At its core, the argument (against advertising) presumes that attorneys must conceal from themselves and from their clients the real-life fact that lawyers earn their livelihood at the bar. We suspect that few attorneys engage in such self-deception.… Bankers and engineers advertise, and yet these professions are not regarded as undignified.

-        Bates v. Arizona, 433 U.S. 350, 369 (1977)

The business of law has radically changed over the past 40 years. This change was underway before Bates v. Arizona, in which the Supreme Court authorized advertising. The case transported the business of law out of the shadows and into the open. It meant that lawyers had the constitutional right to treat the practice and profession of law as a business.

The case was brought against John Bates and Van O’Steen, partners in a two attorney legal clinic they started
 almost right out of law school. While the case involved only a small printed ad in the local newspaper advertising reasonable priced legal service, the ripple effects from the decision ultimately have produced a tsunami going beyond the United States. It affected the entire world’s legal profession. Internationalization and now globalization spread the idea around the world that law is indeed a business with advertising, marketing, pictures, websites, logos, directories, rankings, mergers, bankruptcies, alternative structures, consultants, networks, takeovers, and more.

Ethic rules were not ignored, but they simply could not apply when dozens of firms had more than 15 offices outside of London or New York. Advertising their offices in the United States meant indirectly advertising the offices in other countries. Local firms remained handcuffed by the rules and sought out business alternatives to protect their market. The underlying ethical rules governing the practice and the business of law began to erode.

More competition meant that more services were offered and more products were created to allow firms to openly compete. Products and services were now aimed at getting a competitive advantage and increasing profit. Almost anything seemed to be okay for the small advantage of obtaining and keeping a client.

However, the business of law was still largely tethered to the earth until the mid-1990s.

The Internet and communications technology propelled the business of law into a new era. The Internet, while applicable to every business, has asserted a profound effect because law is a business based upon information. In the practice of law, it is information on clients and opponents.

In the business of law, it is information on business practices.

The authors of this compendium have explored each aspect both on the micro- and macro levels of the business of law. Each of the chapters in this book relates back to the changes that have manifested themselves. Consultants have become specialists; in fact, everyone has become a specialist.

So where does the business of law go from here? In my opinion, five primary macro trends will push the business of law into uncharted waters.

Law firms’ structures will change. Five of the very largest law firms have opted to become networks using Swiss vereins as a way to accelerate their expansion. They have copied the largest accounting networks, whose brands are recognized worldwide. This will push the largest firms to move even farther toward a new business entity model. This will require restructuring, redeployment of resources, training, and technology to manage the attorneys in culturally diverse offices. The expertise to accomplish this will be found both in-house and with outside consultants who can lead the firms into the unknown.

Branded firms will compete with the largest independent regional or national firms. The branded firms will also increasingly compete with local firms in order to effectively and efficiently utilize their resources. This will require new services and products for both the largest and the smallest firms.

At the same time, outside of the United States, the PwC, Deloitte, KPMG, and E&Y legal networks will rapidly redeploy into the legal market by focusing initially on tax, mergers and acquisitions, labor, immigration, and other commercial areas. This will be a cause for concern for even the largest independent firms, given the resources and organizations of the Big 4.

Social media marketing will come into its own as the Internet generation takes leadership positons in law firms and corporate legal departments. This will allow the smallest firms to compete with the largest. Specialty firms will become even more specialized and be able to market their services using social media.

Technology combined with redefining legal services has resulted in the unbundling of services traditionally provided by law firms. Firms and corporate clients will have an opportunity to take advantage of these services. The leaders and influencers will affect the pace and development of these alternatives. Both law firm and corporate counsel leaders will create alliances with the alterative resource providers.

John Bates and Van O’Steen were leaders who challenged the legal profession. Today’s leaders in legal media, consulting, networks, law firms, bar and professional associations, legal process outsourcing, and other services and products will continue this tradition by posing the same challenges.

 Law is a profession – Law is a business.   The two are inseparable.

Joseph Borstein Co-Founder and CEO of LexFusion and was a managing director with EY. He is a former global director of legal managed services at Thomson Reuters, formerly Pangea3, and previously served as director of Litigation Solutions. In this role, Borstein lends his expertise to existing and prospective clients by providing them with the latest information regarding the law, ethics, and best practices in the rapidly evolving world of electronic discovery. Clients will likewise benefit from his extensive experience in data collection and preservation.

