Commoditisation of Legal Services – What It Means for the Future of Legal Practice

Commoditisation of legal services affects all us, not just practices which undertake high volume transactional work. This article seeks to address the disconnect between the legal service that the law practice thinks it is providing, and the value that the client attaches to it.

'Commoditisation' is the 'C' word which is anathema to many lawyers today. To many it represents the process by which profitable, time-chargeable work is reduced to fixed-fee drudgery. Commoditisation was at the heart of Professor Richard Susskind's vision of the future of legal services as he warned, at a speech at the Society for Computers and Law, UK in 2006, that solicitors must adapt to the concept of legal services as commodities or face a bleak future. The basis for his concern is that lawyers' work is an information product that can be increasingly replicated and distributed at low cost. It is only a matter of time that customers will wise up and expect to pay much less for the product.

When lawyers today address the spectre of commoditised legal services, they think only of 'conveyancing factories' and home loan mortgage processing or personal injury or workmen's compensation type 'ambulance chasers', and are likely to declaim - 'Oh, we don't do bulk work', followed by a weak rejoinder that it is useful for their junior associates to cut their teeth on this sort of work. The issue closer to the truth is the disconnect between the legal service that the law practice thinks it is providing, and the value that the client attaches to it.

In trying to resist this trend towards commoditisation, law practices are ignoring the key pressures faced by their clients. In-house counsel representing businesses today are constantly driven by the need to demonstrate value from internal and external legal resources. While clients may be happy to pay 'rocket scientist rates' for high-end, high-risk legal input involved in complex M&A transactions or innovative financial products, they will resist paying such rates for repetitive, lower-risk transactional work. If clients know that the legal service they require can be delivered in a smarter, more cost-effective way, they will expect their preferred law practice to deliver.

The converse is also true - a law practice that recognises how its clients value their legal service is far more likely to satisfy their clients' needs and maintain satisfactory long-term relationships than a law practice that continues to insist on charging high fees that do not represent good value. In this respect, the spectre of 'commoditisation' extends beyond the low-value, high-volume type bulk transactional work to encroach upon many areas which are the mainstay of general commercial law practices today.

Which type of pay-by-hour legal services today is likely to become tomorrow's commodities? According to Professor Susskind :

If you find yourself in a practice area which you can imagine, hand on heart in the small hours of the morning when you wake up in a cold sweat in bed thinking about it, that 'actually what I do is highly process-based and I can well imagine that being systematized' - if you can conceive of it being systemised, ?I think it will be systemised.

The case is amply demonstrated by the visible trend of 'packaged legal services' and 'online self-service' agreements and commercial contracts offered by reputable city law firms in more sophisticated and mature legal services markets such as UK, US and Australia. If the commercial transaction, negotiation and allocation of risk is likely to follow a predictable pattern, it follows that legal documentation and advice is also likely to be standard and repetitious in nature, thereby opening a way for commoditisation of this legal service.

Some striking examples of innovative online legal services are 'SALT Enterprise', an online legal compliance training website by Blake Dawson Waldron focused on enabling employees to understand their legal obligations in the workplace. Visit the Legal Technology Award winning website at http://www.compliance.bdw.com/default.asp. 

Another is 'CLICK CONVEYANCING', an online conveyancing platform from Barnett's Solicitors. This is another legal technology award winning website lauded by Professor Susskind for the sort of innovation that drives the client-services experience up several notches and leaves its competitors trailing in its wake - http://www.clickconveyancing.co.uk.

If commoditisation is the inevitable result of market forces, what can law practices do to deliver better value than their competitors? Not by wasting time re-drafting and re-negotiating obscure clauses that clients don't care about. You may sincerely believe that your clients are paying for your 'legal expertise'. The fact is - you are not really selling expertise because your expertise is assumed. Your client can hardly tell a cunning legal stratagem from a reasonably competent one; but they can certainly tell if your service delivery standards are lacking and your prices are higher than your competitor.
A better way to demonstrate value is to streamline and automate repetitive work so that it can be done quickly and consistently by junior staff, allowing senior lawyers to spend more time working closely with the client on legal input that they value most. The key is to offer a packaged fixed price service at a cost more closely aligned to the value of the service.

