*6.3. A Di*ff*use Law Firm*

Finally, the new large law firm will be a diffuse law firm. Up until the 2008 financial crisis, the trend among large law firms was to expand their ranks often through mergers with and acquisition of smaller or medium size firms and/or by opening new offices in strategic locations.<sup>121</sup> The logic behind these developments was that profitable legal projects could only be handled by large firms.<sup>122</sup> The financial crisis, however, showed some of the flaws of this model in terms of profitability and capacity to manage giant firms. The increasing process of digitalization of legal services is furthering these developments and showing that the strategy of having a large, but centralized, law firm may not necessarily be the best one in terms of both maximizing profits and providing effective and client-oriented legal services. In my view, the centralized law firm that was developed in the last few decades should give way to what I label "the diffuse law firm". This will be smaller in size (perhaps reaching one hundred employees), while at the same time making a smart use of outsourcing strategies and technology to lower costs, increase effectiveness, and keep competitors at bay. In a way this is where legal practice meets the dynamics of the gig economy as interestingly put by the Managing Partner of a Danish large law firm:

A: Our organization needs to be extremely adaptable for continuing moving around the resources we have. And this also means that the lawyers we employ must be very, very adaptable themselves . . . which I think, to my surprise, they are, as I would not be so adaptable. But then again, I am 47, and many of our lawyers are 30 years old. It is a different game for them. But the reason I think the future will look different is the fact that . . . well, the Danish Bar Association has recently made a report on legal tech, in which they use the expression gig economy, which is defined as being: you get a job for a client and you need maybe five different competencies to solve the case, you maybe have two of them in house, so you need to obtain the three remaining. So, you go and get them, but it is not necessarily competences that you need in stock all the time, so you hire them for a particular job. For me this means that, in the future, I will not have 700 lawyers on the payroll all the time. I think we are looking to a future where we will be just as well off by hiring in the competencies that we need to solve particular tasks on a case by case basis.<sup>123</sup> Of particular interest in this regard is the, now already "old", organizational technology known as Legal Process Outsourcing (LPO) and its newest incarnation Legal-Tech Process Outsourcing (LTPO). As expressed by Mark Ross "if law firms wish to remain the first port of call for corporate legal departments and the primary conduit for the delivery of legal services, this is predicated on their acceptance of the LPO operating model".<sup>124</sup> LPO essentially consists of subcontracting legal work from

<sup>120</sup> A first mover in this direction is the UK law firms Rradar. See, https://www.rradar.com/.

<sup>121</sup> To date, the largest law firm in the world in Dentons, with more than 8500 lawyers in its ranks, followed by a relatively large number of firms with more than 2000 lawyers.

<sup>122</sup> (Westcott 2018) See also, (Bosman and Hakanson 2017).

<sup>123</sup> Interview with Managing Partner of Danish large law firm, 20 September 2019.

<sup>124</sup> (Ross 2017, p. 77).

high-cost locations to sites where the same work can be executed at a significantly lower price. This often can be done by subcontracting the work to developing countries. Thus far, India, Chile, Hong Kong, Australia, the Philippines, and Sri Lanka have been the most frequent locations for outsourcing legal work, at least from the United States and the United Kingdom. Nearshoring to cheaper locations and providers that are geographically closer, including locations inside the home countries of law firms, is increasingly becoming an option.<sup>125</sup> A more recent version of the LPO is when legal services are offered via a model that departs from the traditional law firm, for example, by using contract lawyers, process mapping, or web-based technology.<sup>126</sup>