     Prior to joining Pangea3, Borstein practiced law at the New York office of Kasowitz, Benson, Torres & Friedman LLP, where he litigated complex civil cases in federal, state, and administrative courts. He has extensive experience in law suits related to securities fraud and market manipulation; civil racketeering (“RICO”); intra-corporate disputes; contract disputes; disputes from derivatives and other sophisticated financial products; as well as S.E.C. enforcement actions. He also has personally managed and conducted complex document reviews or productions in litigations involving regulated financial institutions, insurance companies, real estate investment trusts, hedge funds, private equity consortiums, and pharmaceutical companies. Borstein received his B.A. in psychology and his J.D. at the University of Pennsylvania. He is located in Pangea3’s New York City headquarters.

Edward Sohn SVP, Head of Solutions at Factor and was  a managing director with EY. Previously, he worked at Thomson Reuters. He contributed his extensive experience in managing all aspects of the eDiscovery process including preservation, collection, review, production, and fact investigation, ensuring that Thomson Reuters LMS clients received superior quality through cost-effective and efficient processes. His role involved developing the strategy for new client engagements, managing client-dedicated project teams and mentoring project managers. 

     Prior to Thomson Reuters, Ed was a senior attorney in business litigation at King & Spalding, LLP in Atlanta, Georgia. At King & Spalding, he represented financial institutions and Fortune 500 companies in matters related to civil and regulatory financial claims, class action and securities litigation, government investigations, healthcare litigation, and commercial disputes._

_________________________________________________________________________________________________________________________

Biglaw is boring. In mid-2014, we pitched a regular column on legal entrepreneurship and alternative legal services providers to a leading legal blog, Above the Law (“ATL”). In our pitch, “our holy purpose” was to prove to the broader community of lawyers that traditional players (Biglaw firms, in-house departments, government entities) are no longer the only show in the legal-town, and certainly not the greatest show on earth.[1] We wanted to show that there are awesome alternative legal businesses employing some of the nation’s best legal talent, changing the legal system for the better, and bringing home the proverbial bacon. ATL agreed that we had unearthed a story that wasn’t being properly covered and graciously gave us a bi-monthly column, which we dubbed “alt.legal.”

Since the launch of the alt.legal column, we have published a number of stories on legal startups and entrepreneurs. We have traveled the country interviewing legal innovators, writing about everything from legal hackers to legal machine-learning to robot law enforcement to Biglaw refugees reinventing litigation management. And we didn’t have to search far — our inboxes have been inundated with new stories of legal entrepreneurs, alternative legal service providers, and legal technologists working hard to change the game for the better.

The market has taken notice: measured in investment, venture capital is flowing into legal startups at an accelerating pace ($458 million in 2013, up from $66 million in 2012).[2]

Bottom line, the “practice of law” is being deconstructed, redefined, and opened to new players. Specifically, the forces creating this transformation are: (1) market pressure from upstart entrepreneurs and alternative service providers; (2) value and expertise imported from models of process and business efficiency; and (3) structural changes challenging the traditional boundaries of legal practice. How big are these changes? Here are some examples.

·       Our company (a formerly wholly-owned subsidiary of Thomson Reuters and now a part of EY (2019), employs approximately 1,500 full-time attorneys (largely in India), conducting large scale legal support projects for many of the Fortune 100 and AmLaw 100 firms. We believe we are the largest private employer of attorneys in a country of 1.2 billion people.

·       According to Legal Business magazine, a U.K.-based trade publication, one of the top 10 “overall advisors” in the U.K. market is Axiom, a legal services company that is not a law firm.[3] kCura, the developers of e-discovery software Relativity, received $125 million from San Francisco-based ICONIQ Capital to invest in people and technology.[4]ccording to Legal Business magazine, a U.K.-based trade publication, one of the top 10 “overall advisors” in the U.K. market is Axiom, a legal services company that is not a law firm.[3] kCura, the developers of e-discovery software Relativity, received $125 million from San Francisco-based ICONIQ Capital to invest in people and technology.[4]Legal Businessnot a law firm[3][4]

While we are fascinated by the disruptive changes brought by technology and globalization, we have focused the remainder of the article on legal managed services (“LMS”) companies. These companies are corporations (not partnerships or law firms) conducting large-scale legal-support services, traditionally performed by law firms or corporate counsel. LMS companies are not staffing agencies that add temporary body count to law firms or corporate legal departments. They are stand-alone businesses whose clients are law firms and corporate legal departments. Over the past decade they have proven their ability to be better, faster, and cheaper than the traditional legal players in a wide variety of legal-support tasks (contract lifecycle management, litigation document review, M&A diligence). They have achieved this by implementing: best-in-class business processes; high-end, permanent talent in lower-cost jurisdictions; permanent task specialization and training; and dedicated technologists and cutting-edge technology.

