel and Turnpike Association in Washington, D.C., and at the Intelligent Transportation Society of America in Washington D.C.

     He is active in both the American Society of Association Executives (ASAE), where he holds the Certified Association Executive designation and the Association Forum of Chicagoland.      Oliver is a native of Louisiana and holds a B.A. in journalism from Loyola University of the South in New Orleans, and a J.D. from Washington College of Law at The American University in Washington, D.C

Lucy Endel Bassli is a legal industry expert, engaging in thought-leadership projects to drive change and evolution in the delivery of legal services. She is the founder of InnoLegal Services PLLC, a modern solution provider that offers legal advice and consults on operationalizing the practice of law. She works with law departments and law firms on innovating their legal service delivery and consumption models, and trains lawyers in innovative practices. She also serves as deputy general counsel of legal operations, contracting, and corporate G&A for Snowflake Computing. Lucy specializes in all things contracting: resource allocation, automation, process optimization and smart risk-taking. Lucy also is the Chief Legal Strategist for LawGeex, a cutting-edge AI legal tech start-up automating contract review services.

     In her 13 years at Microsoft, where she ran an enterprise contracting solution, Lucy focused on complex and global outsourcing contracts and gained firsthand experience in legal outsourcing to assist her with high-volume contract transactions. She launched an innovative “managed services” engagement with law firms and actively worked on continuously improving the value received.

     Prior to joining Microsoft, Lucy practiced law at Davis Wright Tremaine, LLP in Seattle, WA, focusing on commercial transactions and commercial bankruptcy. Lucy received her J.D and BA from the University of Houston in Houston, Texas, where she grew up, but has been living in the Seattle area since completing law school.

     Lucy is a licensed member of the Washington and Texas state bar associations, and was named to the National Law Journal list of Outstanding Women Lawyers, 2015. She is a frequent speaker on topics of legal services innovation, legal technology, and legal process outsourcing.

     This article was originally published by the Legal Executive Institute on September 10, 2018 and is reproduced here in its entirety.

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 There has been a significant amount of well thought out articles in the legal press on the topic of the entry of “Big 4” accounting firms into legal services. Most recently, the announcement of EY’s acquisition of UK legal service firm Riverview. It is almost impossible to keep up with this whirlwind of change.

Clearly, the Big 4 are entering the legal space in the US as well as globally; and there are many reasons for this, all of which have been explored thoroughly.

I’d like to take a different approach for this article and provide some perspective from personal experience. Setting aside the historical developments, changes in regulatory restrictions outside of the US, and the disaggregation of legal services, I’d like to focus on what it is that makes the Big 4 appealing to commercial legal departments.

Having been in-house at a leading international company, I was a purchaser of legal services for 10-plus years. While the Big 4 were a more recent entrant, it became clear to me that the characteristics of the services they delivered to other parts of the organization would be very applicable to the legal department as well and very useful. There are several attributes of the Big 4 that make their services stand apart from law firms and stand above the alternative service providers.

These firms are many things to many people, including, but not limited to:

1. Experienced Consultants — The Big 4 have extensive business and management consulting practices with arguably the best professionals in the field. They provide a perspective into legal services which will inherently be grounded in business and tend to offer solutions to problems that contemplate the end business goals. They are experts in all kinds of operations and will naturally focus on efficiency and practical application of theory. Even if I would not have known to ask for this perspective, the Big 4 will always provide it. That kind of experience is priceless for the legal experts buying these services, who may not know that they even need such operational insights.

2. Process Engineers — With an expertise in management consulting, these professionals will undoubtedly and inevitably identify process improvements. After all, managing is all about aligning resources and delivering outcomes, isn’t it? In legal, we desperately need to rethink our allocation of resources. Much of what the industry is going through today is about changing engagements with law firms, adding new professionals into our mix, and outsourcing certain legal work. As challenging as that is for legal professionals to consider and implement, it is very easy for management consultants. Similarly, the focus on outcomes is never lost on management consultants, yet is it often lost on lawyers. Too many lawyers think that the outcome is the production of the legal advice, in whatever format. Helping lawyers focus on outcomes is another priceless benefit the Big 4 bring to every engagement.

3. Project Managers — There is no more beautiful deliverable than a piece of work product delivered by a professional project manager. Beyond just the actual deliverable, all work and engagements run smoother with a project manager involved. People are kept on track, timelines are strict, and action items are carefully tracked. The Big 4 are very comfortable with engaging project managers and make it a common practice on many of their consulting engagements.

4. Established Trusted Relationships — The Big 4 know how to deal with big enterprises. They understand the complexities and (well, let’s call it what it is) the politics of working with a matrixed organization with unclear decision-making authority and undefined processes. Beyond just understanding corporate culture, the Big 4 already have deep relationships with most large US and global companies. They likely have very useful contacts within the organization that may prove quite helpful when trying to accomplish a controversial goal or execute on an unpopular plan. Often these “outsiders” have contacts within the client organization at higher levels than those they are engaging with in the client company on any one particular project. Sometimes those connections help get projects over the finish line.

