ALM Appraises Threat from Big Four’s “Trojan Horse”

In an article published recently on The American Lawyer, writer Dan Packel reports that this year, “For the first time, PwC, Deloitte, EY and KPMG seized four of the top five spots on [the U.K. consultancy Acritas’s] list of global alternative brands, in a survey of general counsel at heavyweight international businesses.”

Packel points out that the attainment of this milestone follows several years of “concerted push” on the part of the accounting firms, who had earlier been discouraged from encroachment into the legal field by the 2002 Sarbanes-Oxley Act in the U.S., and similar measures in other countries. In his comprehensive and timely article – titled “Big Law’s Trojan Horse: Are The Big Four Preparing an Invasion?” –Packel explains how the major accounting firms have worked around the strictures of legislation to position themselves as strong competitors to Big Law in the offer of legal services globally.

While Packel points out that the Big Four are currently making inroads in legal areas that are not major sources of income for law firms (immigration and “high-volume, technology-aided work”), he quotes Dentons’ global chairman Joe Andrew, who says that “Big accounting firms going into law is a Trojan horse.” He cites the accounting firms’ “expertise in processing, their scale, their relationships with our best clients and their familiarity with technology” as indicators that their ascent toward the legal stratosphere will continue.

A basic problem in addressing this encroachment, the article suggests, is a widespread view among lawyers that accounting firms could never compete with their degree of legal specialization, as well as lawyers’ general “resistance to applying technology to legal issues.”

This is a long and valuable article that is worthy of the effort of reading from start to finish. Only after you have done so will you be able to determine whether you should be looking over your shoulder, or into the Trojan Horse that just pulled into your waiting room, in an effort to decide how and how soon (not whether) to protect your knowledge and your assets.

As Packel concludes, “No one in Big Law should be sleeping on the threat, lest they wake up to find their walled city overrun.”

Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

 

Will Machine-Assessed Lie-Detector Tests Become Admissible in Court?

The Artificial Lawyer reports that the European Union is testing a system of automated lie-detector tests for use at its international borders. The technology “will use a digital avatar to interview travellers at border posts, ask them questions and then use facial expression ‘biomarkers’ based on previously taught patterns to decide if they are lying.” The focus of the six-month pilot run of iBorderControl, as the software is called, will be on questions relating to immigration: a major administrative problem in the EU.

A number of EU countries have signed on to the €4.5m project. The trial, which concludes in August 2019, is taking place in Greece, Latvia and Hungary, with administration based in Luxembourg.

As the Artificial Lawyer article points out, if adopted, the system would give decision-making powers relating to a legal area to machine-learning-based technology. “Given that lying at a border in an attempt to gain entry would likely constitute a criminal offence, then this software has important human rights and justice implications.” The author of the article goes on to imagine other legal contexts in which similar approaches might be applied in future – by police, courts, and other legal entities.

The prospect is both alarming and intriguing, and I recommend reading both the article and the comments. To my mind, the most important initial question may be: What legal jurisdiction will first admit assessments of human reliability or deceit obtained by learning-based digital technology as evidence in court?

I would be very interested to know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

Unlikely Bedfellows Unite under Internet Brands’ Umbrella

Last month, Internet Brands – a vertical marketing conglomerate in which marketing for the legal industry forms a major pillar – announced that it was changing the name of its law-services website from “The Martindale Legal Network” to “Martindale-Avvo.”  The name change followed the acquisition by Internet Brands of Avvo.com.

To see these two names – Martindale and Avvo – joined together would have been unimaginable even a few short years ago. For decades, Martindale-Hubbell was the most prestigious name in lawyer rankings. Firms spent fortunes to ensure that they were properly listed in the publication, and lawyers around the world chose other lawyers through Martindale.

Avvo arrived on the scene in 2006 with great controversy, following business practices that were widely criticized. Over time, Avvo morphed into a more traditional and powerful referral engine, but to see its name merged with that of Martindale-Hubbell is likely to take some getting used to.

Internet Brands’ announcement of the name change states that “Martindale-Avvo provides attorneys with highly-targeted lead generation and a wide selection of online marketing tools,” including professional websites and online profiles, interactive tools for managing leads and online communication with prospective clients, as well as other benefits – not least of them being access to its more than 25 million monthly site visitors.

“The integration of Avvo into our legal network and our unification under the Martindale-Avvo name furthers our unwavering commitment to provide attorneys with a wide variety of cutting-edge tools and technology that will grow their practice,” said Diana Schultz, Martindale-Avvo president.

Internet Brands’ other areas of marketing focus include the automotive, health, home and travel industries.

The Use of AI in Investigations: Keeping Up with the Regulators

In a recent article for Artificial Lawyer, Richard Jeens and Natalie Osafo – partner and associate respectively at Slaughter and May –  point out that regulators and corporates are increasingly using artificial intelligence (AI) to carry out investigations. They offer the example of a complex matter conducted by the Serious Offences Office in the UK (investigations into Rolls Royce, advised by Slaughter and May), in which the SOO used AI to reduce the amount of time required for a document search from a typical two years to one month.

