Fall 2013 Innovation in the Legal Industry

in the legal industry

Disruptive business practices or smart business?


As a career counselor and adviser, I need to closely observe the legal industry to provide job seekers with accurate advice regarding career options. Prior to 2008, my advice was fairly standard. If a job seeker came into my office and expressed an interest in doing corporate legal work, I pulled out a chart that was published in The Daily Journal of the 250 largest law firms and discussed how they might find a job with one of those organizations.

Of course, the counseling session described above is an oversimplification—actual career counseling sessions are a more involved discussion of the job seeker’s interests and experience in light of viable career opportunities. However, my intent is to highlight that the structure of the legal industry presented job seekers with primarily two options to perform corporate legal work: as in-house counsel for a corporation or as a lawyer at a law firm to which the corporation had outsourced a vast array of its legal work. There was little discussion of other types of legal service providers or the impact that technology might have on the delivery of legal services.

This is not to say that prior to 2008, offshore outsourcing of some legal functions did not exist or that technology was not being implemented and developed to perform more routine legal work. However, the legal industry was slow in adopting these solutions. When the 2008 recession occurred, general counsels had their legal budgets cut. They needed to find alternatives to continue to provide their corporate clients with necessary services at a lower cost. The recession did not create the changes that are now occurring to the structure of the legal industry; it simply accelerated the pace of change.

The consumer of legal services was forced to ask whether all legal work was the same or whether there was a stratification of services with some complex work justifying top-tier rates and other work being commoditized, justifying a lower fee. In the October 2013 Harvard Business Review article, “Consulting on the Cusp of Disruption,” by Clayton M. Christensen, Dina Wang, and Derek van Bever, the authors cite the following statistics:

An AdvanceLaw survey of general counsel found that 52% agree (and only 28% disagree) with the statement that general counsel “will make greater use of temporary contract attorneys,” and 79% agree that “unbundling of legal services … will rise.” The legal management consultancy Altman Weil, surveying law firm managing partners and chairs, found that in 2009 only 42% expected to see more price competition, whereas by 2012 that number had climbed to 92%. Similarly, in 2009 less than 30% thought fewer equity partners and more nonhourly billing were permanent trends; in 2012 their numbers had reached 68% and 80%, respectively.

According to Christensen, “Adaptation requires innovation, and any company that gets comfortable doing things the way they’ve always done them should enjoy what little time they have left.”

In response to these trends, Santa Clara Law graduates are among those leading innovations in legal services.

Ralph PaisRalph Pais ’75
Partner and Chair of the Technology Transactions Practice at
Fenwick & West LLP, and co-founder of FLEX by Fenwick

The FLEX program originated from Ralph Pais’ observation that clients eventually reach a point where it no longer makes financial sense for traditional law firms to do “run-the-company” legal work. Companies then seek “cheaper resources,” he says, but finding quality attorneys can be difficult, time-consuming and, sometimes, more expensive in the long run.

FLEX is the first consulting service started by an AmLaw 200 firm that addresses fast-growing clients’ need for cost-effective, high-quality, and flexible in-house legal support. Pais developed the FLEX program to make things easier for clients when they are ready to consider other options. FLEX’s internal team consults with clients, assesses their legal needs, and hand-selects attorneys based on the required skills, experience level, and company culture fit. FLEX clients engage attorneys at levels that match their legal workload, generally at a 50–75 percent cost-savings when compared to a traditional law firm.

The results are happier clients that continue their relationship with the firm, empowered attorneys with access to flexible opportunities to work with premier clients, and a law firm that’s finding ways to innovate so everyone wins.

Matthew FaustmanMatthew Faustman ’09 J.D./MBA
Co-Founder & CEO at UpCounsel, Inc.

Matthew Faustman is no stranger to the world of start ups. While he attended law school, Faustman founded a company to help make student notes widely accessible and reduce reliance on expensive hardbound textbooks. After graduation, he started practice as an associate at Latham and Watkins LLP. In a recent interview with Bloomberg Law, Faustman, CEO of new company UpCounsel, stated that he and his co-founder “had a passion for helping entrepreneurs and small businesses.”

Through UpCounsel they hope to make the legal marketplace more transparent and reduce the costs to access legal services for small business clients. Faustman describes UpCounsel as the fastest growing online legal solution for businesses. The company leverages powerful technology to make the process of finding and managing legal services an efficient experience for both businesses and attorneys. By combining price transparency, reviews, and online tools, the UpCounsel platform allows businesses to tap into a diverse and talented legal workforce.

Faustman believes that the legal industry will change dramatically over the next 5–10 years, such that accessing and delivering legal services will become increasingly frictionless. The result will be a dramatic shift in firm structures, hiring, and legal education.

Akshay VermaAkshay Verma ’06
Practice Management at Axiom Law

After law school, Akshay Verma practiced law for more than six years as a litigator focusing on environmental and sustainability law issues for two large law firms, Pillsbury Winthrop and Farella Braun + Martel. He decided to leave traditional law practice in 2012 and take up a business role with an innovator in the legal industry, Axiom Law. Axiom, started in 2000, was the first true alternative to the high-cost, low-efficiency model of the large law firm. Axiom’s business model dispenses with the high costs of legal services driven by per-partner profits and other law firm rate premiums, and now Axiom services the in-house departments of half of the Global 100 with top-notch talent. Verma describes Axiom as the perfect win-win scenario for what he calls “the broken legal exchange.” With the Axiom model, in-house clients receive premium legal services without premium rates, and an opportunity to manifest the transformation taking place in the legal industry. Axiom allows attorneys the opportunity to work outside billable-hour pressures and have true choice over their work and careers.

“Axiom provides me with an opportunity to be a part of that legal exchange, helping general counsel run their legal departments, and thinking through and, hopefully, solving some of the most complex business and process issues that arise,” Verma explained.

Verma says he believes that the legal industry is at a crossroads. In the next decade, and possibly before that, there will be a fundamental change in the way legal services are delivered to clients. How companies like Axiom fit into the bigger picture is yet to be determined, but the change itself is inevitable.

The Effect of the New Face of the Legal Profession on Job Seekers

If the effect of innovation on the manufacturing industry is a predictive of things to come, then the legal industry and law students should be aware that the method by which services are being delivered is changing. The effects of innovation on the legal industry are so important that the Law Career Services office will hold workshops in spring semester focusing on “new model” law practices and their effect on the legal industry for job seekers.

As a career adviser, I can no longer deliver the more simple set of job options I did six or seven years ago. Instead, my career advising sessions must focus on opportunities as they currently exist with some forecasting of future possibilities. You never know, I might be counseling the future founder of the next innovative legal services organization.

—Vicki Huebner has extensive experience working with job seekers and employers to guide them through the recruiting process. A member of the Santa Clara Law Career Services team since 2006, she holds several leadership positions in local recruiting associations as well as in the National Association for Law Placement, the association for legal career professionals.

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