As revealed by several informants in the interviews, several large law firms based in the United Kingdom have recently opened alternative delivery solutions teams or offices in less costly locations, such as Hull, Birmingham, Leeds, cheaper locations in the United States, and even South Africa. Notably, Clifford Chance opened its support services and knowledge management center in Delhi in 2007.<sup>127</sup> These centers are staffed with contract attorneys, paralegals, and IT experts and their role is to execute repetitive tasks in an effective and less-costly way. More often than not, these centers make an extensive use of technology to optimize their performances.<sup>128</sup> This means that, today, LPO has become a the standard global operating model, which combines a best-practices framework with process efficiency, quality control, consultative expertise, and enabling technology at its core. Among the areas in which LPO providers have proven to be effective and tech-savvy one can find e-discovery and document review processes, contract lifecycle management, contract review and data extraction, and legal analytics, just to name a few. This allows law firms to expand the range of services offered and deliver efficiently the appropriate level of legal services required for each type of work product.<sup>129</sup> From the suppliers' side, an early mover for what concerns in-country outsourcing in the United States was the Dallas-based *Atlas Legal Research*. <sup>130</sup> The company was founded in the early 2000s by an Indian-born attorney, Abhai Dhir, immediately becoming a success, increasing its revenue by 20 percent annually since 2001. Since then, *Atlas* has hired and trained legal professionals in India to write legal briefs for American law firms at a very competitive price. Another early mover was *Pangea3*, which is now part of *Thomson Reuters Legal Managed Services*. This firm provides services such as document review and analysis, trial preparation, regulatory change management, financial trade documentation, and contract management.<sup>131</sup> Similar services are also provided by: *Mindcrest*, founded by two former McGuire Woods partners in 2001; the Indian-based *SmithDehn* (former SDD Global Solutions Pvt. Ltd., Indian), which lists among its clients large corporations such as HBO, Calvin Klein, Sony Pictures, and BBC Worldwide;<sup>132</sup> and *Quislex*, with offices—by them defined as "execution centers"—in Chicago, New York City, and Hyderabad, India. Notably, the office in Hyderabad, which has about 1000 full-time employees, is responsible for executing the majority of tasks, and it is divided into several multidisciplinary teams, which include data analysts, statisticians, process experts, software developers, linguists, and technologists.

In addition to this, the diffuse law firm will also outsource the technology used to agile and tech-savvy legal tech companies that will then develop tailored products for the firms. Until now,

<sup>125</sup> (Caserta and Madsen 2019).

<sup>126</sup> See the 2017 report of Thomson Reuters, Georgetown Law Center for the Study of the Legal Profession, and University of Oxford Said Business School entitled 'Alternative Legal Service Providers: Understanding the Growth and Benefits of These New Legal Providers' (Alternative Legal Service Providers Report 2017).

<sup>127</sup> See, https://cliffordchance-businessservices.com/legal\_support\_centre.html.

<sup>128</sup> Interview with Head of Innovation of large law firm, 3 December 2019.

<sup>129</sup> See also, (Ross 2017; Beaton and Kaschner 2016). This constellation would obviously require a proper service legal agreement between the firms and the providers in order for the former to maintain control over the LPO providers.

<sup>130</sup> http://www.atlaslegal.com/.

<sup>131</sup> http://legalsolutions.thomsonreuters.com/law-products/solutions/legal-outsourcing-services/Pangea3.

<sup>132</sup> http://www.smithdehnindia.com/.

the large majority of large law firms have been trying to develop their own products, in a way trying to become themselves legal-tech companies; the more savvy have signed contracts with external providers like IBM-Watson, Luminance, Kira, Elevate and others to have their own products developed in house by these external companies.<sup>133</sup> In the long run, however, this strategy may not work entirely. As known, new technologies, especially artificial intelligence, need a large amount of data to work properly and, no matter how large, each single law firm may not be able to provide the right amount of data for achieving groundbreaking results. Thus, I argue that large law firms should outsource their technology to a number of legal-tech companies and outside consultants. This will be a win-win situation as the firms would get the tailored technology they need, and the tech-company will be able to develop large scale well-functioning products to make available for the general market. As, however, many of the technologies discussed above in this paper are at an embryonic stage and law firms have proven rather prudent in their approaches, it is difficult to substantiate more concretely the manner in which this IT-outsourcing could take place.

This model comes with some challenges. First, outsourcing raises a host of legal questions with regard to client confidentiality. The challenge is that, by storing data on third parties' servers or communicating with clients via email, lawyers give up a certain amount of control over the documents and information, yet remain obligated to safeguard their clients' information to preserve the attorney–client privilege. Second, outsourcing raises concerns related to the nature of legal work, as these services tend to treat legal services less as expert services and more as commodities. This pushes the legal profession to be more driven by the maximization of profits, rather than by the more traditional notions of justice, public good, rule of law, and fairness. This, outsourcing is likely to cause increased inequality among classes of lawyers and, perhaps, even contribute to the proletarization of part of the legal profession. Here I refer in particular to these new forms of legal, para-legal, and IT legal worker who will operate from the periphery and will be somehow excluded from pursuing more meaningful and remunerative careers. These will likely represent the poor segment of the new capitalism described by Richard Sennett in his seminal book on the new culture of capitalism.<sup>134</sup>
