Our #LegalMosaic series collects insights from the brilliant mind of Mark Cohen. These pieces can also be found at legalmosaic.com.
Axiom, a legal staffing-turned-technology company, recently announced a five-year deal with Johnson & Johnson (J & J) to provide multi-shore contract management services to the pharmaceutical giant. Axiom will support J&J’s global procurement contracting function, helping to standardize its vast trove of procurement agreements across a dozen contract types and 10 languages. This is not Axiom’s lone big dollar, long-term contract with a major corporation. A couple years ago, it inked an eye-popping $73 million deal with Credit Suisse to process the bank’s “master trading agreements.”
Axiom’s metamorphosis from staffing to technology is emblematic of the maturing face and changing focus of legal service providers. They have come a long way since the early days of staffing and legal process outsourcing (LPO). The first generation of sourced work performed outside law firms involved high-volume/low value tasks– principally document review. Labor arbitrage was the lynchpin of the early service provider model. Their greatest contribution was to debunk the myth that all ‘legal’ work must be delivered from the law firm structure. ‘Disaggregation’ of legal services spelled the beginning of the end of law firm hegemony over legal delivery. Law firms have not only ceded work to service providers, but corporate legal departments—initially seen as another form of labor arbitrage—have expanded their breadth and scope dramatically at the expense of law firms.
Market acceptance and an increased emphasis on technology and process in legal delivery has enabled leading service providers to vie for more complex and scalable matters–‘legal service 2.0.’ Labor arbitrage is an element in this second phase of disaggregated legal delivery, but its centerpiece is automation, data, and knowledge retention. Service providers’ corporate delivery model— on-demand or ‘gig’ (even when the gig is longer-term)– enables them to deliver services more cost-effectively than law firms that are saddled with embedded cost escalators—‘partner tribute,’ expensive real estate, and employees with fluctuating workloads. Service providers have also replaced certain ‘services’ with ‘products,’ further reducing cost and promoting timeliness (e.g. subscription legislative and regulatory updates).
Service providers like Axiom and UnitedLex have amassed substantial war chests for research and development, proprietary and best-in-class tools, process improvements, and global footprints. They are unconstrained by anachronistic regulations that prohibit law firms from institutional capital investment at a time when investment is crucial for improving legal delivery. Technology, process, investment capital, cost, structure, domain expertise, agile workforce, and a customer-centric approach are hallmarks of the 2.0 version service providers. A handful of providers have adaptable use models enabling them to work directly with customers or in collaboration with other providers. UnitedLex (ULX) is an interesting example.
UnitedLex: Created By Business To Deliver Solutions
UnitedLex is a global legal and business services company, the byproduct of its incubation in three Fortune 100 companies. Sequoia Capital and JP Morgan are investors. Since its 2006 launch, UnitedLex has melded legal, business, and technical expertise with technology and financial stability to deliver solutions to legal and business customers. Dan Reed, the company’s CEO and Founder, calls this ‘economies of knowledge’— applying domain expertise, retained intellectual capital, and the appropriate technology to secure significant customer performance/cost gains. UnitedLex offers a suite of service offerings including litigation and investigations , digital contracting solutions, IP monetization, law department optimization and cyber security. Like Axiom, ULX has grown rapidly in response to a strong market demand. In less than a decade ULX has built a global workforce of more than 2,000 strong, comprised of lawyers, engineers, software developers, financial analysts, and project managers. It has developed a suite of proprietary technologies tailored specifically to address its selective service areas, and its 22 globally integrated delivery centers enable it to scale quickly, seamlessly, and securely. With approximately a quarter of a billion dollars of investment capital on hand—and Sequoia Capital and JP Morgan as investors– the company enjoys financial stability and flexibility.
But what makes UnitedLex especially noteworthy is the way it leverages its human, technological, and financial resources across the legal ecosystem. For example, ULX created a ‘Legal Residency Program,’ a partnership with seven top law schools across the country. The Program channels physician residency programs, providing law school graduates with ‘hands-on’ experience working with clients/customers while acquiring a suite of ‘contemporarily relevant’ legal competencies that include project and data management, technology, and cyber security. Law graduates train and work at UnitedLex for two years of paid internship and, upon completion, stay on as ULX managers or enter the marketplace with differentiated skill sets. The participating law schools are winners, too; their scholarship funds receive a percentage of revenue generated from client work performed by the Program.
UnitedLex also works closely with law firms, counting half of AmLaw 100 law firms as customers. It has established ‘solutions centers’ in a handful of elite firms, providing no-sunk-cost infrastructure to return eight and nine-figure cost reduction for the law firm as well as competitive advantage in the marketplace and risk mitigation. UnitedLex also counts 25% of the Fortune 500 companies as customers and nearly 20 of the Fortune 50. It has managed more than 15,000 litigation matters, $135 billion in total contract value, and has analyzed more than 65,000 patents. Perhaps its time to retire the ‘alternative provider’ moniker for companies like ULX and Axiom—they are mainstream.
Law firms had a monopoly on legal delivery when legal expertise was its sole element. Legal delivery now requires legal, technological and process expertise. It also requires capital and domain expertise. The days of undifferentiated, ‘big box’ law firms are over.
Well capitalized, tech and process savvy service providers with domain expertise and agile, client-centric models will continue to expand their market imprint. Law firms—not service providers—may soon be the legal vertical’s ‘alternative providers.’
This was originally published on Forbes.com.