After the retrospective in Part I of “The Road from BigLaw to GigLaw,” we now look into the future of our industry. Specifically, we consider the progressive delivery models that the consumers of legal services have worked for years to put into place and which we believe will be firmly entrenched in the post-Covid-19 economy.
Specifically, we believe that as the legal industry continues pitching towards a buyers’ market, clients are exercising their spending power by demanding specialized services of extraordinary quality, delivered in the most efficient manner possible. No longer will legal consumers be faced with a Hobson’s choice between purchasing the top-shelf legal services they need or forgoing the same due to forbidding expense. As the advancement of technology continues its galloping pace, exemplary legal services are increasingly available for legal consumers to carefully select based on their need for precisely tailored specialization and then purchased as needed on an a la carte basis.
As we discuss below, the freeing of legal services is normalizing the creation of in-house “virtual teams” that are comprised of specialized professionals drawn from dozens of disparate sources, both in-house and outside counsel, relying on both lawyers and other ancillary providers of legal services (including sophisticated A.I.) for the commodity work that used to be bundled within BigLaw’s model.
And, as businesses are fast realizing, the true benefit of modular specialization is not limited to responding to exigencies as they arise. Much to the contrary, staffing a legal department’s virtual team with specialty providers means that prescriptive counseling is easier to put in place on the front end. This will decrease the frequency and severity of disputes and, ultimately, ensuing litigation. Less unnecessary litigation will further complete the cycle by driving down the need for retaining expensive, full-service litigation firms.
As we conclude in this post, the unique value proposition of our GigLaw model was created with these precise client demands in mind. By leveraging emerging technology, we are able to provide our Oracle/software licensing and audit counseling unadorned by the burdens of BigLaw which can be at odds with client needs. Further, in the time since we handled the Mars v. Oracle matter, we have experienced years of similar recurring disputes across a wide variety of licensee clients, developing a knowledge base that frees our clients from wasting time and money understanding the contextual landscape of a matter.
In light of the inescapable trends outlined below, we predict the steady proliferation of comparable GigLaw firms that put into place similar value propositions, each leveraging their own unique specialties. And, as long-time practitioners dismayed by the strain on the attorney-client relationship caused by the final stages of the BigLaw model, we believe this can’t happen quickly enough.
At the beginning of 2020, The Center on Ethics and the Legal Profession at the Georgetown University Law Center issued their anticipated “2020 Report on the State of the Legal Market.” The report’s prognosis on the state of the lingering BigLaw model was nothing short of apocalyptic. Adamant that the “fundamental choice that most law firms face is to adjust to the new realities of the marketplace or face an increasing erosion of their abilities to compete effectively,” the report was derisive of “incremental changes” that attempted to “stave off the inevitable.” The authors concluded that “sooner or later, the market will prevail” and the firms that decline to “listen” to the market will fight for “crumbs”:
As one commentator noted: The risk for most law firms isn’t complete obsolescence. There will always be a need for legal work. The risk is marginalization, being pushed to the side to fight with each other for crumbs as others deliver exactly what the market demands. And the market is speaking loudly to those who will listen.
Others were even less kind. Writing for Forbes last November, Mark Cohen identified a fundamental “misalignment” of the law firm partnership model with “customers’ value proposition.” Mr. Cohen noted that the partnership model worked well when the law was “solely about lawyers” and when law firms had a “virtual monopoly” of legal expertise and thus “dictated the terms of client engagement.” But, as shown by the fact that law firm services have remained flat for six or seven years while the demand for law firm services has increased, there is a “marked divergence between law firm and client valuation of service.”
In plain English? Even before the pandemic, law firms valued their services more than their clients valued their services.
The plummeting client valuation of legal services is attributable to multiple factors, many of which stem from the simple availability of new delivery options:
The delta can be explained by the failure of law firms to adapt to changing consumer expectations; the partnership model that discourages re-investment, especially among older partners; new skillsets; new delivery options (including the Big Four); and a growing willingness of legal buyers to source “legal” services to legal service providers with new business models.
Urging law firms to “rethink their economic/business model, value proposition, (lack of) alignment with clients, hiring practices, resources, strategic partners, supply chain collaborators, and delivery capability,” Mr. Cohen concluded by stating that “[c]ustomer centricity is more than just a buzzword … it is the essence of legal services delivery in the digital age.”
In a matter of months, the Covid-19 Pandemic descended.
