The Legal Services Bill and its Impact on the Legal Process Outsourcing Industry
The Legal Services Bill finally received Royal Assent on October 30, 2007. Regular readers of my blog, and those who have attended some of my conference presentations, will be aware that I have been harping on about the potential impact of this piece of legislation for some time now. The particular section of the Bill that will have the most far reaching consequences on the legal profession and provide a colossal boost to the growth of offshore legal outsourcing, is the provision allowing the formation of Alternative Business Structures. The summary to the Bill at paragraph 15 states as follows:
“Alternative Business Structures (ABS) will enable lawyers and non-lawyers to work together on an equal footing to deliver legal and other services. External investment will be possible”.
Put simply, non-lawyers can own and invest in law firms. To all intents and purposes this opens the doors to banks, insurance companies, supermarkets and other corporate entities, both owning and investing in existing law firms, or alternatively, setting up their own firms and marketing legal services to the general public. I strongly believe that this piece of legislation can be viewed as a major flattener in the provision of legal services globally. I have unashamedly borrowed the concept of flatteners from Thomas Friedman and applied it to the burgeoning offshore legal process outsourcing industry. If you combine the impact of the Legal Services Bill with the fact that finally, the legal profession has woken up to the concept of legal process outsourcing offshore, there is no doubt in my mind that over the next 5 years we will witness a dramatic change in the delivery of legal services to the general public.
I am perfectly aware that some are of the opinion that I am simply offering up scare tactics when I discuss the Legal Services Bill, the de-regulation of the U.K. legal profession, and the impact that this will have on the legal market as a whole.
I felt somewhat justified however, when I came across an extremely informative article a couple of days ago in the TimesOnline. For the full text of the article click here
The article referred to ten trends that will shape the legal market.
At trend number 4 the author commented that: “Technology will enable projects to be “unbundled”. This may mean that parts of the project are outsourced to India and that they are done in a systemized manner. This could have a significant impact on the need for junior lawyers, particularly if they start to price themselves out of the market.”
Trend number 6 stated: “High Street legal services will be fundamentally transformed by the Legal Services Act. A number of major brands will dominate the provision of retail legal services. Will that be law firms, or outsiders such as supermarkets or banks? It is too soon to tell whether existing law firms will be able to develop strong enough retail brands.”
Finally, at trend number 7, the author went on to say that “If the Clementi reforms (the forerunner to the Legal Services Bill) are broadly successful, one can expect firms higher up the chain to take in outside capital and float on the market.”
At first glance one might expect the author of this article, to be someone within the Legal Outsourcing industry. But no, the author is in fact Tony Williams, a former Managing Partner at Clifford Chance, the world’s largest law firm. Now, when a former Clifford Chance Managing Partner starts to talk about supermarkets and banks offering legal services, major law firms floating on the stock market, and the offshoring of legal work to India, it’s time to take this line of thought seriously.
Let’s look at these potential scenarios in a little more detail and consider the impact that this will have on offshore legal process outsourcing. First, we have the acknowledgement that the technology is available to enable the breaking down of many legal functions into systemized routine tasks capable of being outsourced offshore. Junior associates currently demanding ludicrously high starting salaries and excessive hourly rates for this routine level legal work are clearly those most at risk.
Second, Mr. Williams comments that although it is too soon to forecast what the impact of their entry will be, supermarkets, banks and other corporate entities will enter the legal services market, it is just a matter of when. These major corporate entities will come to dominate the provision of retail legal services. None of the corporations looking to enter the legal services market will be bound by the traditional and antiquated existing methods of legal services delivery. They will simply look for the most cost effective method of providing legal services to the general public. These companies either already have offshore locations or the capability to scale up significantly quicker than even the world’s largest law firms, to provide legal support from offshore destinations.
Mr. Williams’ final point on the Legal Services Bill, commenting on the potential floatation of some firms “higher up the chain”, only reinforces my belief that this will give the offshore legal outsourcing industry a huge boost. When major firms also have responsibility to their shareholders, as well as their clients, then the salaries that they pay their junior associates to perform relatively routine, offshoreable level legal work, will raise more than a few eyebrows. When corporate clients increasingly demand that law firms provide an offshore solution in responses to Requests for Proposals, shareholders will not be happy if the firm is incapable of responding to these requests.