Jeens and Osafo believe that lawyers who work with such agencies would be wise to take note, and to incorporate AI into their own investigations – in part to create for themselves and their clients a level playing field with regulators. They point out the advantages and “boundaries” of using AI for investigations, the former of which include the ability to very quickly sort which documents require further, human review – and even to develop a plan for their review (e.g., marking the most relevant results for reading by the most experienced lawyers).

On the less advantageous side, they remind us that search algorithms are only as useful as the instructions they have been given, that they are less able to cope with unexpected results than humans are, and that legislation has yet to determine the limitations of AI data searches of personal information. Furthermore, as a relatively new technology, AI programs are only gradually learning to detect subtleties in documents, or terms with “coded” meanings.

For these and other reasons, caution is advised, but Jeens and Osafo point out that not only is AI becoming a fixture in investigations, it is likely to expand its range of advantages and services to the field in future.

I would be interested to know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

Next Step in Law-Firm AI Implementation? Getting the Lawyers on Board

Remember when we all learned that humans use only about ten percent of their brains? Well, apparently that is an urban myth – science has shown that we use all parts of our brains every day. However, it turns out that humans are responsible for the current stunning underuse of advances in artificial intelligence that could be easing their mental workloads.

Even at DLA Piper, one of the major users of legal technology (such as the contract and document analysis programs available through Kira Systems), Director of Innovation Adam Hembury estimates that his firm is using only one percent of the overall potential AI support currently available to its lawyers.

At a recent legal AI forum in London, Hembury explained that it is not that the technology isn’t useful, but rather that “especially in a large, international law firm, getting the message out and [encouraging] partners and practice groups to make regular use of AI solutions, especially where training is needed [… is] a challenge.”

The Artificial Lawyer, which hosted the forum, views Hembury’s comment in a positive light, underscoring the fact that AI offers much more than document review and analysis. “Although AI systems are now ‘through the door’ and have proven their value,” The Artificial Lawyer article advises, “what is needed now is a significant ‘capacity building’ programme inside law firms to ensure uptake across the partnership.”

Other speakers at the forum pointed out that especially in national and international firms, adoption of new technology can require buy-in from senior lawyers at several different sites, which adds to the complexity of implementation. Many firms do not have the resources – including the critical component of time – to invest in the major educational initiatives that are needed to facilitate effective technological support.

At what critical point do humans stop what they are doing every day and invest the time that is needed to make what they are doing every day easier? It is a difficult – and an expensive – question that requires brain power of the human variety to solve.

How are you addressing this issue at your firm? Please let me know your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

 

 

Do or Die: Outside Law-Firm Rosters Shrink as Client Spending Grows

Lest any of us get too comfortable in our swivel chairs, a new report from Michael B. Rynowecer, president of the BTI Consulting Group, indicates that in 2018 – despite spending more on outside legal counsel than ever before – clients are using fewer outside firms than ever.

In a September issue of The Mad Clientist –the blog of BTI — Rynowecer reported that his company’s survey of more than 350 law-firm clients showed that “22% to 30% of clients are cutting, or about to cut, their law firm rosters. This sets a new record and is double the prior average of 13% of clients looking to cut back at any one point.”

The clients BTI surveyed attributed the cutbacks to unsatisfactory work and poor service on the part of firms, combined with the increasing complexity of legal work. “For clients, fewer law firms translates into better risk management,” Rynowecer says. He predicts that clients’ primary and secondary firms will benefit the most from the shift to smaller rosters, although these firms too will need to demonstrate their ongoing value. “Fringe players” are the ones most likely to be shown the door.

These clients are planning reductions from hundreds or dozens of firms to fewer than ten. – Michael B. Rynowecer

Collaboration within firms and client service will be key to success in the new, more streamlined future, Rynowecer suggests. His blog includes valuable pointers for firms keen to remain in the good graces of their clients.

His tips may also serve as inspiration for firms looking to supplant existing firms on those same rosters, where there may indeed be opportunity: BTI found that only about a third of clients recommended their current firms to others.

Does the shift to smaller rosters present an opportunity or a death knell? It seems that at least in part, it may be up to law firms to determine their own fates.

I am always interested in hearing your thoughts on any matter related to the law, either in the comments section below or directly via email.

Competition Likely Cause of Unprecedented Merger Frenzy

U.S. law-firm mergers to the end of the third quarter of 2018 reached levels unseen in the first three quarters of any year for more than a decade, according to an article published last week at law.com. The number of mergers recorded by Fairfax Associates between January 1 and the end of September of this year stood at 56, up six from the same period in 2017. Twenty of them were completed in the third quarter alone.