Over the following chapter, we will discuss: the rise of legal managed services companies; the workflows, processes, and technology they employ; and the future of the legal business structure. Finally, we will touch on the benefits (yes, benefits) to law firms (even boring Biglaw firms) and what this radical change all means.

The Rise of Legal Managed Services

Axiom is based in the U.K. and works closely for clients in commercial transactions, M&A, litigation, and other areas. Axiom’s lawyers are highly trained and carry top credentials. But Axiom is not a law firm. It is a corporation that places its attorneys through insourced and outsourced solutions. Like many good companies, Axiom prides itself on operational efficiencies that are rarely found in the traditional law firm structure, like low-cost overhead, a culture of agility and flexibility, and a centralized command structure. And perhaps the great distinction is that Axiom can — and does — receive outside investment, operating formally in a way that blurs the line between business and law.

As mentioned earlier, Legal Business magazine proudly proclaimed that Axiom had breached the top 10 “legal services providers” in the U.K. Outside of Axiom, the Legal Business list of prestigious “firms” included all the usual suspects (Allen & Overy, Clifford Chance, Freshfields, Linklaters, Slaughter and May, and DLA Piper). This was the first time a non-law firm has appeared in these ranks, but it will not be the last. Legal Business noted that this breach of the coveted top 10 was “significant” and “demonstrate[ed] how non-law firm providers are winning over some bluechip clients.”[5] In our view, this breach demonstrated something else: alternative legal services providers are not just “winning” the business of “bluechip” clients but are gaining their respect and trust. Axiom has won that ephemeral prize every attorney desires: prestige.

For those that have been following the alternative legal space, Axiom is just one of many recently birthed companies fueling this transformation. Like Axiom, many of them find their heritage in entrepreneurship and investment. While Biglaw firms rely heavily on their storied history and prestige, many of the new heavy hitters were birthed after 2000. Companies like Axiom, Pangea3, Quislex, and UnitedLex are relatively new players, but are steadily increasing their headcount, revenues, and market share.

The increase in the legal market share for LMS businesses explains unusual trends in the overall legal services marketplace. The New York Times reported on detailed research into the legal market HBR Consulting, a leading provider of legal metrics. This research found that companies worldwide increased their total legal spending by 2 percent in 2014. Yet, during that period spending on outside law firms fell 2 percent.[6] Surely some of this is attributed to corporate counsel insourcing functions that were previously given to Biglaw firms. But we believe much of the work is being sent to LMS providers, which have become part of the corporate legal departments’ growing arsenal for improving efficiency. At Pangea3, we have seen a double-digit spike in demand over this time period, and we hear that our competitors have too. The legal services pie is getting bigger, but law firms’ share is decreasing.

Still not convinced? Read this year’s report published by Georgetown Law Center for the Study of the Legal Profession and Thomson Reuters Peer Monitor on the state of the legal market. That report squarely addressed how “the market for legal services has changed in fundamental — probably irreversible — ways.”[7] The report then defines “the dominant trends impacting the legal market in 2014 and key issues likely to influence it in 2015 and beyond.”[8] The report recommends that law firms need to accept, anticipate, and act on the growth in market share of non-traditional competitors.[9]

The trend is becoming clearly observable, but we are often asked why this is happening. Why, seemingly out of the blue, are LMS companies are growing so quickly, and why are they able to tackle this work better, faster, and cheaper than the traditional legal players? Part of the answer depends on circumstance and the forces creating a crucible of efficiency after the Great Recession in 2008. But a more interesting answer comes from the business world, which has always implemented project management, specialization, and technology optimization to improve quality, efficiency, and low costs. LMS companies represent the long overdue application of these practices to the law.

Legal Managed Services: Project Management, Specialization, and Technology

LMS businesses do not include providers of temporary staff augmentation or part-time contractors.

