Since launching in 2018, we have demoed our contract drafting software to hundreds of law firms. When we talk to partners in these firms, we hear a genuine desire to improve their work – a better way to draft legal documents, and a way to differentiate from the competition. It is easy to see that these partners are primarily concerned with providing the best experience for their clients and not getting left behind. Good legal technology provides exactly that – an opportunity to do your best work in minutes instead of hours.
In every firm that we do a demo for, there is a question that starts forming about 5 minutes in. By the end of the demo, it has become the elephant in the room.
It boils down to:
“If we start using your software, how can we still make money?”
It makes sense. Legal drafting software can make lawyers more efficient, but requires investment of time and money. Lawyers are paid by the hour and therefore receive less money the fewer hours they bill. The last thing lawyers want is to be punished for their investment.
At the same time, it is uncomfortable to ask the question because it is similar to admitting that your business thrives on inefficiency.
We’ve helped firms deal with this ethical dilemma for several years. Below, we share some of the ways they have turned this challenge into an opportunity.
The adoption conundrum
It’s unfair to say that lawyers are incentivized by inefficiency. Most partners have their clients’ best interests at heart, but are understandably concerned about flipping the table on a model that has worked great for the past few decades.
When a firm decides not to go through with adopting a legal tech solution, it’s usually because the firm doesn’t have an answer to the question set out above.
More than pricing, competitors, concerns about the technology itself, etc., we experience this fundamental question on how the business model should change along with the purchase of the tech as a fundamental barrier to adoption in law firms.
Take the following example: a partner in the Corporate department produces a lot of corporate housekeeping documents. They decide to use document automation technology to speed this process up. Where a specific document used to take 1 hour to draft, that same document is now drafted in 10 minutes.
What does the partner charge?
Ten minutes? Something near to what they used to charge pre-automation? Something in between?
Different lawyers tackle the problem in different ways. Here are a few examples.
The easy road
There are ways to completely sidestep changes to the commercial model and the ethical conundrum outlined above. On the easy road, legal tech is used as an added bonus to delight clients.
- Free client portal – making knowledge available for free has become a popular way of marketing your services in all sectors and industries. Law firms are increasingly jumping on the bandwagon. We have seen many firms launch self-service document creation portals to either the general public (e.g.: CooleyGo) or to a select few key clients. Both can present a great way to gain new clients or improve relations with existing ones.
Important note: these types of portals never give away “the crown jewels”. Rather, they showcase the firm’s areas of expertise and provide the basis for starting a conversation.
- Non-billable documents – law firms draft a great deal of non-billable documents like engagement letters, pitches, proposals, and various administrative documents. For those documents, efficiency is all that matters. No ethical conundrums around pricing where there isn’t a price to be charged in the first place (e.g.: this automated engagement letter).
- Commodity work–many documents don’t even reach lawyers, and instead stay under the radar, particularly within corporate environments. If you’re a commercial lawyer working in a large firm, chances are you’ve never been asked to draft an NDA, despite millions of companies collectively concluding millions of NDAs each year. Like NDAs, many types of legal documents have gained a “commodity” status in the sense that their creation is routine and predictable. Similarly, every commercial contract needs boilerplate provisions, but no client is ready to spend money on the perfect library containing force majeure/severability/assignment/… clauses. Making this material available (for free or in a heavily discounted way) can be a powerful marketing strategy without the issue of pricing playing a role. After all, the need for this type of expertise has not vanished; what has changed, is the client’s willingness to pay for it. (e.g.: Rightso by Timelex)
The easy road doesn’t offer as big an impact in the potential revenue gained from automation and knowledge management. But it doesn’t need to. Its primary purpose is to showcase the possibilities to hesitant decision makers and delight clients. It can also be a way for law firms to be seen as innovative, without rocking the boat too much.
The hard road
As with most things in life, the hard road is the one that ultimately leads to the greatest benefit. The “hard” part about this road is not necessarily that the right technology is expensive, difficult to implement or requires a lot of upfront preparation (although no one should deny that it occasionally involves that too).
Rather, it requires a rework of the existing approach. More than just thinking about which tech to buy, it requires the firm to think about how it will change the way it works. While a select few courageous lawyers may have the drive to push this type of change through, the entire partnership must be willing to jump.
There are no two ways about it. Courageous though these lawyers are, many of them will not see their project go through. Those that do succeed can play a key role in outsized returns for the firm, provided they tackle the new model appropriately.
Here are some ways that we have seen this play out:
- Fixed fees – the ethical problem of pricing a document you spent 10 minutes on at the equivalent of 2 hours of work is only problematic if this is not clearly communicated with the client. Many clients, unsurprisingly, prefer fixed fee billing over the uncertainty of the billable hour. Fixed fee billing perhaps seems scary to start with because of the uncertainty for the firm, but it’s actually a matter of statistics. Individual files may be unpredictable, but across many different files you can calculate the average cost, and base your fixed fees on it. Some fees will be too low, some will be too high, but in the end you should arrive at the same total amounts. When combined with good legal tech, that allows you to better predict significant parts of the workload, it is therefore a win-win for the client and the firm. The client pays a fair price and knows up front what that price is. The firm gains the same revenue at fraction of the internal cost and in less time (e.g.: audit report generator by Sirius Legal)
- Subscription model – a few legal service providers have begun experimenting with a “Netflix-for-Legal” model. At a recurring fee, clients receive all the legal support they need. Clients like this approach for the peace of mind that it offers – much like insurance. For this model to work for the service provider, however, it needs to be very efficient (e.g.: TenderBase by Geerts/Denayer).
Naturally, there are many more pricing models (or “alternative fee arrangements”). These are just a few that the ClauseBase team has assisted in the implementation of.
Get in touch!
Want to know more about the examples outlined above? Don’t hesitate to reach out!