5. Proven Results — The demonstrated success in tax law services has set a foundation for expansion into legal services that is grounded in experience on very complicated legal principles. Surely, if the Big 4 can become experts in tax law, they can deliver just about any other legal service!

6. Scale — The Big 4 have presence in almost every country where there is business conducted by multi-nationals. They can reach a scale that few other providers can compare with. They seem to have connections to experts on every topic of interest to their corporate clients, whether internally within their own employee base, or within an intricate and powerful network of related entities and affiliates.

7. Quality and Reputation — There is an undeniable trust that comes with the Big 4, which is why so many large corporations choose to use them for broad ranges of services. That umbrella of trust seems to cover all the work they do, even in areas that are new to these providers. There is history of high quality, and there are widely accepted expectations of continued quality work from the Big 4. There is little doubt or uncertainty in their ability to deliver on their promises.

8. Technology — The Big 4 know how to invest in technology. They have sizeable R&D departments and are comfortable setting aside resources for the benefit of their future. They have been around a long time and continue to evolve by keeping up with technology advances. They are certainly interested in legal tech, and with their ability to scale and investment resources, will have an easy time catching up to anything that is leading the market, and likely become the industry leader themselves. Those are baskets that many clients would be comfortable placing their eggs in!

9. Predicable Pricing — These are not low-cost service providers, but neither are law firms. One thing the Big 4 has, however, is predictability on pricing. Long gone are their days of pricing by the hour (at least in the Big 4’s world), and instead fixed fees based on the project scope are the norm. More importantly, the Big 4 are accustomed to helping clients define the scope of work during the process and will adjust their pricing accordingly.

10. Sheer Size and Locations — The Big 4 have what seems to be an unlimited number of people located in the most remote corners of the world. It feels like there is no place in the world where they don’t have a presence and no end to the availability of people to put on the task. There is nothing more frustrating than hearing from a service provider that they don’t have the people available when you need them. The Big 4 always have people available.

These are some of the attributes that make me confident about the Big 4 expanding into legal services. There is no question about their potential in this space, and it only makes sense that the law firms and “not-so-alternative anymore” providers would be watching closely and learning.

Indeed, as I reflect on this list, I have to ask, why would a corporate legal department hire anyone else for certain work that is not worthy of law firm rates and is more complex than what the “not-so-alternative” provides deliver today?

Janvi Patel is co-founder of Halebury, and past VP of Elevated Lawyers, focusing on client management and business development as well as team building and management. She started her legal career as an employment solicitor at Charles Russell (now CRS) before moving in-house as a senior employment lawyer at Nortel for EMEA. In 2007, seeing that there was a gap in the market for flexible legal advice provided by experienced in-house lawyers, Ms. Patel decided to set up Halebury – one of the first alternative legal services providers at the time. She is a regular speaker at business and industry forums, Speakers for Schools, and an appointed board member on Thomson Reuters’ In-House Consultation Board. She is a strong supporter and advocate for women’s rights at all levels and is an advisory board member of Equality Now and the Children of War Foundation. She is also a founding committee member of the Cherie Blair Foundation for Women – Mentoring Programme.  

   Denise Nurse is co-founder of Halebury, and a past VP of Elevated Lawyers, focusing on strategy, management, and client service.  She co-founded Halebury as an opportunity to create the kind of firm that she would like to work for. Having started her career as an in-house commercial solicitor at Charles Russell (now CRS), she worked in-house as a commercial and technology lawyer for Sky before helping to develop and shape the Halebury offering. She mentors women in law and tech, as well as young entrepreneurs. She also speaks regularly on diversity and inclusion in business and is a supplier executive committee member for MSDUK, the supplier diversity organisation.

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 The Business of Law

For centuries, the provision of legal advice has been provided through one dominant option: practitioners of law. Like doctors, lawyers as a profession have focused on individual specialties and been licensed to practice or advise the public on legal issues. In order to create efficiencies, groups of individual practitioners formed partnerships to bring resources together, provide a wider selection of practice areas, and pool risk – businesses run by lawyers for lawyers. For recipients of this service, this has been the only option.

The dominant business model has been (and still is) “an organization or economic system where goods and services are exchanged for one another.” The early part of the 21^st century, however, has seen some of the most radical changes in business model options for the provision of legal services. Resourcing options play a major part in this significant evolution.

The last part of the 20^th century saw the steady growth of in-house law departments within businesses. The start of the 21^st century has seen the rise of flexible legal resourcing provided as a subset of services by law companies. These were named “Alternative Legal Service Providers,” or ALSPs, to denote the fact that they are not structured as law firm partnerships or even businesses owned and managed by lawyers. Businesses in this area offering a broader range of services now call themselves “law companies”; at times, the names are interchangeable.

For the purposes of this chapter, we will focus on the relatively new business model of providing flexible legal resourcing options for business legal departments and law firms by ALSPs and law companies, how this works, and its impact on the overall business of law.

