By Paul Stroka
The legal community is experiencing a once-in-a-generation shift in the way services are offered, provided, valued, and delivered. Through a combination of new technology, innovative staffing, and creative capability, lawyers and their clients are redefining their relationship.
As part of this shift, law-firm leaders around the world are facing a common dilemma: lower their rates or lose legal work to less expensive non-law firm providers. And, once the end client realizes how an outsourcing model through an alternative legal service provider benefits efficiency, it is unlikely to reverse course on subsequent projects – resulting in a permanent loss.
In lieu of competing with these organizations, law firms may want to leverage ALSPs as potential allies that can help reinvent and enhance their services. With clients relying on outside counsel for bold, proactive, and dynamic solutions to their most challenging problems, such an alliance offers the exact cure for what ails so many clients.
Law firms were historically chosen to lead and provide support for any legal matter or ancillary project that required law-related experience. Now, clients recognize that almost anything in a legal case or transaction that they can effectively complete without their outside counsel will be cheaper. And, although many clients were previously reluctant to engage an alternative provider out of concern for quality or the potential impact upon the final outcome, few sophisticated clients maintain such a view. With the rise of an entire industry of professional, specialized, and cost-effective alternative options led and staffed by lawyers with deep experience, most well-informed clients insist upon disaggregation of legal services.
There are, however, many projects that a non-law firm provider cannot handle alone. Many of these projects also do not fit well into the high-cost law firm model. This disconnect represents a unique opportunity to satisfy clients’ demand for legal services by using a hybrid approach consisting of both outside counsel and an outsourced provider. Each party would benefit from new business that wouldn’t exist but for the other.
For example, a corporation is unlikely to bring an action with a potential recovery of $50 million dollars where the costs could reach seven or eight figures. If, however, a law firm could offer an alternative arrangement, e.g., a flat fee or blended rate, this partner with a lower-cost offshore team instead of 20 associates located in a major U.S. city to lower costs dramatically, the client will consider the matter more seriously. If the client proceeds, the law firm could still earn a multi-million-dollar fee. This model is equally applicable in ancillary areas, such as contract lifecycle management or derivatives administration, where the difference between new business and no business may simply be a creative, disaggregated proposal.
Historically, lawyers served as a client’s advocate in court, a business transaction, or a government inquiry, among similar high-profile concerns. As these matters evolved, counsel also assisted in drafting contracts, pleadings, or other agreements.
When the amount of paper grew, the cost of processing it became unreasonable and the time necessary to evaluate it distracted lawyers from their core mission: to provide great strategic legal advice. Corporate legal teams recognized this imbalance and began searching for substitutes to supplement their outside counsel. Instead, they found bona fide alternatives that virtually eliminated the need for hiring a law firm for many legal tasks.
This shift has been accelerating over the past few years in law firms and corporate legal departments. As legal-operations leaders continue to track metrics and evaluate the myriad of options available to law departments, they are growing more savvy. Frequently, this has led to dramatic reductions in law firm hiring, particularly with routine contracts or serial litigation.
The proposed collaborative model reenergizes the client-law firm relationship by liberating law firm professionals to focus on the highest-value work their clients prize most. It enables them to develop strategy, provide solutions, and share novel legal theories, rather than manage basic, high-volume tasks that an organization can outsource or perform internally using widely available technology.
Most law firms are unlikely to maintain control over or regain the rote projects they once managed – projects now considered better suited to a lower-cost provider. And, although law firms are losing some work to alternative legal service providers, there are many instances in which clients, faced with projects that would be too costly under the law firm model, will simply choose to do nothing. This demand for legal services frequently goes unmet, which creates an opportunity for law firms who can meet it with a cost-effective disaggregated solution.
Law firms should proactively engage alternative legal service providers and identify the types and sizes of projects for which “collaborative disaggregation” may be appropriate, as well as potential clients who would welcome the idea.
There is a vibrant discussion in the legal profession about reinvention of existing roles and their influence on business relationships. Lawyers who can help their clients creatively approach advocacy in a resource-constrained environment can return to their core mission and fuel growth for their firms. They can also distinguish themselves as knowledgeable members and an extension to client’s team, offering advice and consultative services beyond a particular matter. This unique approach can be a critical factor in fostering an existing relationship or building a new one.
Whereas lawyers used to compete with other professionals for the attention of their clients, they are now competing with everything from a computer screen to an artificial-intelligence program. Technology is faster, at least as accurate, and typically priced more precisely on value rather than time.
While many corporate legal teams independently select preferred technology providers, they are still receptive to suggestions from outside counsel – particularly if the choice of tool is part of a proposed alternative arrangement. This gives law firms the freedom to bundle technology into their proposals as an element of their relationship (and profitable arrangement) with their outside provider.
From machine learning to artificial intelligence, experience with and knowledge of advanced technology reflects an innovative culture that buyers of legal services expect in the current climate. Recommending a pinpoint solution or a custom suite of tools at the outset to accomplish a client’s goals can be pivotal in a chief legal officer’s decision-making process.
It is critical for law firms to be more proactive because many are losing business to their clients or vendors and consultants that support them. There has been a dramatic and measurable increase in cheaper alternatives to traditional law firms that handle commoditized, lower-value work with technology and unique staffing models.
That said, technology is not yet replacing human interaction or the delivery of high-level, strategic, or subject-matter-specific advice. Research shows that it will change – rather than eliminate – work for firms prepared to engage as valuable, trusted advisors vs. volume providers. If law firms can leverage their strength in client relations and subject-matter expertise proactively to create opportunities to handle new projects in novel ways, they will fuel a variety of promising initiatives.
With this expansion in mind, AmLaw 100 law firm Akerman LLP created its Akerman Data Law Center in collaboration with Thomson Reuters Legal Managed Services to offer clients research, multi-jurisdictional surveys, and regulatory gap analyses in matters related to data privacy and security. The firm’s Data Law Center also uses artificial intelligence tools to better interpret and operationalize legal knowledge to help build greater efficiency into the delivery of their legal advice. By partnering with Thomson Reuters Legal Managed Services and leveraging artificial intelligence technology, Akerman combines rules, reasoning, decision management, and document automation to benefit its clients.
What law firms should be concerned about is missing the chance to evolve. This collaboration between alternative providers, law firms, and technology solutions exemplifies the future of legal practice.
After all, clients expect a unified and collaborative approach to their legal matters. It is very common for companies to cobble together panels of preferred vendors from which it will select outside counsel, digital tools, and other support teams. Under these circumstances, there is an expectation that each law firm will collaborate and share information or best practices for the benefit of the client. However, a law firm that approaches the end client with an integrated, expert, and cost-effective model will be better positioned than those firms that arrived with no alternative or technological ideas (let alone solutions).
Although it is a challenge to secure placement on an organization’s preferential listing, the end clients are usually committed to ensuring that panel counsel can also benefit.
Instead of solely focusing on the singular partnership between the law firm and the client, truly dedicated firms will find ways to engage alternative and technological legal service providers in a dialogue about long-term collaboration. This conversation not only has the potential to strengthen the client’s market position, it reflects a willingness to be flexible and to prioritize the client’s interest over its own. Law firms that can make this connection and develop true partnerships with alternative legal service providers gain an overall advantage and make a lasting impression on those they represent.
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