Legal Market Commentary by David Kinnear

The movie is infamous. The one rule of Fight Club is written indelibly on the walls of time. There is also one golden rule in the modern legal industry: Better, faster, cheaper wins. And that’s why I found myself chatting this week with Harry Buck, CEO of Legal Outsourcing 2.0 (LO2).

With several chapters of ITO, HRO, BPO and FA&O in the rear view mirror, I returned to the legal space several years ago to see what, in effect, the sector was doing about change. The answer, candidly, was “not a lot” – though the implications of those limited first changes have proven significant. The legal technology we embrace today is possible largely because of the way in which one or two technologies braved the headwinds to prove that (a) it’s legit. and (b) that it works. Think: eDiscovery and early players in PM, such as Clio.

In the services space, the proposition was essentially labor arbitrage: “Our team is cheaper than yours.” That kind of thing. But adoption was tough going because of a variety of technology and cultural barriers. The world has since moved on by a large yard or two. One or two of the earlier “big” players in the space dropped out – finding the going tough and perhaps making the same revenue more easily via other disciplines.

But now law is becoming mainstream and with this awareness comes change. Law is no longer insulated from the business or from business imperatives. Rather, in-house counsel seek greater alignment with the business and demand easier integration. Technology is starting to make things easier – allowing these professionals to demonstrate the unique value they bring to the business. Law firms have been watching closely and with an eye to both the bottom line and the top line, they’re making changes. Some more slowly than others – but there is a much broader awareness of market forces today than there was this time last year.

This is where the rule comes in. There is a new breed of provider that is embracing the winds of change to power their boats through the water. They make no bones about their intent. It’s refreshing. There are some functions that are critical for in-house or in-firm functions that simply cannot be justified at routine billing rates any more. There are business cases like eDiscovery, contract review and Cybersecurity analysis that require quick response teams to swoop on the material and get the job done – then go away instead of sitting on the Balance Sheet or the payroll tab.

Whereas some of the players in this outsourcing category used to be big and, by definition, clunky – this new breed of industry participant is agile. They tap technology because now they can. It exists. The scope of what can be undertaken now has increased greatly – and the awareness, comfort factor has grown tremendously. Curiously, just like we have learned to become familiar with and reliant on technology like iPhones, in-house and in-firm teams have come to rely on their external couterparts. A natural equilibrium is forming, which reflects a much more realistic and sustainable economic model also.

So here’s a case-in-point: LO2 is an alternative legal services provider run by Harry Buck. Harry has spent plenty of time around the traditional legal industry – enough to know that there are ways for clients to spend less. They typically like that. So what are the sorts of things that organizations like LO2 are doing – here are three examples that keep Harry’s growing team very busy:

  1. Secure, immediately deployable, data breach document review solutions.
  2. Secure, high quality, low cost, document review solution.
  3. Secure annotation work for legal AI tech companies that helps them scale faster.

Ah, you say. But isn’t this just like the old days of anything goes – long-distance challenges of working with strangers who don’t understand your business and sometimes even what you’re saying. Some still labor under these difficulties. Many more have moved on. Things have evolved. No more leaky roof sheds, insecure connections and strangers working on files. Compare the following specs with anything you would find (or expect to find) locally:

Security.  The facility where the work is performed in ISO 27001 (data security) certified compliant.  The room where the review is performed is controlled by bio-metric access.  Cell phones are not allowed in the room.  The computers are hooked up to a local area network that access the data hosted in the US remotely and are not otherwise connected to the Internet.  Data is encrypted at rest at the facility, as well as in transit to and from where it is hosted.  The data is backed up in multiple locations, including in the United States.  The computers are not hooked up to printers and their thumb drives are disabled.

Quality.  All communications are with an Am Law 100 experienced US lawyer who serves as the onsite project manager for the review.  Both project managers are licensed in New York.  One was a capital markets associate at Baker and McKenzie.  The other a staff attorney for litigation and eDiscovery project management at Jenner & Block and Milbank Tweed.  All reviewers are trained, experienced, full time employees.

Pricing.  The price point is lower than any competitor.  It is all-in pricing and includes the project manager time, tech time and the front-line reviewer’s time.

We can debate how fast the legal industry is changing. We can debate how much it will ultimately evolve. We can debate how much regulation will survive – and the role that regulation will play in the ultimate surival or demise of the legal industry as we know it.

But no-one gets to debate the rule.

The rule is a constant. It’s like gravity. It just is. It always wins – even if it takes time. The broader economy has been kind to the legal industry and some openly ask if we’re heading toward a recession scenario. The latter may accelerate some of the economic forces that are already being felt.

In the end, however you get there, better faster, cheaper wins.

The smart money is betting on a win.