On the day we launched Beeman & Muchmore and shifted from BigLaw to GigLaw – June 1, 2020 – law.com posted a data-driven article by Hugh A. Simons entitled “Are Layoffs Coming? And If So, Who Will Be Impacted?” In this article, Mr. Simons analyzed data from the 2008 – 2010 Great Recession to project the impact from the COVID-19 pandemic on the legal industry. Suffice to say, he was not optimistic. As he concluded:
But, as an order of magnitude, if we repeated the same net 2008-10 contraction percent, and allowed for two new associate classes at smaller numbers than 2008-09, we’d be looking at a total of 20,000 departures—17,000 and 3,000 from the Am Law 100 and second hundred, respectively.
To repeat, the top 100 law firms are expected to lose 17,000 attorneys, or an average of 170 attorneys per firm.
As we outlined in Part I, BigLaw endured the Great Recession while still maintaining record per partner profits by firing associates and staff and thinning out the partnership ranks. Our move from BigLaw to our GigLaw model coincides with the fact that few believe this approach can continue through the current Covid-19 inspired economic decline. As Mr. Cohen stated:
Even after the global financial crisis, the law firms adjusted at the margins—furloughs, reduced rack rates, and internal cost-cutting measures. This time things will be different; the changes will be broad, deep, and enduring.
That is not to say that the old guard controlling BigLaw will not thrash against change. But the difference between the Great Recession and the changes brought by the current pandemic is acute – technology and consumer mindsets are radically different:
The old guard will cling to the hope these are temporary changes. They will point to the recession precipitated by the 2008 global economic crisis and suggest the current one will take a similar course. This time is different. Technology and new delivery models are far more advanced than they were in 2008. Consumers have a different mindset and a greater urgency to solve a growing list of complex challenges. The potential of technology and its ability to support new models, processes, and paradigms is already on display. The genie is out of law’s bottle, and it will not return.
After ignoring the change on the horizon for years, Mr. Cohen predicted that legal industry is “unprepared,” yet has no choice but to confront the “swift, comprehensive, top-to-bottom reimagination” of the legal industry.
The multi-faceted role of technology in transforming the state of the legal industry cannot be overstated. Most obvious is the explosion of telecommuting. One day, the vast preponderance of BigLaw attorneys had routinized long commutes to expensive Class A commercial office spaces. The very next day, most attorneys were not just working from home. They were performing from home (court appearances, depositions, etc.). Calling this moment in time a “great reset,” Richard Rosenbaum simply believes that many attorneys are not going to go back to their office spaces:
Regarding Covid and virtual offices: It's a trend that's already unfolded at top law firms, but Rosenbaum and others said that coronavirus could accelerate it. "I think that a lot of law firms are going to see a percentage of their lawyers, not everyone, but a percentage of their lawyers will never come back to the office full time," he said. "They'll work remotely for a good amount of their time. They may or may not need their own exclusive office in their firm. That will change space planning at firms."
Some studies report that 76% of attorneys believe that the pandemic will have a “lasting impact on the way their firm uses technology.”
Despite its emergence with the pandemic, it has long been proposed that so-called virtual offices can have a profound impact on billable waste – the amount of the billable hour that is spent on something other than the compensation of the attorney:
In recent years, however, a third option has emerged. The industry has struggled to brand this new type of firm, sometimes called “virtual,” “distributed,” or “cloud-based.” As the names suggest, these firms have abandoned expensive office space for remote or co-working locations. But they share another similarity that is more relevant and stark: a radical reduction of billable waste.
Though the technology has been around in some form for a while, the rise of telecommuting (and the accompanying virtual offices) was made possible through recent advances in cloud-computing technology, including the essential cornerstones of reliability and security:
One of the main factors allowing lawyers to work remotely is the wider use of cloud computing. Technology and security advances mean employees can work from nearly any computer or device and remain safely under the purview of IT and compliance standards. Case files can be viewed securely whenever needed, saving hours by obviating a commute to the office. Cloud software is also crucial in enabling remote teams to leverage legal databases.
Secure remote access and the consolidation of case information into one well-organized electronic space not only aids productivity, but it is also essential in meeting data privacy regulations. The ability to encrypt sensitive client information, control where it is stored and monitor who can access it is key for compliance with privacy regulations — such as HIPAA and GDPR — as well as ethics and professional responsibility requirements.
The impact is not just convenience to the attorney and the decrease in billable waste. Technology provides access to the types of resources that used to be the exclusive province of BigLaw:
AmLaw 100 firms typically have an army of research assistants, paralegals and support staff on every matter. These staffs provide everything an attorney might need at every stage of the case. In addition, each of them likely have access to the most up-to-date tools to complete their assigned tasks. While non-AmLaw 100 firms may not have the budget or physical space for a huge support staff, technology gives them access to the same quality of information.