Context

The UK legal market was valued at £35.1bn in 2018. The main legal spend is for business and commercial work, and nearly 47 percent of that revenue is with the largest law firms.[1] However, within this, the ALSP market has been growing at a rapid pace. In just two years, it has seen an increase in revenue from $8.4 billion in 2015 to about $10.7 billion in 2017.[2] ASLPs as a subsector are now making a considerable dent in the market, especially as there continues to be a drive for in-house legal teams to monitor and curb their external spend and look for greater efficiencies.

While traditional law firms service customers in industry, ALSPs often service two sets of customers: the in-house legal teams of industry customers and traditional law firms, partnering with both to provide strategic resourcing solutions. The fact that ALSPs support traditional law firms surprises many who might consider the two entities to be competitors, but it should not. Traditional law firms are built on talent and have resourcing requirements just like any other business. However, the way ALSPs deliver to each of those customers is aligned with each operating model.

Legal Services Resourcing Models for Business

In-Source

The first phenomenon in response to the growing needs of business and limited choice in legal service provision was to in-source. Hiring lawyers to work directly for and within a business gave cost certainty and more flexibility. Initially, lawyers were often hired on the basis of the particular practice area with which a business needed the most help at the time: M&A, employment, or commercial contracts, for example. This method has been a success. The continued growth of in-house legal teams over the last decade has been largely driven by cost pressures, as corporate executives look for ways to reduce external legal spend. In fact, in-house legal teams have more than doubled over the last 15 years from nearly 13,000 in 2002 to almost 28,000 in 2017.[3] The scale of growth is considerable.          

There are distinct skillsets that in-house legal teams bring to their internal stakeholders, such as the ability to work with commercial teams on the ground as well as the ability to work with businesses to provide operating and strategic advice. This commercial and operational experience is invaluable, and the training is hard to replicate within a traditional law firm. The benefit of a General Counsel (GC) working within and for a business directly is the added efficiency gained by having a trusted advisor available to support the business and understand the commercial drivers for decisions, the operational realities of a particular course of action or inaction, and the environment in which the business is operating. The GC can become preventative rather than reactive. Helping to organise and prepare business colleagues and navigate a way through the legal framework helps avoid the need for a specialist until absolutely necessary. In an added dimension, the GC can also add value by providing strategic advice on business decisions. The skills gained by in-house lawyers are invaluable, and the cost effectiveness of having a lawyer in the business is evident.

As a result, some in-house legal teams are now bigger than traditional law firms and run as a business unit themselves. The operating model of each in-house team is as varied as the businesses they serve, as most tailor their operating structure to align with their corporate entity and its business goals. This makes a diverse customer base to support from a legal resourcing perspective, each with its own requirements, opportunities, and challenges around recruitment and retention.

Outsourcing

An alternative or addition to the in-source model is to outsource legal services provisions. In its purest form, this is the original model: to instruct an external law firm how to manage legal matters. The last 30 years or so, however, have provided a variety of outsource options where the legal work is unbundled and separated out into its constituent parts. The main areas of growth have been to:

1.     Off-shore, on-shore, or near-shore low-value, low-risk, repetitive work to paralegals or lower-cost legal providers in a systemized process-heavy environment.

2.     Bring in secondees to cover team absences, growth, or gaps, or bring in temporary resources to work with the in-house team.

3.     Move work to a technology solution – for example, contract management and e-signature tools, document creation and automation tools, eDiscovery for document review, and more.

Flexible Legal Resourcing fits all of these categories. As an alternative to a traditional law firm, the ALSP model broadly provides contract lawyers who are able to work on temporary assignments or projects. Often they will also have in-house experience so they are more readily available to hit the ground running when joining a team and understand the commercial aspects of the legal advice to be provided. Costs are usually fixed on a day rate or fixed fee, providing price certainty for buyers. The lawyers will work either on- or off-site and as and when needed, so for short projects or part-time assignments. The overall relationship is managed by the ALSP, so the payment and business management of the flex lawyer is undertaken by the ALSP, reducing the burden on the customer and freeing the lawyer to focus on legal advice rather than admin. 

Managing the cost of resourcing – is in-sourcing the answer?

Cost pressures remain a driving force for the continued growth of the in-house legal team, but budgets for legal spend are still being reduced. However, many GCs have started to realise that in-sourcing is not the long-term solution. GCs looking at innovative ways to manage their resourcing gaps, especially at the mid- to senior-end of the market, have started to lock in deals with ALSPs to resource and manage a pool of senior talent to support their legal and commercial teams on an ad hoc basis. This model provides ongoing flexibility and bespoke outsourcing, which can be aligned with business goals.

No two in-house teams have the same operating model, so each one will generally require a bespoke solution. Here are a few examples of how it works for clients with different requirements.

Example 1: FTSE 250 company would like to reduce their headcount, especially their senior talent pool; currently the total in-house team >400. The company retains an ALSP to provide flexible senior in-house resource on a continuous flexible basis to scale up and down as and when deals come through. The ALSP is able to manage both the projects and junior members of the team. A project manager oversees work allocation / work undertaken by the external team to ensure the pipeline always fits with the business goals and that the external team is working with the customer to ensure efficiencies in delivery of service and, ultimately, cost savings.

