Is the Business of law definition going to be the same in 2025?
What is the Business of Law today? How much do you feel it differs from, say, thirty years ago? In good years it is tempting to get lulled into thinking that most everything will be the same as ever. 2019 was quite a year for Biglaw, and then 2020 came along.
The Business of Law, by definition, is to solve clients’ legal and regulation related issues in exchange for a legal fee. In the past, and still today, law firms would help clients achieve their goals by providing labor-intensive legal services.
It almost feels intuitive, right? That ”legal services define the Business of Law” seems like it needs no further explanation. However, such a definition harbors one very peculiar assumption.
Namely, it assumes that the business of law is all about LAW FIRMS and legal SERVICES. But that is a dangerous assumption to have, I feel, as it brings the risk of disruption.
What risk, you ask?
For starters, it is risky to assume that the business of law is equivalent to law firms (or anyone, for that matter) rendering legal services. Such an assumption could leave you open to blind spots.
Clients are, and always have, been only looking for solutions. Over the past few decades, law firms were the dominant (if not the only) legal solution vendors. However, it already is no longer the case, let alone in the future.
Photo by Markus Spiske on Unsplash
The business of Law new entrants
Generally speaking, law firms have had a great run. From the emergence of the Cravath system and up until the Golden Era of law firms, it seemed like nothing could hinder their growth.
However, that was all before technology and regulations empowered other market participants to enter the Business of Law arena.
(granted, regulations are still an obstacle, and likely the only remaining bastion of the law firms’ dominant position)
In addition to law firms, the following entities are involved in rendering legal services today (and will likely be even more so in the future):
Inhouse Legal Teams
Somewhere at the end of the “Golden Era” (i.e., around 1980-90s), big corporate clients started feeling that outsourcing their entire legal work was getting quite expensive. At least in part, that was likely fueled by the fact that corporate legal projects became much more complex, longer, and multidisciplinary.
And the complexity of legal projects hasn’t decreased over the past few decades. If anything, it only became much more complicated as globalization advanced. Multinational corporates established legal teams in virtually any jurisdiction where they were present.
Big corporate clients continued to use law firms for more niche-specific legal work. However, they kept the strategy and owned the most important legal tasks.
Photo by Nastuh Abootalebi on Unsplash
More recently, inhouse legal teams started to cooperate also with the legal process outsourcers and alternative legal service providers (a.k.a. the NewLaw). At that stage, it made the most sense to delegate high-volume repetitive legal work. However, as alternative legal service providers grow in sophistication, inhouse legal teams may charge them with increasingly complex projects.
However, regulatory and compliance frameworks get more complicated (always have, always will be). We will likely reach a point at which it will no longer be sustainable even to outsource large chunks of non-strategic work. There will be a need for a more durable solution.
I feel there will be two distinct stages in solving the needs of modern corporate clients.
Stage One: the rise of legal service products
Initially, inhouse legal teams will likely start to deploy legal products that could serve a large and scalable number of legal requests. I feel this is already happening to some extent, just not at scale.
What could be an example of such applications and their use case? Imagine internal compliance check cases. Depending on the regulatory framework, compliance cases may occur pretty frequently, which could overwhelm the inhouse legal team, or even be too expensive to process externally.
A more sustainable way of addressing compliance requests could be to deploy legal service products. Inhouse legal teams could do it with the help of no-code technology platforms, which are akin to app builders for non-programmers.
Photo by Kaleidico on Unsplash
Stage Two: the rise of DAOs
DAOs (Decentralized Autonomous Organizations) are constructs based on Blockchain and Distributed Ledger Technology that behave as self-governing entities. As such, DAOs and the whole technology and surrounding culture are very nascent, and still in the early development.
I do believe companies of the future will use DAOs (or even operate as DAOs, to begin with), which would solve tons of complexity and scalability issues.
(more on DAOs below)
The Big Four Accountants as legal vendors
Having the Big 4 players in the legal space is not new. I believe the Big 4 has successfully tested waters in the legal market in some niche areas, and are now looking to diversify and ramp-up.
“Law firms may still have some competitive advantages over the Big4—namely, a close relationship with clients, and the capacity to handle complex matters.
However, give it enough time, and I am sure this advantage will melt away. Clients will start considering other aspects of legal services too…” - Daniel Acevedo
The Big Four has very deep pockets and open culture. Their teams are multidisciplinary, and they have a track record in different fields. If anything, it would be a pretty safe bet to say they will remain as vendors of legal solutions.
Their advantage is in being able to provide integrated solutions (i.e., accounting, legal, and IT - to name some).
Alternative Legal Service Providers (ALSP)
Alternative Legal Service Providers are companies that leverage technology, legal talent, and business models other than Biglaw to provide legal solutions. Their solutions could come in the form of outsourced legal services or legal products.
“…(companies) were asked if they have any apprehension turning to ALSPs if faced with a hard cost-cutting requirement. All agreed: No apprehension. This represents a change from the last economic downturn...
ALSPs are often more agile and more open to new approaches. The feeling is that law firms are struggling to react on the fly...