As the name indicates, managed services employ full-time professional staff, business excellence, principles, and process efficiencies, while leveraging a globalized workforce and adopting technology.

Project Management

This is where the traditional legal industry has simply lagged. For the most part, and with some modern exceptions, law schools simply do not teach project management. As a result, most of the powers-that-be in Biglaw firms simply do not know anything about project management and do not see it as a core skill their new attorneys need to grasp. Some firms are seeing the light (employing project management strategies in the practice of law), but many attorneys resist the change, protesting that bespoke, tailored legal advice should not be jammed into a predetermined workflow. It is fair for Biglaw partners to debate the merits of project management in their practice of law, which is often as much art as science. But there’s no debate that for process-driven legal tasks (large-scale contract analysis, derivative documentation, or litigation document reviews), proper workflows, and team management are of paramount concern.

In fact, as the volume and complexity of legal support work has increased (due to the exponential increase in electronic communications), managed services providers gained prominence by proudly implementing the business world’s best practices and statistical error reduction methodologies.

Methodologies such as Lean Six Sigma ensure statistically validated work and allow errors to be tracked, corrected retroactively, and eliminated going forward. These project management techniques both reduce the number of errors in large-scale legal support projects, while ensuring attorneys complete tasks in a measurably efficient and productive way. Better, faster, cheaper.

Specialization and Domain Expertise

Biglaw firms often do not hold “non-lawyers” in high regard, but LMS companies believe in that bringing legal, process, and business expertise together creates a better final work product.

For example, while Pangea3 employs well more than 1,000 full-time attorneys, we also employ and empower experts in Six Sigma error reduction (some of whom are certified Black Belts), experienced project managers, experts on financial compliance (some of whom are CPAs), and e-discovery technology experts (many who are CEDS-certified).

These differentiators drastically improve the quality of the work product and ultimately spell the difference between a traditional LPO (legal process outsourcing — think labor arbitrage) provider and a true Legal Managed Services provider (think expertise and specialization). An LMS provider can tackle more sophisticated work, such as organizing and managing the facts of your case using sophisticated case management tools, freeing up Biglaw lawyers to do what they do best: win their cases and provide legal advice.

Technology Enablement

As discussed, a key force driving the need for high-quality Legal Managed Services companies is the staggering volume of “Big Data,” and the burden and complexity of the high-volume legal-work it creates every day. Whether it’s a document review in high-stakes litigation or a review of corporate policies for the compliance department of a multinational, the stakes are high, and a critical “hot” document could be anywhere. Technology created Big Data, and it has finally begun to provide solutions to the Big Data problem. However, Biglaw firms and corporate legal departments rarely have fluency with the rapidly changing technology solutions such as machine learning and data analytics. These are rare skill in the traditional legal field, but are standard offerings for LMS companies.

Quality LMS providers possess this expertise and employ capital and human resources to ensure they remain on the cutting edge. They are able to wield advanced technology with efficiency and good judgment, and can typically consult traditional lawyers on the right tool for the job at hand.

This again allows attorneys to maintain their primary focus on the traditional practice of law.

Accordingly, firms are able to decrease the total cost of representation, while maintaining the quality clients expect from their trusted outside counsel. With the same tools, but in the right hands, the individual lawyer is able to maximize time spent on important legal issues.

Future Reforms in Legal Business Structures

Speaking of the practice of law, in the United States, legal practice is highly defended and protected from “non-lawyer” interlopers by the ABA and state-bar associations. Non-lawyers cannot share profits with lawyers and law firms cannot sell equity stakes to business professionals. A non-lawyer engaging in or profiting from legal practice will be punished, and hours of scholarly debate focus on when lawyers are or are not providing “legal advice.” Originally intended to protect the objectivity of counsel from conflict, in the modern legal practice, this prohibition may have become more harmful to the consumer of legal services than good.

In the U.K. and some other jurisdictions, things are changing fast. By defining and dividing out specific areas of practice, the new U.K. laws encourage more competition from “non-lawyers.” Critically, the U.K. now allows for a new structure of law firm called alternative business structures (“ABS”). Critically, ABSs allow non-lawyers to sit in professional, management, and even ownership roles. In the past few years several large consulting and professional services companies have obtained ABS status — including KPMG, BT, and PriceWaterhouseCoopers.

