Editor's note: This article is part of a weekly series from The Legal Intelligencer examining how law firms adapted during the last two years and where they are headed as the economy recovers.
Between new players looking to provide legal services and pushback from clients over paying for routine work, law firms potentially have less to do.
In response, some firms have looked to retool their business models, adjust the roles they play for their clients and, in some instances, get out of certain businesses altogether. For many firms, staying ahead of the curve will mean recognizing these challenges and figuring out creative ways to adapt, consultants say.
"Underestimating your opposition is a really bad idea," Edge International consultant Jordan Furlong said.
Furlong recently heard a general counsel say that her job is not to produce or deliver services to her clients but to manage solutions -- a role law firms would be served well by if they chose to embrace the concept, he said.
Firms should think of themselves as the managers of solutions and recognize they will do some of the work and send some out to other providers, he said.
"Smart firms will say they still want to manage the process and sit at the client's right hand," Furlong said, adding however, that they need to realize there are some things the firm is good at and other things a legal process outsourcer (LPO) may better handle.
The real battleground for law firms in the near future will be over who will serve as the quarterback, or the solutions manager, Furlong said.
Law firms in the United Kingdom seem to have been the early adopters of this model. Furlong pointed to Lovells, now Hogan Lovells since its merger with U.S.-based Hogan & Hartson. Lovells had gone out to find regional firms to do certain work at a lesser charge while Lovells would serve as the guarantor of the smaller firm's quality and liability.
Hogan Lovells London-based partner Michael Stancombe said the firm created what it calls its WAVE process eight years ago after some large clients started asking for some of the "smaller" work to be handled in a more cost-effective fashion while keeping Lovells involved in the oversight of the whole matter
The firm came up with the idea of having clients give it all of the work, as opposed to the portion it had prior, and the firm would manage it with the goal of decreasing the client's legal spend by 20 percent. All matters came through Lovells and anything below a certain threshold would be sent out to two pre-selected regional firms to handle at a lower cost. In turn, Lovells was able to increase its rates for the high-end work it was doing given the fact that the clients were still saving money. That also made up for sending out some of the work, Stancombe said.
The clients could theoretically just contract with the two smaller firms and cut out Lovells, but they want the management capabilities and high-end work from the firm, he said. The key factor in the WAVE concept is that the lead firm maintains oversight of the entire matter. So far, around 9,000 matters have been handled under this system, Stancombe said.
Since Lovells merged with a U.S. firm, WAVE is still implemented, and Stancombe said his legacy firm is working with its new colleagues across the Atlantic to see if such a system might make sense for their clients.
London-based Berwin Leighton Paisner took that concept a step further. Rather than utilizing a variety of lower-cost regional firms, Berwin Leighton created one that it controls. Lawyers on Demand is a subsidiary of Berwin Leighton that provides less expensive, though still highly trained, lawyers to serve on an interim basis within a client's law department. The freelance attorneys have the support of, and are under the control of, Berwin Leighton, but they operate under a different cost-structure
"We understand that work volumes are increasing yet many clients are coming under pressure to reduce legal costs," the firm said on its website. "All LoD fees are agreed in advance using a daily rate that reflects the expertise of the lawyer."
Other firms in the United States are using a distinct, internal attorney tier in an effort to reach a similar result. Adam Smith Esq. partner Janet Stanton called the concept a "light division" of attorneys. These lawyers are still part of the same firm but are perhaps resident on a different floor or office building and have no anticipation of becoming partner.
The idea is to combat the competition from temporary staffing agencies and keep as much of the commodity work in-house as possible, Stanton said. But this is just one type of service model and not suitable for every firm, she said. Some firms may choose to give up that work altogether and let the LPOs handle it.
Other firms are providing certain outsourced services themselves rather than let an e-discovery or document review LPO do it, Stanton said. They have created "e-discovery mills" or information centers in which lower-cost attorneys are working in lower-cost markets to handle work formerly done by more expensive junior and senior associates.
In an effort to make the work of junior associates more palatable to clients, the Practical Law Company is looking to team up with firms rather than work against them. Ian Nelson, head of the company's U.S. business development, wouldn't jump to call his company an LPO and said it has never looked to compete with law firms, though it does have some law department clients.
PLC provides online support for law firms, mainly in the transactional realm, that includes drafts of documents such as letters of intent, acquisition agreements or closing checklists. The goal is to stop lawyers from spending hours of research on how to draft these documents and instead focus on the legal services that can't be outsourced.
"There's a level of information that all lawyers at a certain level should have," Nelson said. "Clients shouldn't be paying for it."
Most of PLC's attorneys are former large-firm lawyers. Nelson said this isn't a lesser alternative but just a different way of training and providing services. Now that clients are interested in working with smaller firms, Nelson said, they are still expecting the same caliber of responsiveness and resources. Companies like PLC look to get lawyers up-to-speed faster, he said.
As with many LPO services, some firms have found a way to bring this research function in-house. And as with many business of law innovations, the concept hails from the United Kingdom
Professional support lawyers started in the United Kingdom more than 10 years ago and some consultants say they may be migrating into U.S. firms. The role of a professional support lawyer is to serve the firm or a specific practice area by staying up-to-date on changes to the law and assisting or providing drafts of legal documents all in an effort to prevent younger associates from billing the clients for hours spent doing the same thing
This attorney, who isn't billing time and can often work on a flexible schedule, might focus on researching new laws, draft documents and manage document systems, hold training sessions for younger lawyers and answer questions for billing attorneys on institutional knowledge within the firm.
The role is a cost center for law firms, as these positions are generally paid at a senior-associate level, but they can also be viewed as a way to combat the unwillingness of clients to pay for younger lawyers to learn on the job.
In February, London-based Clifford Chance was seeking a professional support lawyer for its New York office to work with the mergers and acquisitions and corporate finance practices. Some of the job descriptors included gathering and disseminating "know-how," collecting precedents and creating, updating and managing standard legal forms.
Regardless of whether firms are bringing the competition in-house, working with outside vendors or holding tight to the traditional law firm model, clients have an increasing number of options when it comes to service providers.
"There used to be one monolithic legal services provider -- the law firm," Furlong said. "Now there are many and clients will choose among them."
The "huge role" for law firms, he reiterated, is the quarterback.
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