As a result of the leveraging of technology, for the first time, “AmLaw 100 firms are seeing a credible threat to the relationships with some of their most prominent clients from firms outside their ranks.”
But decreasing cost and increasing access has been the bread and butter of technology for hundreds of years. The real impact will be in the new business models that were unimaginable even a decade ago.
Referring to technology as a “good news/bad news story,” Mark Cohen reaffirmed technology’s “utility as a tool to help solve law’s wicked problems, primarily by the “democratization of access to and improvement of the delivery of legal services.” As he explained further, this has led to the disaggregation of legal tasks and added to the business of law, rather than the mere delivery of legal services.
That has had a profound impact on the labor-intensive, lawyer-centric delivery of legal services. Technology has fueled the disaggregation of “legal” tasks and has morphed legal delivery from the sale of legal expertise to legal expertise leveraged by technology and process—the business of law.
Remember the one-stop law firm of 100 years ago (as discussed in Part I) that was capable of handling all of the legal affairs of a large company? Everyone knows that his antiquated model has already been disaggregated for decades, with many law firms handling separate matters. The next step in evolution is further disaggregation – right down to the component parts of the teams handling specific matters and tasks. The 2020 Report on the State of the Legal Market explained how disaggregation will lead to client-driven “virtual teams” thus foreshadowing a shift from BigLaw to more GigLaw firms:
Widespread disaggregation of services as clients have increasingly opted to create “virtual teams” of lawyers to handle particular projects — with teams consisting of lawyers from one or more outside law firms working with designated in-house lawyers and with other non-law firm service providers (sometimes including project managers, accountants, legal process outsourcers, legal staffing firms, and many others).
Echoing this sentiment, Mark Cohen further predicts a post Covid-19 emergence of a “seamless, integrated team drawn from multiple sources” driven by, among other things, expertise and customer satisfaction:
“Going digital” was once an illusory concept for most General Counsel and their senior management teams. In the [after coronavirus] world, it will be well understood. The legal function will no longer be divided into law firms, corporate departments, and other supply chain providers. It will operate as a seamless, integrated team drawn from multiple sources. Its remit is to proactively defend the enterprise while collaborating with business counterparts to drive impactful enterprise value. The designation of a firm, in-house, or other provider resource will not matter—expertise, collaboration, delivery, results, and customer satisfaction will.
Technology and data will immeasurably guide in the identification of talent and assembly of these teams:
Consumers will benefit from the rapid transformation of the post-Corona industry. Corporate buyers will have access to platforms enabling them to identify needed talent quickly, reliably, and across geographies and skillsets.
Even the hiring decisions themselves will be informed by “secure, on-demand access to data-driven information” that will facilitate the otherwise complex mechanics of team assembly.
Even before the onset of the Covid-19 pandemic, it was abundantly clear that the client-centric trends that began in earnest with the Great Recession were quickly maturing into operational business models dictated by client need rather than the wants of law firms. At the beginning of this year, we began forming our GigLaw model in direct response to our clients’ demand for our software licensing skills and experiences and their concurrently diminishing demand for the expensive accouterments of BigLaw that they felt did little to further their needs as consumers of legal services.
We trimmed out as much overhead as possible which, thanks to technology, turned out to be a lot. We removed the compensation structure that rewarded the internal leveraging of credit and labor to flow towards the narrowing point of a pyramidal structure. We removed all external metrics from our practice, leaving Beeman & Muchmore to be judged on the value proposition of the services we provide and nothing else. With our resulting agility, we now easily assimilate into any legal team and can provide our services at any stage while we deftly stave off litigation that we believe to be increasingly anachronistic.
While we believe our value proposition would have fit the demands of the legal industry absent the coronavirus, we could not have anticipated the rapidity with which the fundamental underpinnings of our model would move into the mainstream. So-called virtual offices seemed destined to take root, while the legal industry’s tolerance for precipitous salary cuts, mass layoffs and the Am Law 100 arms race already feels as if it belongs to a different world.
Our GigLaw value proposition involves our repeated exposure to substantially similar recurring software licensing disputes involving Oracle and other large ERP providers while working in BigLaw. But our specialized services are only one of any number of modular pieces that clients will increasingly seek on an a la carte basis. We look forward to other skilled and experienced attorneys putting into place their own version of the GigLaw value proposition as they shift away from BigLaw. Indeed, as Beeman & Muchmore evolves, we look forward to further acquiring additional modular pieces to offer to our clients under the same value proposition.
And, in the end, we believe simplifying the delivery of legal services will remove the long shadow that has been cast over many aspects of the attorney-client relationship.
Art and Joel
Published on 6/30/2020
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