The legal landscape has never been more confusing. With new entrants into the industry, law firm forays into non-traditional ventures, and the proliferation of new legal technology vendors, participants and stakeholders are scrambling to optimally position themselves among competitors and allies.
In the U.K., for instance, we have seen an explosion of new entrants that reached varying degrees of success since the launch of alternative business structures in 2007, which allow non-lawyers to have a financial stake in a law firm. Around the world, the Big Four accounting and auditing firms’ march into law has been difficult to ignore as they hire top talent, notably in East Asia, and ink deals with U.S. law firms to bolster their legal presence. And in Australia, we have witnessed KPMG’s ongoing expansion with its launch earlier this year of a new government-focused legal practice and a joint venture with legal tech experts.
Law firms are changing shape, too. Pinsent Masons surprised the market by describing itself as a global professional services business with law at its core, underscoring the blurred lines. This blurring has been fueled by the continued revolution in legal tech, including the increased use of artificial intelligence, which has materially altered how lawyers practice.
What the Client Wants
It comes down to client demand: The most discerning clients seek innovative solutions that require more than the top-tier legal acumen that, for many years, has been law firms’ bread and butter.
This changing picture poses questions for law firm leadership and general counsel, who increasingly must make difficult decisions about how to invest in legal tech to meet client demand. Should they stay in their comfort zones, investing in technology infrastructure that is well-established and familiar? Due to the pace of change in legal tech, fear of venturing beyond current platforms will force businesses to play catch-up with their more nimble competitors.
Further, big tech infrastructure investments are notoriously hard to push through in the legal industry. Law firms, in particular, are hampered by their traditional partnership structure, which limits the agility and enterprise that otherwise would encourage investment in digitization. Traditional law firms are not equipped to invest in technology, project management, workflow, design, or training. To raise some obvious examples, if Uber, Google, or Facebook were structured as law firm partnerships, they never would have scaled the heights that they have.
And this is not a one-time investment. To keep pace with technology, law firms and corporate legal departments must continually look to invest. For example, in July, we saw U.K.-based law firm Simmons & Simmons acquire Wavelength to draw on legal, data, design, and engineering skills from within, and outside, the legal profession.
Innovation & Partnerships Changing the Landscape
Tech-curious law firms can find value by identifying an external partner, such as an enterprise legal services provider, that can bring in the right capital and expertise — and that can continually invest in technology. Without the right relationships, however, even the largest law firms cannot match that scale, or the scale of the Big Four firms, or even that of the major companies they call their clients. Approaching legal services’ brave new world of technology may seem daunting at first, but partnering with an ally allows law firms and legal departments to more effectively satisfy client demand.
This is a fast-moving space, and case studies of legal innovation success abound. The most famous example in the U.K.’s managed legal services space was Thames Water’s ground-breaking deal with the former Berwin Leighton Paisner in 2010, with the utility outsourcing its entire legal department to the firm and then buying back legal services. This contract was highly successful, renewed for an additional three years in 2015 and put out to tender on an expanded basis in 2018, with Eversheds Sunderland winning the new five-year contract. The concept is still going strong at Thames Water as a testament to its success.
To keep pace with technology, law firms and corporate legal departments must continually look to invest.
Others have taken the model and run with it, adapting it to take it to an entirely new level. At UnitedLex, our own enterprise legal services arrangement with DXC Technologies is, to date, the largest in this space. It has involved the redeployment of DXC’s entire legal team, as well as a complete rethink about how legal issues flow through DXC’s business and how they are best resourced — whether by lawyers, by artificial intelligence (through a deal with Seal Software), or by other technology. The model also centers on cultivating the “digital lawyer” and retraining individual resources to think and behave differently for the new digital business age. As we refer to the model, “Enterprise Legal” provides an opportunity to recast the legal team’s role to better focus on adding positive commercial value to the business.
Other examples in other areas of legal innovation include the stratospheric rise of the contract lawyering business model. One of the leading names in this space, Pinsent Mason’s Vario, recorded revenue growth rates of 50% in the past year. And there are interesting examples of successful joint ventures with technology and other consultancy partners in this space too: For example, DWF’s partnership with legal engineering business Syke and Thomson Reuters’ Contract Express to grow and develop the firm’s automated contract drafting tool, DWF Draft. And Allan and Overy’s FUSE offering provides start-up ventures with a platform to develop and collaborate with a host of partner companies.
It must be said that the examples above of law firm innovation have been slow to evolve and have not ignited more rapid evolution. However, there are no lack of creative options to keep the focus where it strongly belongs — on the client — and derive solutions that achieve long-term results notwithstanding traditional operating structures. Case in point: Our recent announcement with Ashurst to provide hi-tech enhanced compliance, discovery, and investigation management service.
Despite the din of new entrants and rapidly evolving technology, clients are making clear what they need, and those legal service companies that truly listen and respond will become the new order of trusted advisors.