The Firms

November 10, 2008 5:40 AM

Welcome to the Future: An Interview With The Futurist

Posted by Paul Lippe

Richardsusskind Based in the UK, Richard Susskind is the world's pre-eminent legal futurist. His new book, The End of Lawyers? (Oxford University Press, Dec. 2008) is extraordinarily timely, as many factors are coming together to accelerate change in law.

I met Susskind recently in Wales for a conversation about the future of law. In Part 1 of the interview here, Susskind explains how change is likely to come to a change-resistant profession.

One of your earlier books, The Future of Law, was about a 20-year transformation of legal services, propelled in part by technology. How did lawyers react to that book and how did that affect your approach to The End of Lawyers?

The End of Lawyers? is a sequel to The Future of Law. The reaction was surprising and remarkable. In the UK, it created quite a stir--some seemed to like it a lot while others detested it. I was predicting, for example, that e-mail would come to dominate the way lawyers and clients would communicate and that the Web would become the first port of call for lawyers when undertaking research. Some senior lawyers called for me not to be allowed to speak in public. In any event, it created debate, it challenged the status quo, and widened some people's horizons. Above all, it taught me to be brave in my predictions and not to shy away from controversy.

The title of the new book Is a pretty extreme hypothesis.  Do you really foresee a world with no lawyers?

As I say in the first chapter, the question mark in the title should at least hint that I wrote it not to bury lawyers but to investigate their future. My aim was to explore the extent to which the role of the traditional lawyer could be sustained in coming years in the face of challenging trends in the legal marketplace and new techniques for the delivery of legal services. The book is neither a lawyer-bashing polemic nor a gratuitous assault on the legal profession but a collection of predictions and observations about a generally honorable profession that is, I argue, on the brink of fundamental transformation. The book points to a future in which conventional legal advisers will be much less prominent in society than today and, in some walks of life, will indeed have no visibility at all. This, I believe, is where we will be taken by two forces: by a market pull towards commoditization and by pervasive development and uptake of information technology. At the same time, I identify a whole new set of jobs for lawyers who are prepared to spread their wings.

Lawyers seem to think in many ways that law is sui generis as an industry and not subject to ordinary economic laws. Where does that thinking come from and where is it likely to go?

For most large law firms, business has been good over the past decade or two. The underlying business model has worked well, there has been a steady flow of work, fee income and profitability have increased steadily and remarkably. While other sectors have struggled, lawyers have endured and prospered unstoppably. But the party is now over. The credit crunch is going to accelerate change in the legal profession, bringing much more demanding and discerning clients who increasingly will require more work at lower fees. And I believe that lawyers, in order to survive and prosper, must respond creatively and forcefully to this impending demand.

Can you compare where US and UK law firms and law departments are in developing along the lines you forecast?

I’ll focus on large firms and legal departments. Taking the last first, I find that in-house lawyers are keen on the idea of using much more technology and of moving towards commoditization, but they lack the resources and the time to do so. Although they might benefit the most, they are the least advanced. US law firms, I say, were far quicker in the early 1990s than UK firms to embrace office automation for lawyers; but now [the US firms] are some way behind the most technologically thrusting of the UK firms. The latter have invested more, for example, in knowledge management and in online legal services. Understandably, the best of the US firms have not yet seen why they should bother. Business has been very good without that stuff, thank you very much. But times are changing, [there is] less work [from] more demanding clients. These new techniques will move from being optional extras to key ways of working.

What milestones can we look to in the next 24 months to suggest that your model of the future is correct?

Generally, my predictions are longer term than 24 months. Bill Gates is right when he says--and I paraphrase--that less happens in the world of technology than you expect over two years but there is much more change than you anticipate over a 10 year period. That said, look out for two major growth areas in the next two years. The first is legal process outsourcing. The Big Four tax firms have already shown how complex professional work can be outsourced to India and other low cost centers. Lawyers will and should follow suit. The second is collaboration amongst share the costs of some legal services, such as [on] regulatory compliance matters.

Can you explain the Legal Services Act and its implications for US law firms?

