Small Law Firms, Technology

alt.legal: Bigger Than BigLaw

Columnist Joe Borstein explores the surprisingly big world of SmallLaw.

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At alt.legal, we typically focus on entrepreneurs and innovators who are changing the legal profession for the better, having fun, and making money in the process. But there is another, larger group of entrepreneurs in the legal industry who we have neglected, until now: SmallLaw lawyers.

While they hate to admit it, each runs a start-up business in one of the most competitive industries in the world. The big business of SmallLaw is one that has always intrigued me. In my first article before joining ATL, called “Rise of The ‘Super Lawyers,’” I wrote about how legal outsourcing can empower mere mortal lawyers to be super-human in their abilities — “battling the villainy of impossible workloads, constant distraction, unnecessary stress, and unfathomable boredom (every associate’s Super Villain) while achieving better results for their clients.” While the article was stupid — and no one read it — the idea still resonates. Specifically, alt.legal businesses are bringing innovative tools, technologies and alternative business models to the market every day, which should allow SmallLaw lawyers to expand their powers and leverage their skills.

This week, to explore this further, I sought out a true expert in SmallLaw to ask how these businesses can stay on bleeding edge. For this I went inside my own massive parent company (Thomson Reuters) and asked around for the resident SmallLaw expert –- I got Karl Florida.

Karl is Managing Director of Small Law Firms, and before I hear you snooze, the business he sits over generates nearly a billion dollars in annual revenue (how big is your business?). And, if you are a resume snob, I’ll also throw in that Karl went to Harvard before getting his MBA at Stanford University, so even though he isn’t a lawyer, he just might have something valuable to say.

So I asked him: just how big is SmallLaw? Freaking Huge.

According to Karl, SmallLaw — defined as firms with fewer than 30 attorneys -– includes a staggering 280,000 firms in the United States alone. Of these, 200K firms are solo attorneys. Small law firms are critical to meeting the market’s legal needs. Consumers and small businesses spend about $170 billion on legal services annually, usually with small firms. They are looking for legal help with a wide range of practice areas: family law, criminal law, personal injury, estate planning, commercial real estate and simple business transactions, just to name a few.

He explained that over half of the 280K domestic SmallLaw firms buy Thomson Reuters products and services such as legal research, practice tools, business development solutions, and print publications. Moreover, a team of thousands within Thomson Reuters is dedicated to meeting the needs of these customers.

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Thus, I was convinced that Karl was the man with a unique view of this massive market. Enjoy the interview below:

JB: How is technology impacting the SmallLaw world?

KF: Technology is advancing rapidly, helping firms increase efficiency and profits. As the demands of competition and client expectations increase, firms inevitably need technology to survive, let alone thrive.

Four big trends are giving small firms new options:

Productivity Software: Good software can help firms create, organize and share information to streamline workflow and save time. For instance, simply using drafting software cuts document creation time in half and eliminates errors.

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The Cloud: Small firm lawyers are mobile and need to access information from anywhere, so we’re seeing the move to the cloud accelerate. Over a third of small firms already store documents in the cloud, and a lot are using cloud-based software applications like practice management to make collaboration easier.

Outsourcing: We’re beginning to see some new management practices among our small law firm customers. For example, we recently met with a small Kansas City firm that outsources almost everything clerical or administrative, so they can actually focus on practicing law. This makes a lot of sense, since firm administration can take up as much as half of a lawyer’s time.

Artificial Intelligence (AI): Big data analytics are being applied to law just as in many other parts of the economy. It’s early days, but there are a lot of interesting new tools that open up really exciting possibilities to simplify the job of being a lawyer.

JB: In other industries, technology leverages the skills of top practitioners allowing them to replicate their skills and service more customers. How can SmallLaw lawyers create leverage in the legal space?

KF: In the near term, we think the cloud is most critical for small law firms because it helps them compete as equals with the big dogs. Small firms don’t usually have IT resources or a robust technology infrastructure, so letting a cloud provider manage their data and applications for them can be really attractive.

Over the long term, AI might even handle some legal reasoning and strategy, based on patterns and predictive analytics, which can help level the playing field for small firms too. (One of my favorite articles on this can be found here.) This does seem a bit spooky and far out into the future, but think about it — we have self-driving cars that are likely to be on the road soon, so we shouldn’t underestimate the capacity of AI in any domain.

JB: How is the alt.legal world bumping up against SmallLaw?

KF: Over the last decade or so, we’ve seen greater availability of self-help legal services from providers such as LegalZoom, particularly for routine legal matters (e.g., wills, company incorporations, patent filings). Some firms are jumping into this game by offering simple legal services over the Web themselves — essentially as loss leaders to find more prospective clients.

We can see the future forming even more rapidly beyond the U.S. For example, under the Legal Services Act in the U.K., many different forms of alternative business structures are coming into play. These run the gamut from new ways of managing what used to be traditional law firms, to new types of providers that have more “corporate” structures from day one.

A couple of U.K. examples I find interesting are franchise operator Quality Solicitors, and law firm aggregator Metamorph Law. These types of alternative models are intended to provide better service for clients and more sustainable profits for firms. The jury’s out as to which models will survive, but the sheer amount of innovation in the U.K. will no doubt uncover some great new pathways to advance the industry.

JB: What will the future look like for SmallLaw?

KF: The best firms will be run efficiently. They’ll adapt to competitive and client demands by adopting new tech and new business processes to deliver better work product and service at less cost. They’ll accept industry standard tools and practices, rather than feeling the need to reinvent the wheel as often as they do today. They’ll also be willing to outsource more clerical or administrative work to trusted partners.

I also think small law firms will compete more on service than they have historically, because new tech and processes will enable delivering a level service comparable that what clients experience when they interact with other tech-enabled service industries.

Overall, it’s really exciting time in the industry. The delivery of legal services to consumers and small businesses is ripe for innovation, and we’re seeing the investment and startup communities wake up to the legal market. At Thomson Reuters, we’ve started to work more with outside partners, including the community around the Stanford Center for Legal Informatics (Codex), to envision the future and start experimenting. It has been a lot of fun collaborating with leading thinkers at academic institutions, startups, small law firms and other participants to help shape the future of legal services.

We can’t stress this enough, if you feel called to traditional legal practice of law, it is critical that you understand these trends and use them to your advantage. Karl is not alone, but he has the education, resources and experience to help SmallLaw firms pick and choose the best tools so that firms can outbid their rivals, win new matters, and delight current clients with innovative solutions.

The following cartoon made me laugh, and reminded me of how hard it is to get customers in legal to consider if and when to leverage new tools:

If you are in SmallLaw, and take the time to listen, people like Karl can help you extend your reach and leverage your skills and multiply your impact – never bring a knife to a gun fight.

Joe Borstein is a Global Director at Thomson Reuters’ award-winning legal outsourcing company, Pangea3, which employs over 1,000 full-time attorneys across the globe. He and his co-author Ed Sohn each spent over half a decade as associates in Biglaw and were classmates at Penn Law.

Joe manages a global team dedicated to counseling law firm and corporate clients on how to best leverage Pangea3’s full-time attorneys to improve legal results, cut costs, raise profits, and have a social life. He is a frequent speaker on global trends in the legal industry and, specifically, how law firms are leveraging those trends to become more profitable. If you are interested in entrepreneurship and the delivery of legal services, please reach out to Joe directly at joe.borstein@thomsonreuters.com.

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