ALSPs also tend to be better budgeters. They provide better information on who will be staffed, how many hours, etc. Law firms struggle with that sometimes...”
Revenue growth and adoption of ALSPs have been convincing, and they are indeed forming a base for future service and product diversification.
Not only companies but even some of the Biglaw firms warmed up to Alternative Legal Service Providers. Some law firms are even starting their own (captive) ALSPs. Effectively, these entities would take on a large volume of work, analyze and unbundle it (where necessary), and process it with the help of technology and established principles of project management.
“When asked if those operations might be hurting the firms’ brands, one (client) responded: “I would argue they hurt their brand more with $600 associates doing work inefficiently in these times...”
Legal Product Vendors
Now, legal product vendors are an exciting category. By definition, they are in the business of law via their digital applications which solve legal problems. So far, they are deep niche players.
One pretty known example of such niche players are companies that help retail with claims in case of flight delays or cancelations. These startups have found one peculiar, underserved niche. They realized people don’t usually pursue such claims by traditional means (claim amounts don’t justify the costs of retaining a lawyer).
Now you could apply such a model to other niche areas and create particular verticals.
I am pretty sure we will see more and more of such solutions. Now, whether we get a separate company for each vertical remains to be seen. I feel those vendors that manage to reach a certain momentum would likely expand to other verticals. That would be a natural step, given their know-how.
Additionally, other organizations (like law firms) are also capable of developing such solutions. Moreover, they are even in a better position to build and monetize them, given all the legal talent, resources, and brand power.
The only question is - will they be willing to do so?
The Business of Law and DAOs
Imagine being able to buy or sell a company by merely delivering your private keys. I, for one, would subscribe to such a possibility.
(What is a private key, you ask? Uhm… I should probably step back a bit)
I have mentioned above that Distributed Autonomous Organizations (DAOs) are distributed ledger technology constructs. As such, they always involve specific rules of internal governance that arrange relations of the members of their community.
(pretty much like company bylaws, heh?)
However, unlike company bylaws, these rules are self-enforceable as long as certain conditions are met (e.g., cast votes).
But how could DAOs play any role in the business of law? After all, a DAO isn’t able to render legal services, right?
True, but DAOs could eliminate the need for some legal services through prevention and proper structure setup.
Consider the following example - an investment fund vehicle has to adhere to various compliance rules, both internally and externally. Legal professionals (either inhouse or otherwise) are in charge of making sure the company is compliant.
Imagine now if you would use the DAO concept instead. You could develop a set of rules that would be enforced by and between the members of the investment fund without the active intervention of lawyers. The technology behind DAOs is what makes such examples possible.
So instead of running an investment fund in a traditional vehicle and having to factor in compliance costs along the way, shareholders could consider an autonomous organization.
The role of lawyers in the latter case would be to transfer relevant know-how into the DAO internal rules - a sort of legal architects.
(we are still very far from such solutions, at least concerning the regulations)
Photo by Ilya Pavlov on Unsplash
What about Law Firms?
Law firms and biglaw are still pretty much central in the business of law definition.
(you just can’t answer what is the business of law without thinking of them)
However, law firm dominance will erode. In the future, various legal entities (and likely even mathematical constructs) will carry the business of law.
Does that mean law firms would be entirely wiped out?
I don’t think so, for at least two reasons. Firstly, there will always be niche areas where strategic legal advisory is of importance. Artificial constructs aren’t able to cope with that, and likely will not be in any foreseeable future.
(although, with the advent of quantum computers and self-programmable algorithms…)
Secondly, lawyers, too, are capable of innovating and are doing so at an impressive pace.
Just look at this law firm from Croatia that could serve as an example to many international law firms. Or perhaps see this ever-growing list of law firms without billable hours. By some definitions, these firms could classify as the Alternative Legal Service Providers.
Law firms will likely, at some point, transcend their current operating model. Perhaps they will not be strict organizations anymore.
“There will be many new concepts of legal service providers. DAO will be one. Lawyers may not be in a legal entity based on partnership and equity alone. They could be “gathering” based on data sharing.
Imagine most of us won’t even know each other’s identities, yet will jointly operate some AI system and provide the data sets for training and upgrading.
The future will bring excellence and profits to those who can provide their digital assistants with better data. In the end, owning content and know-how will always matter…” - Marko Porobija
Photo by Estée Janssens on Unsplash
So, all being said...
What is the business of law? And does it matter that law firms pretty much define it today?
It doesn’t seem to be so. At the end of the day, the right question to ask is - always - “how can I be solving my clients’ problems in a self-disruptive way?”
Ivan Rasic holds the Transnational Trade Law and Finance LLM, a program by Universidad de Deusto (Bilbao, ES), Universiteit van Tilburg (Tilburg, NL), and Goethe Universität (Frankfurt, DE). After his work in law firms and inhouse, he started a legal tech company.
Nowadays, Ivan leads STP Informationstechnologie AG's Sofia RnD center with project/development management, culture, strategy, and special project initiatives.
Ivan is an Ambassador at European Legal Tech Association (ELTA). He closely follows and writes on future of law, legal tech, ALSPs, and new ways of delivering legal services.