Fairfax Associates’ principal Kirsten Stark attributes the increase to law firms’ competition for market share. “This is a reflection of firms facing an intensifying competition for work, an intensifying competition for clients,” Stark told Brenda Sapino Jeffreys, senior reporter with ALM. “In their view, they will be more competitive if they have broader talent, better talent, and mergers are how to get there.”

For specifics on the mergers – 80% of which involved “smaller firms with five to 25 lawyers” – and Stark’s predictions for the future, check out Sapino Jeffreys’s article, originally published in The American Lawyer. It is rich in detail.

In the meantime, I welcome your thoughts on this or any other matter related to the law, either in the comments section below or directly via email.

Artificial Intelligence: A Primer for Lawyers

For those who may be apprehensive about so much as clicking on a post relating to artificial intelligence (AI) as it applies to legal practice, I highly recommend a recent article in The Artificial Lawyer by Product Manager David Kleiman of Bloomberg Law.

Kleiman points out that anyone who has ever used Google has already entered the world of AI, and that customized AI is the next logical step in the evolution of legal practice. “AI can help lawyers make informed, data-driven decisions and improve their efficiency,” he says.

He goes on to point out that for many, “[W]hat can be overwhelming and scary is the jargon and varying definitions of AI that have permeated the legal industry.” The purpose of his article is to demystify the terminology and address other barriers that can stand in the way of individual lawyers approaching and using AI to improve their legal practice.

Kleiman stresses that human intervention and supervision is necessary to the effective use of AI, and it is from this perspective that he guides the reader through the intricacies of how machine learning is most efficiently deployed in the legal setting. While his examples are naturally based on features offered by Bloomberg Law, the principles apply to other platforms.

Let me know how far your law firm has moved toward adopting artificial intelligence into legal practice. I am always interested in hearing your thoughts on any matter related to the law, either in the comments section below or directly via email..

Big Four Accounting Firms Continue Their Advance into Legal Arena

A month ago we reported on the expansion of EY into the legal field through its acquisition of the U.K.’s Riverview Law. Now we learn that PwC U.K. has joined forces with immigration law specialists Fragomen of New York City – giving PwC “a major foothold in the U.S. market,” according to a report in The American Lawyer. Fragomen has offices in 16 major U.S. cities and 25 offices outside the U.S., while PwC offers immigration services in 170 countries.

Describing the alliance as “one of the most significant examples to date of the Big Four joining forces with a law firm,” The American Lawyer article points out that in addition to positioning the two companies to maximize their appeal to companies around the world, “the relationship will also enable shared clients to draw on PwC’s complementary services in tax, Social Security and global mobility consulting.”

In recent years, each of the Big Four accounting firms has taken significant steps to strengthen its ability to offer legal as well as accounting services, particularly in the U.S. and the U.K. One report from The American Lawyer shows that independent firms should be more concerned about this encroachment than Big Law needs to be, warning that “The Big Four are slowly moving beyond tax-related legal activities, eyeing a range of practices that could include employment, immigration, international arbitration, cybersecurity and data privacy, and even private equity.”

What steps is your firm taking to address the potential erosion of services that law firms traditionally offer? I welcome your thoughts on this or any other matter related to the law, either in the comments below or directly via email.

 

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U.S. Law Firms Mark Best First-Half Revenue Growth in Ten Years

Citi Private Bank reports in The American Lawyer that the first half of 2018 was better financially, in particular for small- and large-sized law firms, than was the first half of 2017. In fact, overall revenue growth across the industry in the U.S. contributed to the strongest first half since 2007.

Citi Private Bank’s Law Firm Group, which produces the semi-annual “Law Firm Leaders Confidence Index,” surveyed 186 small-, medium- and large-sized law firms; they concluded that 2018’s first-half growth could be attributed to “a pickup in demand and solid rate increases, together with moderate expense growth…”.

In their article for The American Lawyer,  John Wilmouth and Gretta Rusanow of Citi Private Bank indicated that the positive trend is likely to continue at least through the balance of the year. They point out, however, that the positive results apply primarily to international or global firms and small boutique or niche firms, rather than to those closer to the middle.

“[AmLaw] Second Hundred firms continued to struggle,” they write, “as they have since the beginning of last year. Revenue was up only 1.3 percent, as a decline in demand tempered an increase in lawyer billing rates. …  [T] his was the only segment for which expense growth exceeded revenue growth.” Boutique or niche firms, by contrast, “actually posted slightly stronger revenue growth (6.9 percent) than Am Law 50 firms.”

The report offers an intriguing look into details of trends in various areas of law-firm operation, including consumer demand, length of collection cycle, number of lawyers, number of salaried vs. equity partners, expense growth and inventory, as well as financial data.

I would be very interested to hear your comments on the Citi Private Bank study – or any other matter relating to the law. Leave your comments below, or contact me directly via email.

 

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