In our view, this simply makes too much sense to ignore. Shouldn’t estate planning, for example, involve experts who provide tax and accounting insight alongside legal advice? Shouldn’t high-volume discovery matters also include e-discovery technology and IT consulting? Why don’t technology consultants include IP attorneys and their wisdom in their offering? Wouldn’t clients benefit from HR consulting paired with labor and employment legal practices? ABS entities will begin to create these innovative, integrated legal/business offerings and compete globally for the business of multinational companies. We struggle to see how they do not end up claiming market share in the States and “arguably open the world to legal services providers.”[10]

The American Bar Association (“ABA”) has investigated this in the past, but even small steps in this direction were halted. Given the pressures, however, and the enormous potential for innovation and profit, incremental steps forward are anticipated by many. In the meantime, LMS providers will play a big role in bridging this gap and allowing U.S. Biglaw to compete. We foresee future partnerships between Biglaw and LMS providers to be a necessary interim step until our laws are liberalized.

Legal Managed Services: Benefits for Law Firms

If LMS companies are eating into Biglaw’s market share, it would stand to reason that they are natural-born competitors. After all, it was not long ago when outside counsel collected virtually all fees related to representation — from legal research, to long-distance telephone calls, to document review, to closing arguments at trial — as revenue to the law firm (even with some of those costs as pass-through).

Today, with technology startups, and LMS companies on the scene, law firms are seeing revenue from traditional legal support tasks departing coming off their books. And the Biglaw firms are perceiving this “threat” from LMS providers: according to a recent survey, 68 percent of respondents from large firms believe that non-law firm providers of legal services are either presently taking their business or pose a threat to do so.[11]

We respectfully disagree. If leveraged correctly and incorporated as part of a larger strategic approach, the deployment and integration with LMS companies can result in new business lines, market advantages, and increased job satisfaction resulting from an increase of the actual practice of law.

Project Management is Not What Lawyers Signed Up For

Today’s law firm attorneys are asked to do the impossible: handle increasing workloads and increasing the quality of work, while somehow simultaneously lowering the total cost of representation and improving overall profitability and margins. These tasks are not easily achieved in any industry, but they are particularly difficult within the constraints of the traditional law firm operating model. This model (the traditional pyramid) includes costly physical overhead and personnel, a culture of following precedent, and a decentralized command structure.

Ultimately, legal managed services present two major advantages. First, managed services can free up law firm associates to spend their time on the most complex, outcome-determinative work, allowing them to achieve better results for their clients. Second, they allow firms to be agile and create value within a new reality. As a result, firms can become more competitive, winning new clients, and increasing profits on work with existing clients.

Lawyers Actually Practicing Law Again

Working strategically with LMS companies can help top firms improve their ability to recruit, train, and retain the world’s top legal talent by sending a clear signal to the marketplace that a career at their law firm will not revolve around years of inefficient document review or other high-volume, repetitive (but important) work. Furthermore, attorneys in such firms will more quickly develop their skills in the traditional practice of law, including oral advocacy, witness preparation, and legal writing. Associate morale can improve by reducing the tremendous cost of a revolving door, and increased retention also improves the ROI on training associates on the firm’s practice.

A Competitive Edge

Law firms can also deploy managed services to create a competitive advantage. In an RFP or fixed-fee scenario, the firm presenting the lowest overall price tag on representation will often have the winning edge. If deployed correctly, partnering with an alternative services provider can give law firms a competitive advantage in attracting new clients.

Research shows that the vast majority of firms continue to face price competition, despite the recovery in the overall economy. Moreover, many are adjusting their pricing strategy by integrating fixed rates whereby the risk of cost overruns is born exclusively by the firm. Future-focused firms are getting creative, pairing alternative fee arrangements with outsourcing, and advanced technology. And it’s working: They are winning business with a lower cost solution, while still maintaining non-discounted rates.

For smaller firms, the support of managed service providers can be a game-changer that can level the playing field when competing with their larger rivals. Today, small- to mid-size firms with lower headcounts are better able to compete for big, bet-the-company matters, because engaging with high-quality LMS providers allow them to scale up with professional staffing without increasing overhead.

Conclusion

Despite all this action, the focus of the mainstream legal media still remains fixated on the AmLaw 200 and their always-exciting profits per partner (“PPP”) numbers. This boring narrative misses the most dynamic and disruptive area of the industry, and we hope you continue to follow this story on Above the Law, as we at alt.legal follow the disruptors working hard to make the legal system work better.

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.