Winds of change blowing strongly
Market pressures forcing providers of legal assistance to lower service costs
THE traditions of the legal profession are increasingly coming under fire in an environment where, for clients large and small, costs matter more than ever.
In the past five years since the global financial markets crisis reshaped the economic and regulatory environments for most businesses around the world, the focus has shifted increasingly to enhancing efficiency and reducing costs. Market forces are putting pressure on legal service providers to find ways to bring down the cost of their services.
Until now lawyers have shaped the legal profession, allowing tradition to dictate how it operates.
However, the landscape has changed significantly and the manner in which the legal profession services its clients will increasingly be deter- mined by the market that it serves.
In recent years two key trends have developed internationally, both driven by a demand for more equitable legal fees:
A new legal services business model that strips away the bells and whistles and offers only the quality legal service required by the client.
The use of technology to introduce greater efficiencies to the profession and reduce costs.
As is so often the case, the winds of change are blowing strongly from across the Atlantic. Towards the end of 2010 American entrepreneur Bryce Arrowood declared the 100-year-old American law firm model “broken”.
He teamed up with Mark A Cohen, a former assistant US attorney, to form Clearspire, a Washington DC-based law firm using an advanced technology platform to reduce costs drastically.
Clearspire lawyers work mostly from home and the business is run by entrepreneurs and technology experts.
According to the Clearspire website, “Traditionally, law firms have succeeded in the practice of law, but have often failed to provide value, efficiency, and knowledge-management practices.” By embracing technology and a different approach to business, Clearspire says it is able to provide legal services from senior-level attorneys often for about half the cost of traditional big-firm lawyers.
Considered an American legal rebel, Mae O’Malley, an intellectual property and technology lawyer, is the founder of Paragon Legal.
Ranked the 45th fastest-growing services business in the US in 2011 and now a multimillion-dollar company, Paragon Legal outsources senior attorneys to clients in need of legal services for specific projects at a fraction of the fees that a big law firm would have charged for the same work. The majority of Paragon lawyers are women wanting a greater work/life balance. Interestingly, one of O’Malley’s first clients was Google, and others include Facebook and LinkedIn.
The first South African example of a legal service provider with no traditional bricks-and-mortar infrastructure is Caveat Legal, which provides its clients with access to experienced legal teams as and when required without the burden of hiring in-house legal staff or the expense of briefing a law firm. The innovation in the business model means quality legal services at about half the cost, with the lawyers themselves earning more than they did while in the employ of traditional law firms.
A common misconception is that it is mostly medium and small businesses that are pushing back against rocketing legal fees, while big corporations continue to see the value in large-firm legal services even if these come at high costs. This was shown to be a myth when in 2008 the Association of Corporate Counsel (ACC), a global bar association representing the interests of corporate in-house legal teams, launched its controversial ACC Value Challenge.
The ACC Value Challenge aims to reconnect the cost of legal services to value by encouraging in-house law departments to measure the value of their legal-service spending and to use only law firms able to reduce their costs to corporate clients while maintaining strong profitability.
Among other things, the ACC Value Challenge strongly encourages the use of technology to reduce legal costs, in the hope that this will enable law firms to move from the “billable hour” to value-based fee structures.
With clients demanding increased value in legal services at lower costs, legal-service providers have little choice but to make use of technological advances that will enable them to improve the value-to-cost ratio of their services.
The firms that harness these technologies should be able to decrease costs to clients and simultaneously increase profit, thus differentiating them from the competition.
Technology advancements in the legal profession include online knowledge bases containing continually updated and standardised contract and pleading precedents, practice notes, drafting notes as well as other legal know-how.
Document management technology simplifies the handling of high volume legal tasks and document generation systems enable the automated generation of standardised legal agreements.
Innovative legal research technology is crucial in redefining value between the corporate client and the law firm. This need has resulted in the development of a number of fiercely competitive online legal research platforms.
The reality is that the market is forcing lawyers to become creative in the way that they provide their services.
Rather than being seen as a threat to the profession, this should be embraced as an enormous opportunity for practitioners with the right mindset.
To quote from Richard Susskind’s book The End of Lawyers? Rethinking the Nature of Legal Services, the aim should be “…to find and embrace better, quicker, less costly, more convenient, and publicly valued ways of working”.