As midnight, January 1, 2000 approached, fears were rampant that computers worldwide would simultaneously crash because most software used two rather than four digits to indicate the year. Thankfully, my law firm’s new Y2K Practice Group stood ready to tackle the legal problems Y2K seemed bound to bring. Of course, midnight passed without calamity, denying the Y2K Group of the riches we had envisioned.
Of course, there is nothing unusual about firms creating new service lines to meet the actual, anticipated, or perceived demands of clients. Clients’ needs evolve; lawyers’ offerings must as well.
This explains the growing number of law firms offering Legal Operations practices with process-related or technology-enabled services— litigation document review, high-volume contract remediation, project management, flexible staffing, and more. The target market is high-volume, cost-sensitive matters not requiring the bespoke legal advice necessary with most commercial legal representations.
Are Legal Operations practices here to stay, providing new revenue streams that (unlike traditional practices) are scalable? Or are they yet another marketing ploy aimed at firms’ corporate clients?
Although Legal Operations practices face significant obstacles, they have enormous potential and may prove transformative. The key is for private practitioners to leverage their role as legal advisors and partner with those who already know how to deliver those services.
Lawyers Are for Rough Waters, Not Calm Seas
An initial challenge stems from the role lawyers play. Clients hire lawyers to tackle individualized exceptions to legal rules. They want creative ideas for mitigating risk and capitalizing on opportunities. Maintaining existing processes is the opposite of this. Lawyers’ raison d’etre is to look beyond the routine, not to contemplate a client’s challenges from a process viewpoint.
The Juice May Not Be Worth the Squeeze
A first-level document review costing $100,000 seems an obvious revenue opportunity for a law firm. But for a firm already earning a multi-million-dollar fee, the allure dims given the need for project management, staffing, access to the appropriate software, etc. The same is true for many other process-related offerings. Easier to enlist a trusted third-party partner (say, Elevate) with the necessary people, processes, and technology.
A Limited Market
Large law firms typically represent many types of clients because the market for commercial lawyers extends beyond a certain size of client or particular industry. However, the market for Legal Operations offerings is highly concentrated in enormous organizations with huge volumes. Even among Fortune 500 companies, large-scale document reviews or third-party discovery requests are often surprisingly few. Such a narrow target may not seem worth it to many firms.
Yet, a real opportunity exists. When an organization facing a non-routine issue hires a lawyer to resolve the matter, it often reveals a new need of the client (and other similar clients) for ongoing compliance processes to prevent recurrences of the problem. The lawyer can provide legal advice, but operationalizing legal advice (with protocols, training, monitoring, and reporting mechanisms) is critical.
Traditionally, law firms have left that to clients or non-lawyer vendors. It is too expensive to have lawyers provide operational assistance for very long. But many clients would welcome leaving such assistance to their law firm rather than hiring a new vendor or handling things in-house.
Consider a law firm that, while handling numerous consumer fraud claims against multiple clients, determines that many such claims stem from unclear disclosures. Providing a client with clearer language is one thing; distributing that language, training that client’s employees, and monitoring compliance are quite another.
The firm could offer a tech-enabled managed service to provide such services. Although the cost-benefit of building such a service for a single client may not be clear, the picture changes when we consider multiple clients and numerous matters. A single client’s use of the managed service, priced at $50,000 per year, generates negligible (though likely recurring) revenue, but the firm can easily replicate the service for dozens of other clients, transforming a one-time fee-for-service engagement into a scalable revenue pipeline delivering millions of dollars of annual revenue independent of the billable hours generated by its lawyers.
Such economies of scale highlight the massive potential of Legal Operations practices. Not every legal problem necessitates an ongoing compliance solution, but many do. The myriad issues for which clients seek legal advice provide numerous opportunities for operational support services.
Still, law firms lack experience in creating and managing process-based services, and few firms can front the hefty investment required to have non-lawyer professionals do the job.
There is another approach, one that Elevate helped pioneer: partnering with ALSPs that already possess the needed expertise, staffing, and resources and have operated successfully for years. This approach eliminates the slow journey to profitability for firm-grown managed services that launch with few clients and require significant time for revenue growth. An experienced managed services provider with multiple existing customers can easily – and profitably – take on however few of the firm’s clients initially seek those services. The law firm can focus on identifying additional clients for the services while the ALSP handles delivery. And – crucially – the partnership fulfills clients’ needs without them having to wait for their law firm to launch and grow a new offering.