By Richard Palmer, Senior Managing Director, FTI Consulting
The emergence of alternative legal and non-legal providers in recent years, alongside the increased need for technology, is reshaping the legal sector beyond traditional law practice.
The legal sector has changed tremendously in the past two decades, and this transformation is now accelerating. The proliferation of technology, the growth of alternative legal service providers and a raft of non-legal practitioners who play important roles in delivering legal and commercial services to businesses and clients have spurred the creation of a complex legal ecosystem.
This changing landscape was the subject of a session at the recent Financial Times Innovative Lawyers Summit in London, entitled “Legal Industry or Legal Profession?,” which questioned the most appropriate term for the sector, looked at the scope of its providers and discussed how they are collaborating.
It was such a thought-provoking session, with conflicting views on some matters and agreement on others, that we decided to bring together some of the panelists as well as representatives from different providers to discuss certain aspects in more detail.
While there was a general view that law may be moving from a profession into an industry, there were many lawyers in the room who expressed a need for recognition of their standing and their qualifications. There is a sense of pride at the training they have undertaken and the code of conduct they adhere to. Yet while they may be the ultimate decision-makers on legal matters, they now sit alongside a set of supporting functions that comprise a much bigger picture.
The most obvious parallel — one that was highlighted numerous times during the session — is doctors in a hospital, supported by a vast network of medical and non-medical staff, underpinned by technology used to ensure that patients receive the best possible care.
Reena SenGupta, Executive Director at RSGI and founder of the Innovative Lawyers programme said, “There’s a sense that lawyers are different because they have professional privilege. Yet there are so many different players working within the law who are now essential to the delivery of legal advice and legal services, and you can’t divorce or exclude them from the ecosystem.”
Drivers for change
It’s understandable why law firms and the in-house legal function might be protective of their intellectual capital. But in an overarching environment where all business functions are expected to be as lean and optimal as possible, change within the legal sector was inevitable.
“The financial crisis and the subsequent recession were a real catalyst for change,” said Kerry Westland, Partner and Head of Innovation & Legal Technology at Addleshaw Goddard. “Before then, it was accepted that if you went to a law firm with a requirement, the work might be undertaken by a Senior Associate or Partner. Afterwards, however, many clients simply weren’t willing to pay hourly rates for contract reviews or e-discovery.”
Westland says this was the point at which, in order to manage costs, some law firms and in-house functions established internal paralegal teams and started to use the services of external legal service providers. Yet, while cost-efficiency may have been a key driver, many others were also creating a shift in the legal landscape.
In the past decade, the regulatory and legislative picture has changed dramatically. Businesses have been faced with a range of challenges that have had far-reaching legal implications — from data protection and employment law to financial reporting and due diligence. As a result, many lawyers have found themselves tied up with high-volume, low-value work. This has subsequently led to an increase in outsourcing to free those professionals up to undertake more high-value work.
Business and clients have also demanded a lot more of their in-house teams or law firms, be that in the extent of advice, disclosures or the speed at which services are delivered. To meet these demands, legal teams have had to reimagine their operations.
The role of technology
Central to the growth of the legal ecosystem has been a surge in the use of technology, not only because of the need to reduce costs, but also because of the need to move the speed expected internally or by clients.
There has been a great deal of discussion around the shift to self-service. In B2C interactions, people are increasingly used to portals, dashboards and doing things online, so they expect this in their working environment as well — particularly younger professionals. The ability to access information instantly and to deliver services in a way that cuts time and is user-friendly has become a real priority.
At the same time, the use of artificial intelligence and automation, which are still relatively nascent in the legal ecosystem, have been met by some resistance in certain quarters. There are those who are keen to embrace it and those who aren’t, but that is typical of any emerging technology. There will always be early adopters.
An argument often used around the adoption of technology is that it will replace lawyers. Josephine Good, Manager, Practice Advisors at Litera, challenges this thinking. “From the perspective of having been a lawyer and now working in the technology space, the biggest thing that I talk about regularly is that technology doesn’t negate the need for a lawyer,” she said. “It can create a real opportunity for lawyers to do quality work — tech doesn’t take anything away from professional standards.”
One of the decisions faced by law firms and in-house teams is whether to “buy” or “build” technological solutions, with many opting for the former, due to cost constraints and lack of expertise.
There is no doubt of the role that technology now plays and will continue to play going forward. Westland points to the pandemic as a prime example of a time when data came into play. “When Covid happened, everyone wanted to know what their force majeure clauses were,” she said. “Those that had already digitised their contracts were able to access that information considerably faster than those who hadn’t.”
For SenGupta, any decisions around technology also involve the need to be future ready. “The whole notion of horizon-scanning and resilience completely changed during the pandemic,” she explained. “So being future ready is a key thing, but it requires a real mindset change.”
So, the legal ecosystem has expanded to include outsourced providers who can take on the high-volume work and technology has surged in an incredible manner to expedite processes, manage data and improve accessibility. Alongside this, the ecosystem is starting to see an increase in specialisation, notably from specialist providers.
“Data protection is a huge area as is global investigations,” Westland said. “We’re also seeing increased financial regulation and around the corner is a whole load of legislation around ESG. It really isn’t possible for legal teams to always bring on board or develop staff with specialisms in these areas — and while some lawyers will pivot and retrain, it’s no wonder that businesses will look externally to specialist providers.”
Critically, not all of those specialists and consultants are going to be lawyers, yet they will be experts in fields which will absolutely intersect with legal practice. As legal service providers offer increasingly specialised solutions, they will be faced with the question of how to scale.
According to Varun Mehta, CEO at legal services provider Factor, companies are currently taking one of two approaches to that challenge. “One is the ‘one-stop-shop’, where companies aim to develop many offerings to meet all of their clients’ needs,” he said. “The other approach is a deeper, more focused strategy. It’s about becoming very compelling in one area, such as contracts, and focusing all energy into developing an increasingly value-add offering in that area.”
The way forward
How law firms and in-house counsel make optimal use of this evolving legal ecosystem will depend on business imperatives and client expectations. Some will be more progressive — for example, adopting advanced tech such as AI — whereas others may take a more cautious approach.
Many legal teams are likely to adopt a hybrid approach of both in-house and external expertise and multi-disciplinary experts. For example, law firms may look to non-lawyers to provide expert advice underneath their liability (such as privacy experts or ESG experts).
In-house expertise will also move beyond the legal function, with divisions such as HR having a more thorough understanding of employment law, and non-lawyers dedicated to managing those issues.
General counsel will also have to move out of the legal silo and have more involvement in board-level decision making. “They have a significant role to play in the broader business,” said Westland. “We’re hearing increasing conversations about GCs taking on responsibility for areas such as ESG, for example.”
Good reinforced the key role that technology will play going forward. “I think the basic concept of using technology to make things more efficient is starting to become table stakes and should be firmly established,” she said. “Beyond that, I think people are looking for the next opportunity, and that may come from harnessing and analysing data and making data-driven decisions, which can be particularly important in areas such as M&A.”
The legal ecosystem is remarkably rich and full of exceptionally skilled people and providers. From qualified lawyers and technology companies to consultants and specialist non-lawyers, legal teams can choose the expertise that best suits their needs to deliver on business imperatives and meet the expectations of their organisations.
Richard Palmer Senior MD at FTI Consulting