Example 2: Company with <5 in-house lawyers use the ALSP as an extension of their in-house legal team.  The ALSP in-house lawyer trains on the company processes and is able to slot in as and when required both to help with the day to day, but also on projects operating as a flexible extension of the internal team.

Example 3: FTSE 500 company with an in-house team of >150 is looking to reduce their external legal spend but would like to continue to work with their existing law firm panel. The ALSP is able to provide consistent senior level support at a competitive AFA (alternative fee arrangement) and at partner / senior in-house lawyer level. They work directly with the law firm’s customers and their in-house legal teams. The ALSP lawyers work with the associates / junior lawyers either within the in-house legal teams or in the traditional law firms for support as required.  This is true collaboration between in-house legal teams, ALSPs and traditional law firms to provide an effective customer solution.

Managing external legal costs – look farther than your panel

The lack of transparency regarding costs is a key concern for in-house teams and a key driver for in-sourcing. 

According to recent statistics, legal budgets being reallocated internally has increased from 37 percent in 2013 to 43 percent in 2017[4], and that increase is expected to continue. This reflects the need for more cost certainty, better commerciality of the legal advice, and the ability to flex and manage resources when you control from within. The ALSP market has grown directly in response to this clear demand, for a type of lawyer and service not previously easily available and to allow the internal teams to manage head count costs at the same time.

Curbing the frustration:

As the table above shows, in-house legal teams are still frustrated by the lack of cost transparency and overall costs, as well as the billable hour system. By effectively managing their own resourcing, traditional law firms have the ability to manage the costs they transfer onto in-house legal teams. Using ALSPs as well as Legal Process Outsourcing (LPO) models has been invaluable for a number of law firms, as ALSPs and LPOs have the ability to offer alternative fee arrangements (AFAs). This enables traditional law firms to scale up and down and manage their bills to in-house legal teams. 

Are AFAs possible?

In that same Thompson Reuters study, 2018 State of Corporate Law Departments, it states that 76 percent of their customers state that controlling outside counsel costs are at the top of their priorities. It also states that implementing alternative fee arrangements are considered most effective to control external counsel costs. 

In-house legal teams have taken charge of this concern. A number of in-house legal teams have a program of legal invoice review to ensure that not only are invoices submitted by law firms in scope and budget, but also to provide visibility on spend. Many in-house legal teams have also implemented e-billing systems to help with spend management. Despite the cottage industry that has developed because of the complexities of billing, the hourly rate remains the predominant way of charging in the legal services industry. 

Providing cost transparency and certainty is core to many ALSPs’ operation model, and for most work is undertaken on fixed fees or day rates to ensure customers have control and transparency over budget.

Although new ways of pricing legal services are important, better integration and collaboration between traditional law firms, ALSPs, and in-house legal teams in general is essential to provide better customer solutions. Increasing collaboration throughout the external legal supply chain is fundamental to providing customers with efficiencies in how they buy their legal services. So how do we all play nicely together?

ALSPs and Traditional Law Firms

Flexible legal resourcing has provided a solution to a gap in the market, and traditional firms are creating their own bespoke versions whilst others are partnering with ALSPs to offer this service to clients. In addition, the ability to offer alumni an alternative pathway to working with the traditional firm has arisen. It is becoming increasingly common for ALSPs to work with traditional law firms’ own alumni to manage the firms’ resourcing challenges and assist in managing costs and profitability. 

How ALSPs work with traditional firms

The provision of flexible legal resourcing from ALSPs to traditional law firms generally works on three levels:

·       Backfilling the law firms own teams to support with gaps in resource for longer-term team absences or for spikes in workflow;

·       Provision of secondees to their clients in order to honour panel requirements in a more cost-effective way or as a way of added value/customer service; and

·       Working with the firm’s alumni to offer a flexible resourcing career option for former team members and an accessible pool of pre-vetted and known talent for the law firm.

Traditional law firms tend to have more similar structures than in-house teams; the implementation of flexible legal resourcing can still vary. Here are a few examples of how it works for law firms with different requirements.

Example 1: Magic Circle law firm, implemented own flexible resourcing programme. Branded service managed by bespoke internal team.

Example 2: Leading global law firm with a multibillion-dollar revenue instructed Law Company to provide flexible legal resourcing programme presenting as a joint solution to clients demonstrating range of services and transparency.

Example 3: New entrant regional law firm, working with Law Company to provide flexible work force as part of overall strategy of main law firm and to provide wider range of services to end clients by providing legal operations and project managers alongside generalist in-house and specialist private practice lawyers in curated teams.

Managed Services

The trend toward outsourcing complete tranches of end-to-end legal work has been growing. In the flex legal resourcing sector, the latest iteration of this solution is for entire legal teams or departments to be taken over by the service provider and managed to achieve cost reductions.  Some recent examples include:

ElevateNext and Univar

ElevateNext, using data analytics and consulting from Elevate Services Inc. (its partner), assessed the performance of outside counsel, their efficiency, and adherence to sound budgeting and decision-making processes. They identified ways to streamline efforts, lower costs, and improve outcomes. ElevateNext now handles legal matters directly for Univar, acts as coordinating counsel for certain matters that remained with other law firms, and serves as “chief of staff” to the law department.

