Strategic Legal Technology

General counsels face continued pressure to control legal spending. One increasingly popular way to save is to use an “alternative legal service provider", a company that charges less than large law firms. 

A few forward-thinking law firms have developed their own alternative services. One of the earliest instances I recall is UK-based Berwin Leighton Paisner (BLP). Several years ago, it developed a lawyer staffing business, Lawyers On Demand (LOD). LOD has won innovation awards from the Law Society, The Lawyer, the FT Innovative Lawyer, and InnovAction (College of Law Practice Management).

In May, the firm announced it was spinning off LOD as a separate company within the BLP group (see article in The Lawyer). So I was pleased to be able to interview Simon Harper about LOD. He is a co-founder and, up until the spin out, was a BLP partner.

Ron: Why Lawyers on Demand?
Simon: About five years ago, my co-founder Jonathan Brenner and I observed that clients in the UK wanted a more flexible way to buy legal services. We saw an opportunity to provide high-end lawyers to corporate law departments on a staffing basis, offering a flexible resource with an effective hourly rate significantly lower than law firm rates.

Ron: Why the Spin-Off?
Simon: LOD has been very successful in the last five years. To ensure we can continue to grow, we need additional flexibility. So in May, BLP announced that it would spin-off LOD into a separate entity and retain 80% of the new entity. Being separate gives us a couple of advantages. One is that we can develop our own management style and models. Both BLP and LOD know that the track record of UK and US law firms managing non-traditional models within their business is mixed at best. We wanted to avoid those issues. And second, as a separate entity, with our own identity, we can service the needs of other law firms, a growing market for us. We have already provided lawyers to and had numerous inquiries from other firms. Being separate, I believe we will be able to convert more of the inquiries to working relationships. Even before the spin-out, clients understood they were working with individual LOD lawyers and not retaining BLP – that will continue moving forwards.

Ron: How Does LOD Compare to Legal Process Outsourcing?
Simon: LOD is quite different from LPO. LPO focuses on high volume tasks. The providers routinize and document tasks so that relatively junior personnel can perform the work. In LPOs, most work is performed by workers trained as lawyers but neither the workers nor the providers practice law. In contrast, our lawyers do practice law. Moreover, they are quite experienced and work on tasks not easily routinized or documented. BLP recognized this distinction early on and, in fact, also offers its Managed Legal Service (MLS), which assumes responsibility for all or part a corporate legal function to produce significant annual cost reductions – this can also include partnering with an LPO provider to deliver work in lower cost centres, both onshore and offshore.

Ron: How Does LOD Compare to Legal Staffing Companies, Specifically Axiom Law?
[Editorial Note about Axiom Law: Prior to Axiom’s founding around 2001, lawyer staffing companies focused on providing contract lawyers for high volume projects, primarily document review in litigation. In contrast, Axiom placed former Big Law associates and partners on multi-month assignments in the offices of general counsels. These experienced lawyers offered specialized expertise and worked on high-end projects. By eliminating law firm overhead and partner profit, Axiom can pay its lawyers a good wage, charge much less than law firms, and still earn a profit.]
Simon: Axiom entered the UK market six months after we did but we viewed this as good news; it validated the LOD model and market need. LOD is different from Axiom in at least two respects. First, our lawyers working with corporate counsel teams have the support of BLP know-how, resources and training, and second, we do sell to law firms.

Ron: What is the Attraction for Lawyers to Join LOD?
Simon: We offer lawyers more autonomy and flexibility than law firms (and most corporate counsel teams) regarding how much they work but with the benefit of BLP’s law firm brand. For example, lawyers might choose to work only 10 months in the year or three days per week. Initially we thought that most would choose LOD because of family reasons. It turns out that there are many reasons top lawyers want flexibility. For example, some pursue creative endeavors or are passionate about hobbies, others simply want a change or to avoid workplace politics. The flexibility turns out to be attractive – we receive more than 50 resumes for each lawyer that we take on to the LOD team.

Ron: Can lawyers work part days? Remotely?
Simon: So far, short days have rarely been an option but we have seen little demand for that from lawyers. Clients agree the work location with the LOD lawyers, which is usually the client’s offices, though some lawyers do work remotely and I expect there will be more remote work in the future.

Ron: What Role Does Technology Play in LOD? In allocating lawyers?
Simon: We offer a bespoke [customized] human service. So technology has not been a significant factor in our operations though I expect that will change over time. We are currently investigating options to systematize further our allocations process.

Ron: Will LOD Become an Alternative Business Structure (ABS) in the Future?
[Editorial Note: The UK deregulated its legal market this year, allowing non-lawyer ownership of law firms through the ABS. The number of ABS applications to date as exceeded what most market observers expected.]
Simon: Our business is not capital intensive so we see little advantage in outside investment or that form of business structure. The de-regulation has, however, created a climate very favorable for our service.

