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He's Talking 'Bout a Revolution

Who would have thought that a lawyer -- and an in-house corporate counsel, at that -- could lead a revolution? If, like me, you're a skeptic, take a look at this speech by Cisco GC Mark Chandler at the  Northwestern School of Law's 34th Annual Securities Regulation Institute, because 'dems fighting words.

Chandler has a couple of messages for law firms. First, he speaks directly about how technology is changing the way in-house lawyers practice, as well as implicitly about how high law firm rates are driving in-house decisions. Among other things, Cisco has created an online contract builder so that its employees around the world can create NDAs and standard contracts. And Cisco is also working on a wiki with other Fortune 500 companies to allow direct access to firms' knowledge management systems on securities regulatory compliance. Finally, Cisco "got tired of high billable hour rates from so-called global law firms,"  so it's selected a firm (which isn't a huge global firm, but open to new ideas) to help it address issues related to corporate secretarial matters. And while Cisco uses two large firms for M&A work and litigation, those firms operate on fixed fees.

The bottom line is that in an era where information wants to be free, corporations want access, and they don't want to pay for every minute spent to  find it:

The legal industry has spent millions on IT to up speed access to information. But the only way I can get that information is through an individual billing me by the hour. My in-house team often has more sophistication than the associates who mine the knowledge management system to generate a memo. We’re just not allowed to access the information without paying for someone’s time.

The systems exist today to change the delivery of legal information to clients. But that change would challenge a model that today delivers high profits. Every big company, including Cisco, is using those systems to make our support services more effective, and to drive down the costs of providing service. Law firms are not. Clay Christensen of Harvard Business School has written, and I quote, “Large American law firms are just about the most profitable businesses in the world. Speedier information-gathering capabilities allow large law firms to increase utilization of less experienced lawyers without passing cost savings on to their customers.” So changing the service delivery model will be disruptive, and not just because associates are kept busy doing work that a machine might be able to do better. Changing that model will also cut into the effectiveness of cross-selling. From a client’s point of view, cross-selling is an effort of star partners to leverage the loyalty they have earned to drive hourly work to other parts of the firm. Today, there is little incentive for law firms to apply risk-reward logic to the amount of legal services provided. And General Counsel know that.

In the scheme of the profession, will large firms eventually become extinct and go the way of the "medieval guild system," to quote Chandler? Or are they up to these new challenges? What do you think?

Posted by Carolyn Elefant on January 30, 2007 at 06:31 PM | Permalink | Comments (1)


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