DXC Technology and United Lex

In December 2017, DXC Technology, a technology conglomerate of Computer Sciences Corp. (CSC) and Hewlett Packard Enterprise’s Services business (HPES), engaged United Lex to restructure its in-house department and manage its team and services.

Thames Water and Eversheds Sutherland

Thames Water has worked with BCLP since 2010 as the main provider of legal services and transferred this to Eversheds Sutherland as a complete managed service of its legal team in April 2018. Eversheds’ supports on operational activity under its managed legal services agreement and the existing legal team from BCLP transferred across to their team.

Unbundling Legal Services and Working Together

Whilst in-house legal teams have the ability to unbundle services, traditional law firms are well placed to unbundle the entire legal services delivery supply chain. Innovative law firms are doing just this, and some of the most progressive have fully engaged with ALSPs to partner with them on this unbundling. 

A large part of the unbundling ensures that projects are led by the most cost-effective provider, which ensures it is the right person or tool for the job, creates efficiencies, and drives down spend. Some in-house legal teams have requested their panel firms partner with ALSPs to manage their secondments and further resourcing requests. ALSPs can provide a white labeled service for this, so that in-house legal teams have one point of contact and also the contracting entity has the ability to manage quality control. 

The unpacking allows for a total mix of legal process outsourcing of low-cost repetitive work, automation, flex legal resources, and traditional lawyers working with in-house teams to create a seamless blend and providing the most efficient and effective advice.

The Future

The business of providing legal services to industry has evolved significantly from where it was, even at the start of this decade. Where will we be in another ten years? With the changes that have taken place within the profession and in particular the focus on the “business of law,” we are lining up for greater value for our end customers as costs are more transparent and better managed, and legal services are approached increasingly like a business rather than a legal practice.

The pace of change is only going to increase. Looking at the wider economy, 43 of the companies in the Fortune top 100 globally were new entrants since 2008, and some of those included established names like Apple, who rose from a position of #33 in 2008 to #11 in 2018 – a phenomenal rate of change. 

The legal industry, whilst notably slower to evolve, is having to keep up. Even its slow pace will ensure more radical changes appear. The need to evolve will be highlighted by the potential for disruption, as has been seen in other industries such as hotels (Airbnb), taxis (Uber), and food service (Deliveroo). Law companies are being seen as disruptors in the legal industry as they aggregate the disaggregation that has occurred over the last decade. Expect the continuation of outside investments and law companies going public to further accelerate the pace of change.

 Mark Ross Principal, Deloitte - Legal Business Services and formerly headed Integreon’s Contracts, Compliance and Commercial (CCC) business unit, with accountability for the P&L, solution development, and delivery across the U.S., U.K., India, South Africa, and the Philippines. 

    Mark is a recognized thought leader in the Legal Process Outsourcing (LPO) field. He is a former partner at the first U.K. law firm to offshore legal work, and is the only person to have been invited to address the ABA, the Law Societies of England & Wales and South Africa, The Solicitors Regulation Authority, and the International Bar Association on the topic of LPO.

    Mark pioneered the development of the collaborative law firm and LPO delivery model for end-to-end contract management and led the integration of artificial intelligence into Integreon’s contract review services. He also developed the first State Bar minimum continuing legal education (MCLE) and continuing professional development (CPD) accredited courses on the ethical implications of outsourcing legal work.

    He has been interviewed by numerous publications, including The New York Times, Wall Street Journal, and Time magazine, and has also been invited to speak as a leading authority on LPO by organizations that include: Financial Times, U.C. Berkeley School of Law, Northwestern University School of Law, Stanford Center for the Legal Profession, and the International Legal Ethics conference.

    Mark is on the editorial board of Outsource Magazine, and is on the Advisory Boards of Suffolk Law School’s Institute on Law Practice Technology and Innovation, and Northwestern University Law School’s Center for Practice Engagement and Innovation.

    In September 2016 Mark was inducted as a Fellow of the College of Law Practice Management.

Vince Neicho, formerly a U.K. legal industry veteran, is an expert legal solutions consultant with a focus on law firms and corporate legal departments engaging in e-disclosure, e-discovery, and document review. Neicho leverages his expertise in the litigation support field to help Integreon clients design and plan highly efficient processes, establish flexible and scalable resourcing models, and utilise the latest innovative technologies, including predictive coding and other types of artificial intelligence systems.

   Neicho was previously Litigation Support Senior Manager at Allen & Overy, a global Magic Circle firm, where he introduced the concept of outsourced document review. At A&O he amassed years of experience working with the firm's extensive corporate and financial institution clientele on hundreds of matters, designing and managing a wide variety of litigation support solutions and technologies.