[Editorial End Note: For those who would like to learn more about LOD, I recommend an article by Simon Harper in Managing Partner, Dec 2011/Jan 2012, Flexible Staffing.]

Last week the Association of Corporate Counsel (ACC) announced the 2012 ACC Value Champions, 12 winners of awards that recognizes “effectively driving value by cutting spending, improving predictability and achieving better legal outcomes." 

Amar Sarwal, VP and Chief Legal Strategist at CC, in his Top Ten Takeaways From Our First Value Champions Program blog post, synthesizes what we can learn from these early adopters of better ways of practicing law. My favorites in his top ten are:
-"The value conversation is happening everywhere.”
-"Fixed fees can drive the value equation"…. “But value is more than just fixed fees”
-"CEOs and CFOs care.”

The landing page 2012 ACC Value Champions lists the dozen winners and link to a page about each. In the table below, I highlight seven of the winners

In the last few months I have been writing about law firm service delivery: how firms can optimize the experience of their top clients to gain share of wallet and increase profits. This includes deploying tools such as legal project management, process improvement, technology for efficiency, deep knowledge of the client’s business, and client teams. As I begin pitching this idea as a consulting offering, I have been concerned about the tension between individual partner and firm institutional interests. So I was interested to read The McCormick Group’s Take…on The Value of Client Teams by Steve Nelson. 

Firms should want to institutionalize clients but individual partners may resist. Partners may want to keep their clients and “books of business” portable. Steve Nelson, a leading legal recruiter, lawyer, and former legal journalist, writes in an e-mail update today that the market is shifting away from individuals, toward institutions. Reproduced here with his permission is “The Value of Client Teams":

“At the recent Legal Sales and Service Organization meeting in Chicago, there was an invigorating discussion about client team programs at law firms. While there was debate as to whether these teams actually produce any significant additional business for the firms, one of the participants, Adam Severson, Chief Marketing and Business Development Officer at Baker Donelson, pointed out that these programs can provide one significant additional benefit. In the event a key lateral leaves, the teams can help galvanize the firm to reach out to existing firm clients to communicate its commitment to the client and ability to handle that client’s matters properly and without any interruption, and thus, in the end, keep much of the work at the firm.

This story seemed to coincide with another trend that we’ve been hearing from managing partners throughout the country, specifically that there is a widening gap between the prospective portable billings that incoming laterals vouch for and the actual results that occur months after the laterals arrive. While some of this can be attributed to overly optimistic predictions by the laterals themselves, we believe that other factors are more significant. In particular, the old adage about “we don’t hire law firms, we hire lawyers,” often no longer applies. Instead, in an era where increased pressure is on corporate counsel to reduce outside legal spending, there has been an increased emphasis to consolidate legal providers who both know the client’s business and can offer increased efficiencies. So the ability of one partner (or sometimes even a group) to hold onto a significant amount of a client’s business in a particular discipline is diminishing each year. Add to that the key client programs that many firms have instituted, which include client feedback interviews, secondments, and other initiatives, it’s clear that the landscape of client relations has changed.

There are a couple of implications for the future. One is that law firm lateral hiring should be the acquisition of “talent", not simply the acquisition of books of business. The dangers of that latter strategy are well illustrated in the recent Dewey debacle. But perhaps more subtle is the importance of hiring the best possible business development talent. Those professionals who can help a firm solidify existing client relationships, and perhaps forge some new ones, are well worth the investment.”

I recently updated my list of online legal services. Since the prior update in 2006, there has been less online legal service activity than I expected. With clients using outside counsel less and pressing for better value, however, I believe law firms can gain new business by developing online services. 

ABOUT THE LIST

List Update Sponsor. Neota Logic retained me to update the list. The company’s website explains that “Neota Logic delivers the knowledge of experts in an operationally useful form - as expert systems that can be consulted interactively online or embedded directly in business systems.”

Explanation about Number of Rows. Some law firms have a single row in the online legal services table, some have two or more. A single row can mean either that a firm has only one service or that a single landing page describes and links to multiple services. Firms listed in two or more rows have separate landing pages for each of their online services. Consequently, the total number of rows equates neither to the number of online services nor the number of firms with such services.

Focus is Large Law Firms. The list focuses on large law firms but includes two exceptions. One is LegalZoom, which is as an example of how the consumerization of IT may potentially drive corporate IT and law firms. The other is Indigo Venture Law Offices, which as an example of small firm that offer business-to-business online services.

How I Updated the List. Finding large law firms that offer online services is not easy. Searching a firm website or navigating its menus may or may not uncover an online service. Even for firms I know have a service, in some instances, I had trouble finding it on their website. Given these limitations, I relied on three sources for updates: (1) the online legal service category of my blog; (2) input from Neota Logic; and (3) input from about two dozen legal professionals in the US, UK, and Australia whom I solicited for updates because I know they have long-standing interests in online services.

