A recent article in Lawyers Weekly by Lachlan McKnight, CEO of Australia’s LegalVision, highlights the challenges, and opportunities, NewLaw business models face in providing client-centric legal services to General Counsel. He points to a paradigm shift in legal services – i.e. where 'traditional' law firms feel under threat by NewLaw business models and that in time (aided by technology), will be overtaken. Dr. George Beaton, a strategy advisor to the Australian legal profession, and Richard Smith, a legal business development professional responded to McKnight's article with their comments.
McKnight explains that up until recently, corporate legal teams had the choice of either performing legal work in-house, or to outsource to a traditional law firm. But, this has now “completely changed” with the arrival of NewLaw providers over the past three to five years. Flexible resourcing services, like those offered by Pinsent Masons' Vario, are an example of how a leading, international law firm has reacted to that change. Through the Vario 'hub' of contract lawyers (which is over 600 strong globally) Pinsent Masons delivers flexible, on demand lawyers.
As I see it, clients can still draw on the traditional law firm offerings of Pinsent Masons, but the fact that Vario has grown at such an exponential rate is a reflection of how much value clients place on a law firm backed model.
Pricing strategies and technology are essential
McKnight observes that many firms now call themselves 'NewLaw', while not doing anything fundamentally different. For example, not building and deploying their own technology, servicing customers differently than traditional law firms, or doing away with time tracking, or pricing on outputs instead of inputs. Beaton, on the other hand, points to those traditional firms that have in fact made changes to fundamentally alter their business model to become "NewLaw".
McKnight notes that fixed fees are championed as key points of differentiation by NewLaw firms, but really, they’re still being calculated based on inputs (the amount of time expected to be spent on work) and not outputs. He argues that breaking the relationship between time taken to complete a task and revenue and profit, is the key to the exponential expansion of NewLaw.
Richard Smith argues here that: “progressive law firms realise that with greater risk (which fixed fees actually are), there should be a premium (much as there is with any insurance premium). EvolutionaryLaw firms go one step further and start to have a conversation about ‘value’ pricing.” Real NewLaw offerings, like Vario, need to constantly evolve, look at pricing structures, and adjust to meet client demand. The use of technology is also vital, with any savings passed onto clients.
McKnight further observes that there’s “still more talk than revenue happening in NewLaw”, but that the “opportunity is bigger than nearly anyone imagines”. “If done right, NewLaw firms will destroy the underlying business models of most mid-market traditional firms” with “process, systems and technology” and that “traditional law firms are, as a whole, completely under-equipped to deliver this revolution, both from a cultural and business model perspective”.
Vario has made and continues to make ongoing adjustments to our business model as client needs change. And we price our services to meet the exact specifications of our clients, whether they’re hourly, flat-rate, or a blend of the two. We also utilise technology to increase productivity and lower costs and we pass those savings on to our clients. The speed of change in the marketplace means that we are unrelenting in our drive to adapt and move. Those law firms which aren't moving with the times are going to be left behind if they're not careful.
NewLaw will capture even more market amid strong competition
McKnight highlights the lack of a client focus and technological sophistication in traditional law firms. He predicts that in 20 years’ time, NewLaw providers will have captured upwards of 30% of the broader legal services market, while “traditional mid-tiers will have collapsed [and] only those truly differentiated traditional providers will still be in business.”
Beaton agrees that without adaptation, BigLaw will lose significant market share, and first movers in technology will be better placed to compete against NewLaw firms.
Smith notes that some BigLaw firms are indeed re-creating themselves to such a degree that the re-formed firms are more characterized by NewLaw business models than the old, “their Arthur Andersen/Accenture moment.”
He also argues that it’s the Big4 accounting firms, not mid-tier law firms that present the most significant competitive threat to BigLaw and, also, NewLaw.
We at Vario believe, based on our experience, that what clients actually want right now, and into the future, is the consistency of a traditional, technology savvy law firm working in tandem with a NewLawservice offering that is capable of deploying legal talent on an as-needed basis for special projects or one-time needs.
McKnight continues by saying that even more investment needs to be made into NewLaw, and that those that do receive investment can and will scale exponentially and seize more market share, as the inevitable demand for NewLaw services grows among corporate General Counsel.
A focus on investment has been essential to both Pinsent Masons' and Vario’s growth and development – and we will continue to invest in ensuring we understand our clients fully, and will design and consistently adjust our services to meet their needs.