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 Even before the onset of the global financial crisis in 2008, in-house legal departments and their outside counsel were under considerable pressure to do more with less. The Great Recession exacerbated this pressure and led to a surge in the exploration of innovative legal services delivery models. Two key questions came to the fore for the in-house legal department: 1) Can we reduce or eliminate the need to undertake certain legal services? 2) For the services we must consume, how can we do so as cost-effectively as possible?

Stemming from these questions, a new legal ecosystem emerged in which, alongside in-house resources and outside counsel, legal process outsourcing (LPO) began to play a crucial role in the efficient delivery of legal services. Initially, the LPO industry’s raison d’être was the labor arbitrage benefits available from outsourcing certain routine legal tasks to lower-cost locations such as India, South Africa, and the Philippines. The class of providers augmenting the work of in-house departments and outside counsel has since matured and grown significantly — to the point that the “LPO” terminology is not inclusive enough to capture them. Today, a robust group of companies more accurately described as alternative legal services providers (ALSPs) are handling sophisticated work at a level we could not have anticipated even a few years ago.

Much of that transformation is because of ALSPs increasingly leveraging technology, particularly artificial intelligence (AI). This article will discuss the impact of ALSPs (and the AI that some of them employ) on the legal landscape. It will then address the journey law firms have navigated in their use of ALSPs to date and what to expect in the future.  

Artificial Intelligence: Does It Play Well With Others in the Legal Industry?

To appreciate how rapidly the ground has shifted in the legal industry, consider the question we raised in the first edition of this text just three years ago. We noted then, as we did above, that LPOs (what we might now think of as first-generation ALSPs) were powered by human labor; they leveraged the low cost of labor in remote locations to drive down the cost of document review. It seems a quaint concern now, but it is understandable that many wondered at the time whether the introduction of technology into the field of legal services would threaten the existence of LPOs. In a passage that has stood up well, we addressed the concern as follows:  

While some might argue that technological advances represent a competitive challenge to LPO, nothing could be further from the truth. It is technology that led to the advent of LPO, enabling offshore locations to interact with clients thousands of miles away, and it is the LPO industry that has since continued embracing and incorporating technology into virtually every element of its legal services delivery offerings, including assisting and advising corporations and law firms on the selection and implementation of enabling technologies. It is the LPO industry that now pushes the envelope to redefine the art of possibility in the legal field, providing expert consultants who can weave together advanced technologies as an integral thread in overall legal process transformation.

In retrospect, we were correct to note that technology made LPOs — or first-generation ALSPs — possible in the first place, and even more correct to emphasize that future ALSPs would “continue embracing and incorporating technology” into legal services. This has proved emphatically true. The leading ALSPs of today are almost exclusively thought of as companies pioneering the utilization of enabling technologies, and correctly so.

In fact, the question being asked now is almost a complete reversal from the one we discussed in the first edition. It is not whether technology will kill ALSPs, but whether ALSPs powered by technology — specifically, artificial intelligence — will kill law firms. Again, our answer is no.

It is indisputable, of course, that technology-assisted document review, legal research, deal rooms, e-billing software, data analytics, knowledge management, and document assembly have eliminated the need for firms to devote man hours to certain tasks. It’s also true that the application of artificial intelligence is only making the tools of automation more powerful. But the ways in which ALSPs are applying technology to various areas of legal practice are illuminating, revealing that technology tools remain complements to human legal practice, not a replacement for it.

Litigation

The days are gone in which huge teams of attorneys reviewed hundreds of thousands — or millions — of unfiltered documents. And it is no longer relatively inexpensive, remote labor that performs the task of document review. The leading ALSPs have long been proselytizers of technology-assisted review (TAR) and have been constantly developing, testing, and refining their workflows to deliver smarter and less costly review processes. ALSPs deploy these technologies in a variety of ways, from supporting a quality control process to leveraging artificial intelligence to perform predictive coding.

Likewise, many ALSPs have created platforms to apply natural language processing, machine learning, and artificial intelligence to the task of legal research. Entrants such as Casetext and Ravel Law offer AI-backed research capabilities and other features. Ravel Law’s Judge Analytics, to cite one example, allows litigants to view a judge’s entire history of decisions in different types of cases. Meanwhile, Allegory, a recent Integreon acquisition, uses what it calls “augmented intelligence” to automate litigation management. Allegory makes it much easier for trial lawyers to access relevant information and makes formerly cumbersome litigation tasks like creating evidence binders a painless process.

Contract Management and Review

In corporate departments, AI has led to impressive developments in the areas of due diligence, contract extraction, and contract data analytics. As with litigation, ALSPs have been at the forefront of these developments. Often triggered by the implementation of a CLM platform, an acquisition, or an audit, corporations can be faced with the need to locate, review, and extract information from thousands of contracts. ALSPs offer technological tools available that can support such an engagement. Integreon, for example, uses Kira’s machine-learning-based technology to assist clients with contract extraction, due diligence, contract analysis, and lease abstraction.

Automated metadata extraction, categorization, and related technologies greatly reduce the cost of a contract-by-contract review performed by lawyers. Even when performing those tasks, however, ALSPs frequently support their technological tools with a review by legally trained personnel; it is this combination of human- and technology-driven analysis that provides the most effective end-to-end solution.

