The quarterly publication of the International Legal Technology Association
Issue link: http://read.uberflip.com/i/34686
nothing an LPO vendor claims they can do is capable of being performed by anyone or anything except a big firm. Of course, LPO vendors are maturing and clients are questioning how much work must be done at the law firm level, making these defenses unlikely to hold much longer. In fact, some — including (now former) Howrey CEO, Robert Ruyak — told The Wall Street Journal that challenges from LPO and other alternative legal vendors undercutting law firm pricing were one of the reasons for the law firm’s recent demise. “Another challenge was the rise of third-party document-discovery specialists that could provide litigation support services at substantially lower rates,” Ruyak said. With the LPO industry — at least as part of the broader community of alternative legal service providers — now having the ability to rock some of the pillars of the legal profession, it certainly conveys a significant and growing strategic importance to law firms. Even firms far from demise are seeing profitability being chipped away. From a strategic perspective, we see there are three viable paths for law firms to follow: collaborating with third-party LPO vendors, developing internal captives or eschewing commodity work altogether. Rather than ignoring and distancing themselves from the work that can be done by LPO, firms can either embrace LPO vendors and form partnerships with them, or create new business models to deliver commodity work on a similar basis. Law firms might not be able to continue to bill associate rates for work that can be done just as effectively by contractors (onshore or offshore,) but by working closely with LPO firms, they can ensure they control the deal, collect fees for project management and quality control, and remain a trusted advisor by providing clients with new, innovative and cost-saving solutions. This approach is likely to become increasingly favorable as law firms embrace alternative and fixed fee structures, which can reward innovation and efficiency. Alternately, law firms can build low-cost operations within their walls. Many are already managing contract attorneys, and some firms have created special practices to deliver commodity work outside the partnership track. Much can be said for this model, as clients already trust their law firms and prefer to work with them enough to be willing to pay a premium to do so. How big a premium and how well firms will be able to keep pace with the innovation culture of alternative vendors are still open questions. A third option, of course, is to eschew commodity work altogether. There will always be room for firms that focus only on delivering high-level strategic advice, and even in these times there has been limited rate pressure on that type of work. Michael D. Bell is the Founder and Managing Principal of Fronterion LLC legal outsourcing advisory, and his expertise covers the full spectrum of legal outsourcing advisory services. Michael is the author of the seminal book “Implementing a Successful Legal Outsourcing Engagement,” which is regarded by many to be the foremost authority on the topic of legal outsourcing. He can be reached at michael.bell@fronterion.com. 78 www.iltanet.org Peer to Peer However, it has been high-volume commodity work that has been pushing the profitability of many firms for the past 25 years. A firm willing to deliver only strategic work, with no leverage, will likely succeed, but might not be able to grow. Also, some significant changes to the law firm structure and culture might be required. But the days of providing legal-related services that need not be done by expensive, partnership-track attorneys are coming to an end for most firms. A Time to Reconsider The legitimacy and investment of legal publishers joining the LPO industry does mark the need for firms to perhaps reconsider the implications, bearing in mind that many of the barriers to LPO collaboration are successively falling away. Law firms are finding themselves in a three-part (client, firm, vendor) relationship, rather than the symbiotic partnership they were so comfortable with for so long. LPO vendors provide services differently than traditional law firms. They provide a unique value proposition that combines elements of staffing agencies, legal technology vendors and rigorous project management, and are positioned to do commodity work at a level against which law firms really cannot compete. Responding with simple rate cuts is not the answer. Firms have a choice of several approaches and, while a single model might be elusive, it is clear that choosing the right path is crucial for long-term survival. LPO vendors are definitely on the rise and disaggregation is here to stay. By 2020, we believe that clients will be comfortably in the habit of asking themselves if a traditional, big law firm approach is required for each and every piece of work. Alternative legal service providers, such as technology solutions, staffing companies and LPO vendors, will carry more and more of the burden. Law firms with a strategic plan that takes that into account, either by staffing appropriately to deliver only high-level work or leveraging firms’ historical trusted-advisor relationship to improve profitability, will thrive. ILTA Bradley S. Blickstein is Principal of the Blickstein Group, a consultancy serving the corporate legal community. He focuses on the relationship between law firms, legal departments and outside service providers and advises on a wide range of activities from strategic planning to messaging to media relations. Bradley was a founder and the President of Corporate Legal Times (now known as InsideCounsel) and the producer of ALM’s annual Corporate Counsel Conferences. He can be reached at brad@blicksteingroup.com. Fronterion Presents LLC Ten for 2011 Top Ten Trends for Legal Outsourcing in 2011 Fronterion L.L.C. is an international management consultancy which focuses exclusively on advising law :irms and corporations on outsourced legal services. We assist our clients to capitalize on a changing legal landscape and con:idently engage in legal outsourcing initiatives based on unrivalled industry insight. For more information on how these emerging trends will impact your organization in coming year or regarding Fronterion contact info@fronterion.com or +1.312.473.4887. Copyright © 2010. Fronterion LLC. All rights reserved. For more on LPO trends, see Fronterion’s annual trending report, , at www.Fronterion.com/tenfor2011. T en for 2011