Crudely, this legislation permits, in England and Wales, the setting up of "alternative business structures"--new types of legal business. Crucially, non-lawyers will be able to invest in and build legal businesses; and non-lawyers will, in turn, play genuinely key roles in running law firms and new-look legal businesses. These individuals will not be committed to the ways of the past. They will explore call centers, outsourcing to India, online legal services, the automatic generation of documents, and much more. The delivery of legal services will be a very different business when financed and managed by non-lawyers. And when clients see that legal services can be delivered more cheaply, efficiently, quickly, and to a higher quality using new methods and business models, then they will ask the same of traditional law firms, wherever they are located.

Read Part 2 of Paul Lippe's interview with Richard Susskind here.

Paul Lippe is a founder and chief executive officer of Legal OnRamp.

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Susskind's predictions sound extreme until you consider that this is already happening:

The rules of conduct governing lawyers in the U.S. need to change. These rules are old and archane and hinder the progress of providing efficient legal services. Corporations appear willing to accept this as they engage in outsourcing of services to non-legal entities not bound by such restrictive rules.

There are two types of products or services, standardized and customized. The latter can never be commoditized and is sold based on expertise. While there may be a few areas where the law has a degree of standardization, the vast majority is customized. Litigation, M&A, international contractual arrangements, fraud investigations, intellectual property, employment law, etc all require specialization and will will continue to be dominated by the highest and best experts one can afford. Until legislators begin to make the law simpler, which is not their job, lawyers and other experts will continue to make significant sums of money. This is basic marketing strategy 101.

"The vast majority is customized." Ned, if only that were so!

Michael H. Trotter is his excellent commentary, entitled "Legal Services Have Transformed into Legal Commodities" summarizes all of the various factors that transform the legal services demand curve through four stages (as I see it) from customization to specialization to standardization and finally to commoditization. Trotter's final observation: "If you were to ask partners in most firms today what percentage of their work was commodity products, I suspect that most would say 10 percent to 25 percent. In reality I think the percentage of commodity services for most Am Law 200 firms would be much higher." Now with all due respect to Trotter, I believe he is right in his conclusion, but misdirected in his question. No one wants to admit that their work is not highly specialized and customized. I therefore believe the correct question (which my colleague David Maister and I have been asking partners at significant firms for some years) is: "tell me please, what percentage of your work could you delegate to a junior, given that that junior was properly trained to do the work with quality?" The answers we get are usually upward of 70 percent. The implications are staggering. But don't believe me, try it for yourself.

That said, we should not lose the essence of what my good friend Richard Suskind is saying in Paul's interview - the party is now over, change is coming, and clients increasingly will require more work at lower fees. Richard's observation that "US firms are some way behind the most technologically thrusting of the UK firms" should not be overlooked. By way of an example, apparently conducting due diligence on potential counterparties in over-the-counter derivatives to provide legal certainty in any given jurisdiction can cost anywhere between $10 to $50,000 in local counsel fees plus internal management costs. Allen & Overy has developed a way of cutting its clients’ due diligence costs by way of an online subscription service. For a fixed annual fee of $3 – 4,000 per jurisdiction, you can access a database of legal memoranda to complete the task without hiring outside law firms.

Online subscription services typically require a significant initial investment in non-billable time to establish and then take about three years to break-even. Those on-line services that were launched by many UK law firms five or more years ago are proving to be extremely profitable today. Meanwhile, too many US firms are obsessively intent on short-term billable hour requirements to consider making longer-term investments of this nature.

But I expect that severe cost pressures from a client base besieged by economic adversity could change some of that traditional short-term thinking.

Patrick McKenna is absolutely right. If the "vast majority" of legal work was customized, the Indian legal outsourcing industry would not be thriving to the extent it is now. Most transactions start with standardized documentation that is modified to fit the particular circumstances. And more and more of this is now firm-specific capital rather than the knowledge of the lawyer. 21st century practice is going to look very different from that of the 20th century.

This is excellent. Thank you for providing this thought provoking and insightful interview.

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