Legal Spend Analytics

Legal spend analytics is another area in which technology is being used to achieve more cost-effective legal services. By analyzing data from legal invoices, corporate legal departments can benchmark historical charges from outside counsel and vendors for a variety of legal services. ALSPs in this area use technology to produce reports that not only track outside counsel spending (broken down by firm, practice areas, timekeeper), but also include savings opportunities, progress against budgets, and other key metrics.

Knowledge is power, and these technology-driven legal-spend analytics tools allow corporate legal departments to revisit their entire relationship with outside counsel — from how they select firms, to how they manage them, to when they cut ties with them — from the position of power. The end game is one in which resource allocation is optimized, using the right legal professionals and technology for the jobs to which they are best suited

The Impact of AI

The takeaway from the above should not be that ALSPs, and the artificial intelligence they sometimes employ, is encroaching meaningfully on the territory of law firms. Instead, in each area, the theme is the same: While technology solutions are automating certain tasks and offering lawyers new insights, the human element remains as important as ever in delivering legal services. AI tools still require that lawyers perform a quality-control check, as they routinely do for contract- and document-review solutions. Lawyers are also needed to provide the input that trains the AI tools to become more powerful.

Most importantly, even with the introduction of artificial intelligence in the legal industry, the heart of a lawyer’s work — legal reasoning, crafting strategy, negotiating with counter-parties, arguing in court, and more — remains largely untouched by technology. Indeed, technology-driven ALSPs are not replacing law firms, but rather: 1) reducing the cost of certain services and 2) allowing them to make more informed strategic decisions. In this sense, ALSPs have advanced beyond LPOs, which were initially aimed exclusively at the first goal. But in another sense, the introduction of AI is similar to the arrival of LPOs: It is a disruption to which some law firms will react better than others. The history of law firms’ reaction to ALSPs, which follows, shows us as much.

Redefining the Law Firm Delivery Model: a Journey of ALSP Acceptance

In order to survive in today’s economy and to thrive in the future, many law firms are actively rethinking their business models. This rethink frequently includes an embrace of ALSPs and a reexamination of the traditional pyramid structure as the usual modus operandi for legal services delivery.

Although some believe ALSPs will increasingly contract directly with corporate clients, it is important to consider that they do not practice law and therefore cannot replace law firms entirely. A more natural fit for ALSPs is to supplant the base of the law firm pyramid. This is not to suggest the only benefit of ALSPs is labor arbitrage. As discussed above, we have ample proof this it is not. What ALSPs are doing is leading the way in incorporation of technology into legal services delivery.

Kicking and Screaming

In or around 2006, it was not law firms but corporate legal departments that were the first proponents of ALSPs. Back in these early days, a cocktail of incredulity with a dash of disdain was the tipple of choice for many a law firm partner when confronted with the ALSP elevator pitch. Big Law executives would protest that ALSPs were win-win-lose: win for the firm’s clients, win for the ALSP, and yet lose for the law firm.

This viewpoint presupposes the adequacy of two hypotheses that simply do not hold water any longer: the zero-sum game (the more the client loses, the more the law firm wins) and that every penny of revenue generated by an ALSP is a penny of revenue lost by the law firm.

In any event, these first couple of years can be characterized, perhaps somewhat harshly, as the phase where law firms were dragged “kicking and screaming” into the arms of ALSPs.

On a case-by-case basis, in-house counsel started to advise their outside counsel that in order to retain their business, the firms must begin to use ALSPs. In fairness to BigLaw, this phase has largely passed and did so fairly quickly. Whether the Great Recession forced them to adapt quickly or merely coincided with a change in attitude is a debate for another day.

Checking the Box

Law firms have many constituencies, but their clients always come first. Large firm clients are, by and large, cost-sensitive in-house counsel. Firms can gain both a perception and actual advantage with clients by making clear they understand and are responding to the cost pressures facing their clients.

In-house counsel muscle-flexing manifested itself not only in ad hoc requests that their outside counsel use an ALSP, but also in the increasing prevalence of requests for proposals (RFPs) asking outside counsel whether they had relationships in place with ALSPs.

Law firms responded in turn by undertaking selection processes of their own to choose one or more preferred ALSPs. The end result was that when asked the question in an RFP, law firms could respond in the affirmative. This is the “checking the box” phase. Many of the firms during this phase were simply looking to place a check in the box, and once a master services agreement was put in place between the firm and the ALSP, it was considered a job well done with no further action required. Many firms today are struggling with how to navigate the transition from the “checking the box” phase into the phase that follows: “strategic collaboration.”

Strategic Collaboration

In 2011, our employer Integreon commissioned research tracking the adoption of ALSPs among law firms and in-house counsel. While a minority of firms seemed to worry that using an ALSP might send clients the wrong signal, the results of the research showed such fear to be unfounded. A significant majority, about 75 percent, of both in-house and law firm lawyers believed using an ALSP did not “diminish the brand.” Rather, those that embraced ALSPs were perceived as cognizant of the cost, efficiency, and quality demands of their clients, and consequently appeared to gain a competitive advantage. Today, a significant number of innovative law firms now publicly acknowledge their relationships with ALSPs. These firms are at various stages of the journey that can be termed as “strategic collaboration.”

