Thanks to Malcolm Gladwell, by now we all know that tipping points are "the levels at which the momentum for change becomes unstoppable." According to Gladwell, two types of people often instrumental in creating tipping points are "connectors" and "mavens." Connectors, Gladwell says, are people with large social networks who "link us up with the world... people with a special gift for bringing the world together." Gladwell refers to mavens as "information specialists," or "people we rely upon to connect us with new information." Mavens start "word-of-mouth epidemics" due to their knowledge, social skills, and ability to communicate.
In the last few months, we have noticed (and covered in this blog) a growing number of "connectors" and "mavens" in the legal world, who are spreading the word that legal services off-shoring companies, by moving beyond document review into higher value work such as legal research and drafting, have the potential to bring about a paradigm shift in the way law is practiced in the West.
Marketing guru Phil Nugent (NCG Strategic Marketing) apparently has no particular axe to grind on the subject of large law firms and/or legal services off-shoring. Yet he has just posted an article that amounts to one of the most cogent recent arguments to the effect that legal services off-shoring companies are poised to revolutionize the legal world. Here are his opening paragraphs:
“In retrospect, all revolutions seem inevitable. Beforehand, all revolutions seem impossible.” — Michael McFaul, National Security Council
We are in the midst of a true revolution in the delivery of legal services. And upon reading that, it’s likely that you will fall into one of two camps: those who have already heard the guns firing and who are nodding their heads in agreement, and those who dismiss all the warnings of imminent change as excessive and overwrought.
If you’re part of the first group, I look forward to hearing your reports from the front lines. If you’re part of the second group, and it strikes you as hyperbole that anything could really change the legal industry in this country, in our lifetimes, please read on. Because many of those sounding the alarms happen to be more Paul Revere than Chicken Little.
One of the "Paul Reveres," says Nugent, is Bruce MacEwen:
If you don’t know Bruce, you should. He is the talent behind the thought-provoking Adam Smith, Esq. blog, which looks at far-reaching trends in the legal profession. As the name of his blog implies, he is interested in the business and economics of law. Forgive me for stealing from the old E.F. Hutton ads, but when Bruce speaks, people listen.
And so, when Bruce said, “Outsourcing is here to stay” in a recent post, it’s worth paying attention. He was not talking about software development. He was talking about legal services that have always been provided by top-tier law firms to their corporate clients. But now there’s a new vendor of legal services in the room and it’s not a traditional law firm. It’s another animal altogether that some have labeled Legal Process Outsourcing (LPO).
Bruce continues, “Whatever you call it, and whatever you think of its quality, clients have tasted the fruit of the forbidden tree and they’re not going back."
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[I]n fact, now that Pandora’s box has been opened and viable alternatives are available and are proving themselves, inside counsel will fairly quickly look at all the offerings of the LPOs.
MacEwen goes on to say, “And this is precisely where the independent outsourcing firms can have an impact. Once clients begin to get accustomed to the notion of being able to unbundle, or unchunk, legal engagements – be they disputed matters or transactional ones – there’s potentially little end to it.”
It is interesting that Nugent refers to MacEwen as one of the "Paul Reveres." In "The Tipping Point," Gladwell cites the midnight ride of Paul Revere as "perhaps the most famous historical example of a word-of-mouth epidemic. A piece of extraordinary news traveled a long distance in a very short time, mobilizing an entire region to arms.…"
Regarding the reasons for the upcoming epidemic of change in the legal profession, Nugent cites some statistics that should give pause to many law firm partners:
[A] recent survey of 550 general counsel by InsideCounsel confirms that many of the top law firms in the country have been letting their corporate clients down in many ways. A couple of figures from the survey tell the story succinctly:
51% of general counsel don’t think law firms recognize their budget constraints.
65% of general counsel say that law firms don’t actively seek ways to reduce costs.
Hmmm. If anywhere from one-half to two-thirds of the top law firms are unresponsive to their clients’ needs to keep costs down – and this coming nearly two years into the Great Recession – doesn’t it make sense that these same clients would be desperately seeking alternatives? And in retort to the many attorneys who would protest that any alternatives to BigLaw would by their very nature provide inferior legal services, I offer a third takeaway from the InsideCounsel survey:
59% of general counsel say that law firms don’t understand their business.
