Winds of change blow­ing strongly

Mar­ket pres­sures forc­ing providers of le­gal as­sis­tance to lower ser­vice costs

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - YVONNE WAKE­FIELD

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”.

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