The legal industry is becoming digitized. What does that mean? Digitization is a common term lacking a uniform definition. It is often used to describe a suite of IT assets– networks servers, software, the cloud, and other tools. IT is an essential element, certainly, but digitization is much more than the transition from paper to electronic communication. It is the process—enhanced by technology—of reimagining the delivery of goods and services and creating new business models and structures from which to manage them. Digitization is the interplay of tools, tasks, resources—human and technological—process, and models designed to better serve customers and to provide 24/7/365 connectivity between provider and client.
Then: Labor Intensive Delivery; Now: Tech Leveraged Labor
Law firms, long the incumbent provider in the self-regulated legal industry, flourished when legal delivery involved selling only legal expertise. Law firms had pretty much cornered the market on elite legal talent, and they also had almost exclusive access to legal sources now readily accessible to anyone with a computer. Fast forward to the present: law firms are operating in a marketplace where legal expertise, technology, and process are integral delivery components. Law firms have generally lagged in the effective deployment of IT tools – both internally and externally. They have not deployed technology to reduce cost, streamline efficiency, and more closely align/collaborate with clients. They have been resolute in their ‘brute force,’ labor/cost intensive approach to tasks. That approach served their economic model well—in the short term. The client dissatisfaction it fueled has resulted in work migrating in-house or to service providers. And it has opened the door for new providers as well as entrants from other knowledge-based service lines and verticals that have been digitized for years.
In-house legal departments and service providers have begun to re-engineer the law firm delivery method. They have identified ‘legal’ tasks—contract and document review, research, etc.— that can be addressed differently than the labor-intensive ‘brute force’ method of law firms. This involves a mix of legal expertise, technology, and process. The result: compressed delivery time and cost, budget predictability, efficiency, and mitigated risk. The early stage of digitization was, paradoxically, achieved via labor arbitrage (LPO’s), and later by a combination of labor arbitrage and technology (legal operations teams and service providers). This early stage of legal digitization convinced clients that not all legal functions must be delivered by law firms. That, in turn, spawned a heightened interest in technology, process and project management, new models, new providers, new billing paradigms, knowledge management, inter-disciplinary approaches to business challenges that involve legal issues (not ‘legal problems), new skills required of legal providers, and an openness to change. The pace of that change is accelerating and legal delivery is undergoing a radical makeover.
Law Firms Have Failed to Digitize—This Has Cost Them Business and Eroded Their Market Share
Law firms have ceded billions of dollars of ‘legal’ work to providers—and that includes corporate legal departments—that are digitizing. A legion of legal surveys including Georgetown and CitiBank reveal that demand for law firm services has flattened (and recently declined) while overall legal demand has increased steadily. The delta is widening. Why? Most law firms have failed to embrace—much less implement—digitization. They are ‘running the table’ with their old model rather than reimagining how to deliver differentiated services more effectively. They are seemingly tone deaf to client gripes about cost, inefficiency, poor customer experience, and a failure to understand their business. Not only is the volume of migrated work from firms increasing, but it is also becoming increasingly complex. Consider, for example, the five- year managed contract services deal that pharmaceutical giant Johnson and Johnson recently inked with service provider Axiom to support its global procurement contracting function. Axiom will help J&J to standardize its vast trove of procurement agreements across a dozen contract types and 10 languages. Axiom is not a law firm–it is a legal service provider. This huge, global project underscores the oft-time false distinction between the two.
The features of digitized legal providers are becoming well-defined– they are customer centric, tech and process enabled, agile, diverse, accessible to clients in real-time, intelligent, globally branded, scalable, multi-disciplinary, and enterprise focused. Few—if any—law firms fit this description. The Big Four accounting firms, Accenture, IBM, and others certainly do. Consider that General Electric recently moved its global in-house tax department to PriceWaterhouse Coopers. Law firms should take notice. This is the next phase of legal digitization: managed legal services.
About Mark A. Cohen
I have had a forty year career in the legal field. For thirty years, I was a civil trial lawyer and tried 57 major civil cases. My clients included the United States of America (while serving as an Assistant United States Attorney), four foreign sovereign governments, and approximately 60 Fortune 500 companies. I also served as outside general counsel to three insurance companies and as Receiver of an international aviation parts company overseeing operations on four continents. I then became an entrepreneur, focused on driving greater client focus, efficiency, and value in the delivery of legal services. I founded Qualitas, an early legal process outsourcing company, and later became a Co-Founder and Managing Director of Clearspire, an internationally recognized law firm and legal service provider. Teaching—especially skills necessary in today’s marketplace—is another passion. I am a Distinguished Lecturer in Law at Georgetown where I devise and teach professional competency courses and mentor students. I have spoken widely at educational institutions, global legal conferences, and private companies including: Harvard Law School Speaker Series, Reinvent Law, and 3M’s Global Legal Alignment Summit. My writing focuses on changes in the legal ecosystem and, more particularly, on the melding of legal, technological, and business process expertise in legal delivery.