Ouch.
Given this widespread client unhappiness, in any other industry such an underperforming business model would have been forced out years ago, driven to the sidelines by a host of competitors with lower price points and much improved customer service. Of course, since this is the law we’re talking about, it has taken a little longer to see real change take place, but it’s happening now. Market forces have finally come to the legal profession.
For Nugent's advice to traditional law firms on how to address this challenge, see his article. Clue: it involves innovation, and differentiation from the rest of the pack.
Besides Phil Nugent and Bruce MacEwen, other recent "mavens" and "connectors" presaging the winds of change include legal industry analyst Jordan Furlong. He is the author of the award-winning blog, Law21: Dispatches from a Legal Profession on the Brink. As we noted in a post last April, Furlong wrote an article for The Lawyers Weekly, entitled, "Here Comes the LPO Tsunami," in which he argues that legal services off-shoring is "a game-changer of the highest order":
If you were to ask me what single new development in the legal services marketplace will generate the most upheaval for lawyers and law firms in the near future, I’d have to go with legal process outsourcing (LPO). It’s a game-changer of the highest order, in ways many lawyers don’t yet realize.
Specifically, in a more comprehensive article, Furlong points out that off-shore providers are "moving up the value chain," far beyond "first-year associates’ grunt work," to the point where they are "rewriting the rules of the game":
LPOs, it has to be emphasized, are not just doing first-year associates’ grunt work, not anymore. They are moving up the value chain steadily and with surprising speed, taking on the work of second-, third- and fourth-year lawyers -- not just by using lower-cost labor, but by doing the work more systematically and efficiently. As I said a while back, these companies will not be content with basic work forever; they see no reason why they can’t eventually do the toughest legal jobs. Billion-dollar legal services providers, unfettered by traditional lawyer restrictions, can go global instantly and almost effortlessly. They’ll have more than enough money to acquire the top talent from the best firms worldwide, to invest in new systems and innovations that will reduce costs even more, and most importantly, to change clients’ expectations about what a law firm can deliver. They will be law firms, in effect, and even if lawyers in a given jurisdiction somehow succeed in keeping them out, the landscape will have changed: clients will demand their lawyers compete on the same playing field."
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The prospect that emerges from all this is a legal services marketplace in which many law firms are simply irrelevant — they’re not structured in ways that deliver maximum value to clients and they can’t compete with rivals that are. There was a lot of talk at the [Georgetown Law Firm Evolution Conference] about whether "BigLaw is dead," and I have to agree with those managing partners who dismissed the notion: these firms are obviously up and about and making a great deal of money, and it’s absurd to pretend they’re dead men walking. The worry, for me, is that many firms, of all sizes, aren’t ready for the radical ways in which the playing field is about to change. Their focus is either straight ahead, on their clients, or internal, on their own condition and competitiveness. They’re like a quarterback whose gaze is either locked downfield on his receivers or focused dead ahead on the defenders in his path. As a result, he never sees the hit coming, from his blind side, that flattens him and turns the ball over to the other team. It’s not just lawyers and clients who matter anymore. New players, with an unprecedented combination of size and speed, are charging onto the playing field like a storm and rewriting the rules of the game as they come."
So, are we approaching a tipping point, where the momentum toward a legal industry revolution will become unstoppable? That seems to be the case.
20 years ago, Indian software giant Infosys had only one client, and its founders struggled in poverty. At that time, Western IT industry experts probably thought it was impossible that a country such as India would become a huge center for software development. Only ten years ago, who could have predicted that Indian lawyers by the thousands would be performing document review for U.S. law firms and their clients? Looking back, those apparently impossible occurrences, now that they have happened, somehow seem inevitable. The same will be true for high-end legal outsourcing, such as legal research, the drafting of contracts and litigation papers, and other high-value legal work that Indian companies can provide, and already are providing, at a high level of quality and speed, and at dramatically lower cost.