The end of this journey, one that arguably no firm has yet reached, is when ALSP solutions are so closely integrated into the firm’s overall value proposition that they are simply viewed as part of a suite of solutions that the firm provides to its clients across all of its practice groups. This requires firms to embrace ALSPs at a strategic level, welcoming them into the firm, lifting open the hood, and working with the provider, as Professor Richard Susskind would say, to “decompose” legal functions, map out “as is” workflows, and then reengineer the processes to incorporate ALSP best practices, lower-cost labor, and technology.

The theory behind strategic collaboration is not rocket science. The premise is that the whole is greater than the sum of the parts. Contrary to early concerns that ALSPs would compete directly with law firms, it has become abundantly clear to those firms embracing strategic collaboration that the most effective legal services delivery model is a symbiotic one in which law firms and ALSPs help each other thrive.

ALSPs do not practice law and so are not true alternatives to law firms. Neither ALSPs nor law firms can individually deliver the holistic, end-to-end services corporate clients are now demanding. While one could argue that law firms with captive ALSP units can do so, the fact is that running a captive center, especially offshore, requires a scale that only the largest law firms possess. Even with respect to those few firms, ALSPs offer several other advantages over a captive. These include better capacity utilization by aggregating demand across many clients; conversion of fixed to variable costs; ongoing investments in technology and continuous improvement; and, of course, business continuity assurance with multiple delivery locations.

A common misconception held by proponents of captives is that working with a third-party ALSP means loss of control. This is not the case. Control is more about governance than ownership. For example, some captives are out of control because they have not been properly set up with service level agreements (SLAs). Conversely, a proper SLA and governance structure can give the law firm more control over a third-party ALSP than they might typically have over their own staff.

Law firms that strategically collaborate with ALSPs, meanwhile, can expand their offerings and deliver a complete, end-to-end approach, efficiently providing the appropriate level of legal services required for each type of work product.

Bifurcated Ownership

Unrelenting cost pressure, deregulation, disaggregation, globalization, and technological advances were the genesis of the ALSP sector. Today, the challenge and the opportunity are for ALSPs and law firm clients to develop new service delivery models that will drive even greater innovation. One can either shape the change or be shaped by it. It is incumbent upon all the key constituent stakeholders in the legal services industry to find better ways of working together.

In coming years, there is no doubt we will see even closer collaboration between law firms and ALSPs, with the lines of ownership of the legal services delivery model becoming increasingly blurred as these stakeholders invest in and enter into joint ventures with one another. This can be called the “bifurcated ownership” phase.

How long will it be before an ALSP acquires a major law firm in the U.K. now that external investment in law firms is permitted via the Legal Services Act? Hardly a week goes by without the rumor mill spinning a story about this law firm or that law firm seeking to monetize either their captive ALSP operation or their high-volume practice group. For many of the reasons cited above, it is likely that the majority of those law firms with captive ALSPs today will look to divest these operations in the coming years. Global ALSPs are the most logical acquirers of these entities.

As time progresses, there is a growing optimism about and enthusiasm for reshaping the way legal services are delivered. The new bifurcated model is inevitable. The end result of the journey to this final fourth phase is a seamlessly integrated delivery model, with clients of all kinds benefiting from better, faster, more readily accessible, and cheaper legal services.

What’s Next?

We remain more bullish than ever about the prospects for ALSPs. The industry has matured and transformed over the last 10 years, but that journey, that evolution, has in reality still only just begun.

Out of all of the different stakeholders providing legal services within the new legal ecosystem, it is the ALSPs that have the deepest experience deconstructing and reengineering legal processes using Lean and Six Sigma techniques, applying best practices and flexible resources, and optimizing the mix and utilization of technology, including AI. It is the ALSPs that have the demonstrated expertise to analyze which aspects of the work done by lawyers, paralegals, and support staff can be complemented through automation or the application of AI. As the rollercoaster of legal services innovation and technological advances continues to pick up pace, not only will ALSPs be
along for the ride, but they’ll also have front row seats.

Tony Williams is a principal at Jomati Consultants LLP, a U.K.-based international management consulting firm for law firms, lawyers and in-house counsel that specializes in strategic expansions, reorganizations, and client strategies. Before founding Jomati Consultants, Tony was worldwide managing partner of Andersen Legal and head of its U.K. practice, where he developed the firm’s international strategy. Prior to joining Andersen Legal, Tony was managing partner of the world’s largest law firm, Clifford Chance. He was with Clifford Chance for almost 20 years and prior to his managing partner role he was a corporate partner in London, Hong Kong and the managing partner of the firm’s Moscow office. For his role in the orderly and controlled dissolution of Garretts following the Enron crisis, he was named “Partner of the Year” by The Lawyer Magazine in 2002. Tony is also a founding member of Halsbury’s Law Exchange, an independent and politically neutral legal think tank that contributes to the development of law and the legal sector.