The face of the legal profession in the U.K. is changing dramatically, and I believe that these changes will have far reaching, cross-Atlantic repercussions. The U.K. and U.S. legal markets are in my opinion inextricably linked, with the many of the world’s leading law firms having offices on both sides of the pond. What happens in the U.K. does not stay in the U.K. but will soon be felt all around the Western legal world.
[read more...]
“Alternative Business Structures (ABS) will enable lawyers and non-lawyers to work together on an equal footing to deliver legal and other services. External investment will be possible”.
Put simply, non-lawyers can own and invest in law firms. To all intents and purposes this opens the doors to banks, insurance companies, supermarkets and other corporate entities, both owning and investing in existing law firms, or alternatively, setting up their own firms and marketing legal services to the general public. I strongly believe that this piece of legislation can be viewed as a major flattener in the provision of legal services globally. I have unashamedly borrowed the concept of flatteners from Thomas Friedman and applied it to the burgeoning offshore legal process outsourcing industry. If you combine the impact of the Legal Services Bill with the fact that finally, the legal profession has woken up to the concept of legal process outsourcing offshore, there is no doubt in my mind that over the next 5 years we will witness a dramatic change in the delivery of legal services to the general public.
I am perfectly aware that some are of the opinion that I am simply offering up scare tactics when I discuss the Legal Services Bill, the de-regulation of the U.K. legal profession, and the impact that this will have on the legal market as a whole.
I felt somewhat justified however, when I came across an extremely informative article a couple of days ago in the TimesOnline. For the full text of the article click here
The article referred to ten trends that will shape the legal market.
At trend number 4 the author commented that: “Technology will enable projects to be “unbundled”. This may mean that parts of the project are outsourced to India and that they are done in a systemized manner. This could have a significant impact on the need for junior lawyers, particularly if they start to price themselves out of the market.”
Trend number 6 stated: “High Street legal services will be fundamentally transformed by the Legal Services Act. A number of major brands will dominate the provision of retail legal services. Will that be law firms, or outsiders such as supermarkets or banks? It is too soon to tell whether existing law firms will be able to develop strong enough retail brands.”
Finally, at trend number 7, the author went on to say that “If the Clementi reforms (the forerunner to the Legal Services Bill) are broadly successful, one can expect firms higher up the chain to take in outside capital and float on the market.”
At first glance one might expect the author of this article, to be someone within the Legal Outsourcing industry. But no, the author is in fact Tony Williams, a former Managing Partner at Clifford Chance, the world’s largest law firm. Now, when a former Clifford Chance Managing Partner starts to talk about supermarkets and banks offering legal services, major law firms floating on the stock market, and the offshoring of legal work to India, it’s time to take this line of thought seriously.
Let’s look at these potential scenarios in a little more detail and consider the impact that this will have on offshore legal process outsourcing. First, we have the acknowledgement that the technology is available to enable the breaking down of many legal functions into systemized routine tasks capable of being outsourced offshore. Junior associates currently demanding ludicrously high starting salaries and excessive hourly rates for this routine level legal work are clearly those most at risk.
Second, Mr. Williams comments that although it is too soon to forecast what the impact of their entry will be, supermarkets, banks and other corporate entities will enter the legal services market, it is just a matter of when. These major corporate entities will come to dominate the provision of retail legal services. None of the corporations looking to enter the legal services market will be bound by the traditional and antiquated existing methods of legal services delivery. They will simply look for the most cost effective method of providing legal services to the general public. These companies either already have offshore locations or the capability to scale up significantly quicker than even the world’s largest law firms, to provide legal support from offshore destinations.
Mr. Williams’ final point on the Legal Services Bill, commenting on the potential floatation of some firms “higher up the chain”, only reinforces my belief that this will give the offshore legal outsourcing industry a huge boost. When major firms also have responsibility to their shareholders, as well as their clients, then the salaries that they pay their junior associates to perform relatively routine, offshoreable level legal work, will raise more than a few eyebrows. When corporate clients increasingly demand that law firms provide an offshore solution in responses to Requests for Proposals, shareholders will not be happy if the firm is incapable of responding to these requests.
The face of the legal profession in the U.K. is changing dramatically, and I believe that these changes will have far reaching, cross-Atlantic repercussions. The U.K. and U.S. legal markets are in my opinion inextricably linked, with the many of the world’s leading law firms having offices on both sides of the pond. What happens in the U.K. does not stay in the U.K. but will soon be felt all around the Western legal world.
[read more...]
posted by Mark Ross at
3:58 PM
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