The New Normal

Dr. Stephen Moss

Wednesday 16th August 2017

Alternate legal services providers that harness technology took a sledgehammer to the large law firm model. Dr Stephen Moss looks at how it arrived, and its lasting impact.

‘Advent’ is defined as the arrival of a notable person or thing. In the case of its law firm namesake, it certainly was. Advent Legal was among the first alternative legal services providers (ALSP) in Australia and later Asia, following Axiom Legal in the US and UK. When we first backed and funded Advent Legal we took a risk that a new law firm model could succeed, disrupting the old order and challenging the traditional employment model of law firms. The offering was immediately successful in Asia and Australia, and is now, only 5 years out from start up, established in the UK and internationally since its merger as AdventBalance Legal with Lawyers on Demand last year. The timing was right for an alternative offering, and there are now many many followers in the legal services marketplace around the world.

In the US, firms like Hire Counsel have grown exponentially on the back of servicing GCs and law firm’s e-discovery and variable cost contract labour requirements. It is my view that ALSPs will continue to flourish on the back of client demand for lower and fixed cost solutions, pressure on rates and margins from procurement processes and the awareness of GCs and other buyers of professional services that they can be delivered for much less and more efficiently by harnessing technology.

Offshoring and e-discovery centres are becoming well established in lower cost jurisdictions. Many large law firms have also either implemented or are considering implementing lower cost premises for some of the more rote and compliance based legal work, particularly in large dispute matters.

Crowd & Co is an example of a technology company which has developed an agile, adaptive platform that enables all legal industry participants to engage, transact, collaborate and communicate. For traditional law firms facing up to the underlying crisis of a fixed labour model amid changing demand, they can rent the underlying Crowd & Co technology platform.

Crowd & Co is amongst a wave of ‘post new-law” organisations that are both friend, and foe, to large law – they call it #FutureLaw. As a tech company rather than a law firm they are nimble and innovative, as their appeal in the profession is universal. For the individual lawyer, they offer a practice alternative in a two sided marketplace, and also solutions for in-house teams who are looking to rethink panel arrangements as they are continually asked to do more with less.

With so much of legal services being commoditised, machine learning, block chain and artificial intelligence will make a hard, bottom line impact on firms over time. ALSPs and technology companies in the professional services sector will continue to impact the economy of professional services globally as long as technology continues to be used by innovative legal start-ups that can offer a savvy and cheaper alternative.

Large law knows it has a problem, but the solution is still out there

The 2016 ECP Legal Managing Partner Survey revealed that:

  • 50% of managing partners believe ‘technology changes,’ challenging the traditional firm model, will be the biggest change in the near future for law firms;
  • 75% see artificial intelligence as being positive for the legal industry, and
  • Only 15% see artificial intelligence as a key plank of the long term strategic and technological direction in the legal services sector.

Despite acknowledging that consumers of legal services want change, few managing partners are making proactive changes to adapt to the changing nature of business as it relates to technology and AI. It would seem that many professional services companies, including traditional law firms, are sitting back and acting as if they are immune to such strong consumer sentiment and market forces.

The recent ECP Managing Partner Survey found that most partners acknowledge the impact that technology and in particular AI will have on their firm. But they are not at this stage tending to do anything significant about it. A slim few have started building their business strategy around new technology, one of the key drivers that we believe will reshape the professional services industry within the next five to ten years.

The legal profession is in fact a good indicator of the current state of play of the professional services sector – which also includes accountancy, engineering, architecture and management consulting, with, as one would expect, the IT industry embracing and leading change in this area.

Across professional services we expect to see firms at the top-end continue to consolidate via mergers, acquisitions and combinations. The ‘Big 4’ accountancy firms have a seasoned approach to expansion through combining with similar businesses to gain scale with similar or adjacent specialisations, or widening their market with complementary professional service disciplines. The Big 4 have recently attacked the legal and consulting industries in this regard.

The impact of technology in all our lives and business endeavours is here to stay. ALSPs are growing and multiplying, and to ignore their potential impact is naïve and ill-advised.

Dr Stephen Moss is the founder and managing partner of Eaton Capital Partners and ECP Legal and a regular contributor to thought leadership across the professional services sector. Dr Moss was a founding shareholder and Director of Advent Legal, now Lawyers on Demand, and is a current director and shareholder of Crowd & Co.

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