Saturday, February 9, 2013

"LPOs Stealing Deal Work from Law Firms"

That is the title of this video interview of  law firm consultant Kent Zimmermann of the Zeughauser Group.  In the interview, Zimmermann relates a story from a recent large law firm retreat in which one of the partners raised her hand and said that one of her major clients in the healthcare industry recently used Axiom in an M&A deal.  Not for due diligence.  They used Axiom for the whole deal.

For what it is worth, I think we have a language / perceptions gap at work here.  At least in the winter of 2013, the phrase "Legal Process Outsourcers" tends to connote masses of low-level attorneys toiling away doing low-level work in India, the Philippines, South Africa or in small or middle market cities in the U.S. -- i.e., a simple labor arbitrage play.  

But Axiom's competitive advantage is in understanding the clients' needs and working backwards to a solution.  The value here is in (a) listening carefully to the client (e.g., "we want the same or better quality but lower and more predictable pricing"), and (b) in designing and building a system that delivers that outcome.

For background on Axiom, read this eyeopening article, "Disruptive Innovation", from The American Lawyer.  Axiom has backing from Sandhill Road venture capital and Wall Steet private equity.  One of their investors is quoted, “Axiom has an opportunity to disrupt an industry that hasn’t materially changed in a century. ... With a worldwide legal market that is a trillion dollars each year, there is plenty of running room to build a successful business."

Water runs downhill.  There is a lot of money to be made by making law more efficient and affordable.  Lawyers need to facilitate this outcome, not obstruct it, as society needs and wants better, more affordable access to legal solutions.  Process-driven legal services and legal products are the future.  Indeed, as the cyberpunk science fiction writer, William Gibson, once quipped, "the future is already here — it's just not very evenly distributed."

For my own views on the incipient revolution that threatens 100 years of established hierarchy, see "Losing the Law Business," Cayman Financial Review (Jan 2013); for the implications for legal education, see Section II.C of A Blueprint for Change.

[posted by Bill Henderson]

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The firm I used to work for did insurance defense. Many of our carrier-clients were always looking for ways to trim the cost of litigation. Their solution was to outsource discovery and medical record personal injury litigation. Needless to say, they saved quite a bit of money at the wage slave rate I am sure for which they were having the work done; however, their average exposure in litigation went up about three-fold because the non-lawyers handling the review did not know what to look for a legally relevant. Plus, by the time the case is sent out to the panel counsel for litigation, the discovery period has usually passed...with form interrogatories, requests for production and requests for admission having already been prepared by the non-lawyers and promulgated by in-house counsel. Needless to say, many of the personal injury attorneys in the area know which insurance carriers are utilizing this model and are strategizing accordingly. Most, to great effect.

I am all for making the legal profession more efficient but it must be remembered that oftentimes the lack of efficiency is a necessary accoutrement to the depth and breadth of potential issues that can arise in even the simplest of cases...all of which are potential avenues of exploitation by a trained attorney. And when dealing with the potential compromise of hundreds of thousands to millions of dollars in future exposure i would sure as hell prefer to save a pound on the back end rather than a penny on the front end.

Posted by: Smack | Feb 11, 2013 3:24:43 PM

Mr. Henderson:

You are on the right track with the Axiom comment. But it’s more than listening to clients.

It’s about understanding where AI can imitate human choices and where human creativity is not (yet!) programmable.

Machines are excellent at correlations. Correlation is not causality, but that is the way to bet. So when we are content with a probabilistic result, let the machines learn and deliver.

Lawyers must move up the value chain, to the place where it is not about odds, but the right choice for the specific instance. Case in point — machines work to detect fraud, or underwrite loans and we’re good with a numbers game.

But when we have to decide if a partner is trustworthy, or an opponent is bluffing, we can’t yet beat the judgment honed by several millennia.

Posted by: Robert Arvanitis | Feb 11, 2013 6:06:21 PM

What exactly is a "low level" lawyer? One who doesn't work for a big firm or who has something other than a mahogany desk? We all go to law school. We all work from the same set of codes, rules, and cases. There is a better way to get really good legal services without paying for someone else's Class A office space. The days of BigLaw as one know it are numbered. In today's economy the prestige is not worth the price.

Posted by: Trippe Fried | Mar 14, 2013 9:51:33 AM

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