Professor Susskind's advice to law practices is to become more like their clients - more commercial thinking; more open to innovation and new ways to deliver value; and more client-facing.

I would say that the law firm that actually becomes as passionate as the client about saving money and doing things quickly and cheaply in a simple way will be the firm that will immediately benefit. Competitive advantage will arise for a law firm that doesn't just say it's client-facing, but actually is.

Identifying the disconnect between the legal service and the client's perception of its value may be the easy part, as clearly demonstrated by the bottom-line-bruising fall in lawyers' fees for conveyancing work when the conveyancing scale was abolished. If you won't do it at this price, someone else will! Looking on the bright side, there are yet many successful and thriving conveyancing practices in Singapore today.

How do law practices run a profitable practice in the era of commoditisation? The right response will certainly include a greater use of technology to achieve not only internal effectiveness (eg document automation systems and intelligent drafting tools) but also to improve service delivery standards and enhance the client-lawyer relationship.

The technology that delivers the most impact in terms of internal efficiencies must be document automation - While few lawyers today 'draft from scratch', many lawyers still produce documents from the laborious old-fashioned method of printing a precedent, amending them by hand and then asking their secretary to produce a draft, then proof-reading, making further corrections and so on. Most of the document preparation that takes place in your law firm today probably fall into the middle range of the continuum - using the 'cut and paste' functions in MS Word on a prior work product.

Document automation software has been widely regarded as the best thing to hit the legal profession since word processing; yet law practices in Singapore are regrettably slow in catching on to the fact that document automation reduces the cost of production; thereby creating substantial savings in chargeable time, while ensuring consistency and accuracy in work output.

Document automation specialist, Mark Deal, writing for the TechnoLawyer newsletter in 2002 summarised the benefits of document automation succinctly - 'More Production, Fewer Resources, Less Overheads'. 

In 1990 Peter Hart said this about document automation:

Explaining document assembly software to lawyers is like telling them about heaven - it's where they want to go but not yet.

Seventeen years on, law practices in Singapore who undertake primarily mortgage processing and retail conveyancing testify that if they did not use document automation tools in their practice, they would have gone out of business. Our clients from solo and small practices who used to be hard-core technophobes now see the deployment of document automation systems as a path to more satisfying analytical work and an opportunity to focus on client relationships and business development.

Technology to enhance service delivery and bolster communication ties between the law practice and their clients is a greater challenge, but one that has great potential to give you an edge over your competitors. Many corporations today require their panel lawyers to provide immediate access to real time matter status, billing status and project documentation. To meet this demand, law practices have deployed technology to web-enable selected views to their internal databases and have designed secure online document collaboration websites that enable working teams in different locations to access project documents at their convenience. A good example of client-driven innovation in law practices today is the deployment of client-access extranets; now no longer cutting-edge technology designed to fulfill a novel marketing objective but an essential communication tool in international law firms.

The use of technology must go hand-in-hand with new pricing models designed to price the value of the output (the value of the service to the client) rather than the value of the input (time taken by the lawyer to deliver the service). To remain profitable despite the price cuts, the practice may see a transformation of its structure in terms of partner-to-associate/staff ratio. It may also necessitate regular and effective partner and associate reviews and the timely address of underperformance. In short, law practices will need to be far more businesslike in every aspect of running their practices.

In the UK, the trend towards commoditisation has been compounded by non-legal entrants encroaching upon the legal market. The far reaching impact of the Clementi Report envisages not only 'supermarket legal services' (ie commoditised legal services packaged and offered by non-legal providers) but also the proliferation of multi-disciplinary partnerships wholly owned by non-legal businesses. Potentially, such new entrants backed by major institutions, utilising cutting edge technology and major brand advertising, are all set to transform the legal landscape in Britain.

In Singapore, we are not there yet but there is already much room for change. As Tony Williams, former Managing Partner of Clifford Chance and Andersen Legal says in his article in Legal Week:

... The tools to help firms change are available now. If they use them quickly and effectively, firms have every opportunity to beat off the new competition, to respond to [their client's] needs and remain profitable, at least in the medium term. You can do nothing - but only if you intend to retire within the next five years.

Sylvia Low
Bizibody Technology Pte Ltd
E-mail: sylvia@bizibody.biz