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Law Firm 2.0 – What might the future of law firms look like?

In my continuing Law Firm 2.0 series, today I ask the question: So what will the future of the law firm look like, especially if the status quo situation remains?

Here are some predictions.

First, the continued splintering of the relationship between the client and the firm will splinter in ways that will minimize their involvement over time. Lawyers who really want to practice in the traditional start-up ecosystem and function as true outside general counsels may be forced to leave their large firms and create and / or join smaller, boutique firms with radically different cost structures. I think that as clients use their lawyers less they will begin to see legal services as a commodity, a prediction also made by Richard Susskind.

Second, there is an argument that legal services will become all the more compartmentalized. One can imagine separate, smaller firms whereby one or two areas of law are practiced. Maybe there will be firms that just specialize in venture financings, for instance. This was actually an idea that I wrote a small business plan on back in 1999. Even before the recession, I received several calls from senior associates and / or junior partners claiming that they are thinking of breaking off on their own with similar folks at other firms to create start-up boutique firms, so that they can practice their craft without the same billing rate pressures.

Third, costs, compensation transparency and quality of life issues must be addressed, otherwise law firms will continue to throw dollars at associates to get them to put up with the current state of affairs. And in throwing dollars at the problem without fixing the real issues, those costs will be passed onto their clients.

Fourth, outsourcing will occur. Whether it is offshore, or simply somewhere other than the home office, the associated cost reductions with outsourcing can’t be ignored.

Fifth, I think the billable hour will, eventually, for most areas go away. Legal services will start to look like other services with fixed fees. The Washington Post has a great article with the quote “The economic crisis is giving the prosecution a boost in the case of Fixed Fee v. Billable Hours.” Even a presiding partner at Cravath, Evan Chesler argues for the death of the billable hour.

Sixth, technology will drastically change the way that lawyers work. I can’t begin to explain it as eloquently as Richard Susskind, but technology will end some lawyers’ careers while enhancing others. Lawyers had to be drug kicking and screaming into the email and word processing world (and for God’s sake who still uses Word Perfect? Argh) and will now have to adapt to social media and “always-on” connectivity. Furthermore, lawyers who can use technology to enhance their practices will prosper, while others will be replaced by it. I personally think that document automation platforms will be very important in the future and is why we invested in FirstDocs. We saw technology change the way discovery was performed by our successful investment in Stratify.

So what could Law Firm 2.0 look like? Who knows, but here are some early candidates of firms already doing things very differently:

One is Axiom Legal. In a nutshell they’ve used the professional consultant business model (and corresponding cost structure) and employee former big firm lawyers and experienced in-house counsel that charge half the rate. From what I know, all of their lawyers are 8-10 years or more experienced and charge what junior associates charge at some firms. They are venture backed and are hitting the cover off the ball from what I have heard. I wish that I was in the deal.

Second, I received an email from a “large but not particularly well known firm with offices throughout the southeastern United States.” They have a model of having offices in many non-traditional U.S. cities where work can be farmed out. In the words of a lawyer there with a sophisticate, international practice, he said:

“Most of us choose to work in cities where the cost of living is lower.  That means our salaries and draws are lower, but our hourly rates are also lower.  We can out-source work from our higher priced cities, for example, Washington, where I am, by sending labor-intensive work such as document review and due diligence, to talented and motivated lawyers in, for example, Memphis, Tennessee, and Jackson, Mississippi.  Our expectation of billable hours for lawyers at all levels is considerably lower than that of other large law firms.  As a result our lawyers are fresher, happier, and more likely to stay out our firm longer.”

Third, Craig Johnson, former founder of Venture Law Group, has created a new virtual law firm, aptly named Virtual Law Partners. This looks to be a hybrid model between Axiom and a traditional law firm, but is certainly interesting. Their name says it all – forget the expensive real estate plays and hire your lawyers virtually.

I also had the pleasure of recently reconnecting with an old Cooley alum and his partner: Raj Jha and Todd Smithline. They are primarily an IP / Licensing firm, but use a subscription model to bill their clients instead of the well-worn hourly model

Or maybe all of this is wrong, the traditional law firm will adapt and morph and create its own Law Firm 2.0 vision, one far better than invented by a guy who has been outside of firm life for the greater part of a decade (but I doubt it). The one thing that I do know is that there will be change.

April 14th, 2009     Categories: Law Firm 2.0    
  • http://sinu.com Larry Velez

    We are convinced that the billable hour is dead in IT and it makes sense that businesses and people start looking at the other services, including legal, which they consume the same way they look at their cell phone bill – a monthly recurring fixed fee with unlimited hours.

  • Sylvia

    Check out Legal OnRamp ( http://www.legalonramp.com ), a professional social network for attorneys and inhouse legal departments.

  • Ilana Sorokin

    Check out Outside Counsel Solutions at http://outsidecounsel.net/about.aspx. Their US attorneys provide top-quality legal counsel to clients all over the USA, from offices in New York and Jerusalem, at highly discounted rates.

  • http://aalawfirm.com Andy Arnold

    Based upon this post, just bought The End of Lawyers? (Hope it has some application to a plaintiff's practice.) I am trying to figure out ways to use technology for the benefit of not only my clients and prospective clients. I understand the benefit of blogs and social media, but how to really leveraging technology to change the equation is something I hope your blog and Susskind's book can help me address.

  • http://ccwalters.com Chris Walters

    Great article, here is an example of a progressive computer forensics and e-discovery firm, Stroz Friendberg, LLC. They utilize very competent technology focused attorneys who would traditionally work for a large law firm but choose to utilize their skills by consulting. strozfriedberg.com

  • Pingback: Law Firm 2.0 – The End (for now) and Recap and Downloading the Entire Series. | Mendelson's Musings

  • http://www.ustiffanyshop.com tiffany

    They utilize very competent technology focused attorneys who would traditionally work for a large law firm but choose to utilize their skills by consulting. strozfriedberg.com

  • http://www.GreatLegalMarketing.co.uk Boyd Butler

    Billable hours will disappear for entrepreneurial lawyers.

    Why?

    Because you can only work 40 hours a week.

    Which means you are limited in terms of productivity.

    Plus, you are limited because you are not leveraging true value.

    I.e what value you are delivering to the client which may be much
    more than the billable hour.

    Subscriptions will flourish. Because knowing what you are paying out
    each month makes it easy to budget. And knowing what you
    are getting in each month makes it easy to manage.

    Virtual law firms, where unhappy, experienced lawyers work
    on a retainer/commission structure will bloom. Lower overheads
    for the controlling company and more flexibility both sides.

    Technology is what prospects/clients want to get in touch.

    Why traipse into expensive real estate offices of a law firm
    when you can just as well skype from home/office.

    Firms will continue to discover niche areas and work faster and flexibly
    on smaller scales. These individuals or firms will not be restricted by
    geography, but more their expert status and how well known they are.

    La firms that survive and thrive will be those who learn how to become
    Great Legal Marketing firms because technical quality is expected yet
    Service quality is what is most in demand.

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