Business opportunities in legal services

Looking for innovation in the delivery of legal services leads naturally to an examination of business of lawyering, as opposed to the practice of law, and there is a large range of potential new business models to be considered.

Many of these are touched on in Richard Susskind’s work, including his 2009 The End of Lawyers. One of Susskind’s fundamental points is that much of what lawyers do is repetitive and not particularly intelligent or creative. In a business context, we often refer to something that is high volume, low skill, repetitive work as a commodity, and in the business world it is a well known pattern that most products have a life-cycle that ends in commoditization.

Surely this could not happen to one of the world’s oldest professions? Susskind makes a good case that it can and will happen to large chunks of what is currently considered to be the practice of law—in any case where lawyers’ work can reliably be reduced to a process.

In the UK for example it is possible to incorporate a new company online in less than an hour for about £100, and some weeks later you receive your corporate record books in the post, complete with the minutes of your first shareholders and directors meetings; in the United States is offering similar services there. The same kind of online business can probably be done with any legal business that is principally form-filling. Consider the implications of this for immigration law, for example.

A more sophisticated version of this model already exists in the a large number of what are referred to as legal “factories”, which at their best are websites where members of the public enter their own data which is analyzed by simple software that determines whether they have the kind of case that is profitable to the legal services provider. If they do then the data is then passed on to a team of paralegals for further processing, while the paralegals are supervised by a small number of lawyers at the top of the pyramid. Personal injury, divorce (!), and unfair dismissal claims are all being processed this way in the UK, and in the US covers wills, divorce, and even patent filings with a similar model.

The obvious criticism of this kind of model is that it high-grades the simplest and easiest cases so that the “law firm” can make the most money for the least effort. This is anathema to those lawyers who pride themselves on doing good and creative work for clients who most need their help. However, the better view is that because these commoditized business models can provide simple services so cheaply, they provide access to legal services to that large majority of the public who could never otherwise afford to hire a lawyer.

Off-shoring legal work to India or other low-cost economies (legal process outsourcing, or “LPO”) is another class of business models. The LPO industry in India is only six years old, but it is already worth $150+ million in annual sales. There are some very large law firm and corporate clients (Microsoft, and Rio Tinto for example) who are getting good results, and in IP it is becoming a fairly well known path—prior art searches and patent invalidity analyses are regularly done in India. The economic forces pulling towards LPO are overwhelming, and LPO alone has the potential to both revolutionize and globalize the delivery of legal services around the world.

Furthermore, the tentative trend established in the UK towards allowing non-lawyer ownership of law firms has implications for more dramatic change, such as IPOs of international firms or the entry of hedge funds; these scenarios raise almost as many concerns about ethics as they do possibilities for innovation.

We will explore each of these potential business models and their implications in future articles.