4 PerspectivesNovember 21, 2011

Is Your Law Firm One Click Away from Extinction?

Fifteen years as a client have taught me that people don’t pay lawyers because they want to; they pay them because they have to.  If you’re a lawyer in a law firm, this isn’t abstract advice for somebody else — like it or not, your clients are looking for ways to pay less for what you do.  And I just found another way they will succeed.

Until recently I thought that clients’ drive for efficiency was a function of the economy, and that we’re just a recovery away from business as usual.  Alternative fees are a great idea that most are afraid to implement, discounted hourly rates are as creative as most ever get, and outsourcing legal tasks to anyone other than a traditional law firm was, for all practical purposes, unavailable to most clients.  On one of these thoughts, I was wrong.

A Patch for The Yetis

This story doesn’t start with a legal problem at all.  Instead it begins with 16 boys in my son’s YMCA Adventure Guides tribe, The Yetis.  They needed patches to show what tribe they’re in, and the patches needed a logo.  With no good Yeti images handy, I took a page from Tim Ferris’s The Four Hour Workweek and outsourced the logo design through a posting on iFreelance.com.  The Yetis ended up with a great patch, and I learned two things lawyers should know.

Outsourcing Even Discrete Tasks Isn’t Hard Any More

Sure, the big clients have been sending work offshore for years, but until recently the average client hasn’t had convenient access to offshore service providers or domestic legal talent in remote markets.  Before now, transaction costs and a lack of a roadmap have caused too much friction to make outsourcing available to most clients.  But my Yeti logo project showed me this is no longer true.

I found iFreelance.com, registered as a user, and posted my Yeti Logo project in under 20 minutes.  In that post I left the bidding open for 48 hours, gave a few particulars, and listed a $250 price cap.  In less than two days I had settled on Keehan & Partners to do the work, and ended up with a better logo than I had ever imagined.  The statistics tell the story:

• 20 minutes on iFreelance.com
• Resulted in 16 bids
• From 4 countries
• With prices from $40 to $250
• With 1 freelancer, Keehan & Partners, selected within 36 hours
• Who completed the project within 4 business days for well under $250
• With $0 paid by me to any intermediary.

I ended up with a great product and a promising long-term relationship with a California firm I would never have met otherwise.  Had I known how easy — and cheap — it was to outsource even a single task, I would have done it earlier.  It can’t be that long before this realization hits the legal space.

Outsourcing’s Advantages Can Apply to Legal Tasks, Too

Once my Yeti project was done I began to poke around to see if there are others who are outsourcing discrete legal tasks now that the process has gotten easier and cheaper.  I quickly found Disaggregation:  An Emerging Issue by John Steele as well as Milton C. Regan and Palmer T. Heenan’s Supply Chains and Porous Boundaries:  The Disaggregation of Legal Services, and realized that our seamless access to lawyers and other legal vendors everywhere means that legal services disaggregation is here to stay.  Increased competition on discrete tasks can’t be good news for the traditional law firm economic model.

On my plate now are a dozen things that can be done by freelance lawyers, including corporate policy revisions, discrete legal research projects, and revisions to a contract template.  No, freelancing won’t work for a major transaction or “bet the company” litigation, but individual tasks in any transaction or dispute, like researching the other side’s experts, document review, and a few others, can be segregated and outsourced.

It’s been a while since I learned about the concept of comparative advantage back at Mississippi State, but there are a few reasons why freelance legal talent might be a cheaper alternative for certain tasks:

• an established lawyer nearby might be excited to work on this specific project and willing to cut her rates;
• a lawyer in your industry but across the country might have a template for just the project you propose;
• a lawyer in “flyover country” might be a new entrant into the market and be willing to cut his rates to gain experience as a freelancer; and
• a vendor in Montana, or Mauritius, might have a lower cost structure than your go-to law firm.

A Quick Word to the Naysayers

Yes, I know what the critics will say:  you have no quality control if you hire a service provider in India or Indianapolis or wherever.  Maybe this deserves its own post, but a few responses come to mind fairly quickly:  Must the first draft of that template I need be perfect?  Don’t I need to look carefully at every new service provider’s work, and let their work speak for itself?  And finally, with the cost savings they’ll realize through legal service disaggregation and outsourcing, clients can afford to pay someone to review the work from these new channels.  Will that be outsourced someday, too?

At the end of the day, do clients need the same stable of firms to do all the tasks they need to do?  Not at all.  Naturally, clients will have to assess their needs and what the ever-emerging market has to offer, but — like The Yetis — they may end up with just the product they need, at a fraction of the price.

Categories: Miscellaneous

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