Call for Further Updates. I am left wondering if I have missed any large-law-firm services. If you know of a large firm service, please contact me and be sure to provide the URL.

FINDINGS

Number of Services. About one-half of the firms that offered online services in 2006 no longer do. About an equal number of firms, however, have since created online services.

Types of Services. Most services offer rich content, generate documents, or provide databases of cases or other content. Few seem to apply advanced reasoning techniques to answer questions or perform intelligent intake.

Subject Matter of Online Services. The subject matter of the services ranges considerably but concentrates in financial services (including three just to track Dodd Frank). Four firms offer free document generation services for start-up companies.

Pricing. Pricing and access models vary: free to anyone, free with registration, free to clients, and by paid subscription.

Technology. Identifying the technology platform is typically difficult, so I did not seek to do so. I do know, however, that several use DealBuilder to generate documents and HighQ Solutions to manage and present rich content.

DISCUSSION

In my view, the dot-com boom spawned optimism about online services among some large law firms. Several, especially in the UK and Australia, developed online offerings. With the dot-com crash, however, interest seemed to wane.

Even in the boom, however, law firm economics worked against building online services. Devoting hours to “porting” expertise into a system is tough when trying to provide outstanding client service and meet billable hour targets. While the count of US firms with online services exceeds the count of UK services, my impression is that services in the UK are richer on average. I attribute that to the far greater number of Professional Support Lawyers in the UK than US.

Today, clients demand value and put pressure on rates. The Altman Weil 2012 Law Firms in Transition survey, released last month, finds that efficiency and value are key drivers in the new normal. The report concludes that this “is an exciting time in a profession not prone to exuberance, a time when risk-takers have the potential to capture attention, talent, momentum and market share.”

Legal expertise today is just table stakes. Firms now recognize the need to differentiate from competitors, deliver service more efficiently than in the past, innovate, and provide a better client experience. These trends, plus the economics of alternative fee arrangements, likely will spawn new and more sophisticated online legal services. Firms can deploy such systems to reduce cost, improve value, win new clients, and generate profitable subscription fees.

Beyond economics and AFA, another factor may trigger a new round of online legal service activity: UK legal reform. In January, the UK started licensing “Alternative Business Structures", which allow outside investors to own law firms and provide legal services. Already we have seen a flurry of ABS activity. An outside investor may well see opportunity in building online services for large corporations. It is hard to imagine a success in the UK not crossing the pond to the US.

I welcome comments on other views of the future of online legal services.

Can lawyers match the productivity growth in the rest of the global economy? 

I thought about this after reading a Wall Street Journal article last week, Robots Get a Makeover in Factories, which describe a new generation of robots that help assemble delicate devices, a big change from the early, giant welding robots. This is just another example of the continuous improvement in manufacturing productivity.

Would that we could say lawyer and law firm productivity improves continuously. Of course, measuring legal productivity and quality is hard, a problem Paul Lippe addressed in What if Someone Could Measure What Lawyers Do? in his New Normal column in the ABA Journal (8 Feb 2012). And Fred Bartlit reminds us in his New Normal column last week (30 May 2012) that we should not confuse amount of lawyer time spent with quality of output or productivity.

Improving service productivity is harder than improving manufacturing productivity. Yet consider a host of process- and technology-driven improvements in efficiency, quality, or customer experience:

• Architects’ work was revolutionized by computer-aided design systems.
• Medical care improves demonstrably when doctors and other health care workers follow checklists (as I noted here in a 2003 blog post).
• Customers usually have a better experience waiting in a single line that feeds multiple check-out stations than choosing a single check-out line. (Some of us remember the misery before “jet lines” were introduced.)
• Companies invest significant research dollars to speed up processes. Fast food chains have successfully found ways to shave seconds off the time required to fulfill drive-through orders, which turns out to be critical to profitability. Airlines continue to research how best to board planes efficiently, though the optimal answer appears elusive.
• Technology has improved service experience everywhere. Common examples include the ATM, insurance agents equipped to pay claims in the field, picking up a rental car from a special aisle without having to stop at the service counter, the Apple Store experience of paying the person who helps you via a hand-held credit card reader, and the option to shop on the web instead of a store.

In the legal market, word processing and e-mail were probably the biggest and most ubiquitous productivity boosters over the last two decades Both are about 20 years old and both raise some productivity questions as well. (Arguably, lawyers should delegate more work on document processing than they do. And many lawyers lose time managing e-mail.)

More recently, predictive coding in e-discovery has significantly boosted lawyer productivity, though it remains controversial. I expect that legal project management and process improvement will have a bigger impact but it is early days. Can we expect to see the regular introduction of new processes, techniques, business models, and technology in law that we see in many other economic sectors? As clients continue demand higher value from outside counsel, law firms that improve productivity will win market and mind share.