In­no­va­tive ap­proach to tak­ing on the old guard

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - GRAEME WIL­SON

WHAT is hap­pen­ing in the le­gal ser­vice world? Law firms with names like Bell, De­war and Hall, John & Ker­nick and Find­lay and Tait used to be every­where. Now they don’t even ex­ist. In­stead we hear names like Caveat Le­gal, Cog­nia Law and even Whip­ping the Cat. Those in the know talk about LPO, ABS, non-tra­di­tional lawyers and NewLaw.

So what has changed and what changes are there likely to be in the le­gal ser­vice in­dus­try in 2014 and be­yond? Let’s start at the top with the big play­ers, the le­gal gi­ants of the world and of SA. In the past few years Deneys Reitz merged with global firm Nor­ton Rose (which merged again to cre­ate Nor­ton Rose Ful­bright), Web­ber Wentzel formed an al­liance with pow­er­house Lin­klaters, Baker McKen­zie picked up the team from Dewey Le­boeuf and launched in Jo­han­nes­burg, Rout­lege-Modise first merged with Ever­sheds and more re­cently with Ho­gan Lovells. Ever­sheds then tied up with Ma­hons At­tor­neys.

Per­haps it’s all a bit con­fus­ing, but the big pic­ture is clear — the global le­gal firms have ar­rived in SA in a big way. This trend is set to con­tinue this year with more in­ter­na­tional law firms ei­ther set­ting up their own of­fices in SA or merg­ing with lo­cal firms. The re­sult is huge con­sol­i­da­tion at the top end of the le­gal ser­vices mar­ket with some even pre­dict­ing the emer­gence of a global “Big Four” law firms, sim­i­lar to the ac­count­ing pro­fes­sion.

But the real emerg­ing trend in the le­gal ser­vice in­dus­try is NewLaw. NewLaw is a term coined by Dr Ge­orge Beaton, an ex-South African as­so­ciate pro­fes­sor at the Univer­sity of Mel­bourne who has writ­ten at length about dis­rup­tion of the le­gal ser­vice in­dus­try. Ba­si­cally, his ar­gu­ment is that law firms op­er­ate as a hi­er­ar­chi­cal part­ner­ship pyramid where lawyers churn the hours and fees in the hope of mak­ing part­ner and one day shar­ing in the part­ner­ship prof­its. It is a model that has not changed much in a century and ar­guably pits the in­ter­est of the firm against that of the client.

The global eco­nomic down­turn has worked against these old-style law firms, plac­ing pres­sure on their fees.

It has also given im­pe­tus to the grow­ing num­ber of al­ter­na­tives to the tra­di­tional law firms. These firms are dif­fer­ent to tra­di­tional law firms in al­most ev­ery re­spect other than the use of legally qual­i­fied and skilled pro­fes-

The real emerg­ing trend in the le­gal ser­vice in­dus­try is NewLaw (dis­rup­tion of the in­dus­try)

sion­als. They fo­cus on process and ef­fi­ciency (not hours billed), have flex­i­ble work­ing ar­range­ments, de­ploy dis­rup­tive tech­nol­ogy and charge clients fixed fees. There are an in­creas­ing num­ber of these ser­vice providers in the UK, US, Canada and Aus­tralia with some of these coun­tries en­act­ing leg­is­la­tion to en­cour­age their de­vel­op­ment.

The past three years have been typ­i­fied by in­ter­na­tional ar­rivals and con­sol­i­da­tion at the top end of the South African le­gal ser­vice mar­ket. This looks set to con­tinue. But this is not new. The new in­ter­na­tional trend is NewLaw.

So, in the next few years keep your eye out for tech-savvy com­pa­nies with catchy names, in­no­va­tive busi­ness mod­els and at­trac­tive fee ar­range­ments that are look­ing to mop up a large por­tion of the le­gal ser­vice mar­ket by ap­peal­ing to all but those who need spe­cialised skills and are will­ing to pay high hourly rates to se­cure them.

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