The New Normal

Thomson Acquisition of Outsourcer Signals that Law Is Entering the ‘Age of Entrepreneurship’

Posted Dec 1, 2010 2:36 PM CST
By Paul Lippe

Paul Lippe

Editor’s note: The New Normal is an ongoing discussion between Paul Lippe, the CEO of Legal OnRamp, and Patrick Lamb, founding member of Valorem Law Group. Paul and Pat spend a lot of time thinking, writing and speaking about the changes occurring in the delivery of legal services. We hope you will join their discussions.

Thomson Reuters’ pre-Turkey Day announcement that it was buying legal process outsourcer Pangea3 led to a lot of discussion about outsourcing and the implications of moving legal work offshore.

Outsell’s David Curle had some very discerning thoughts about the implications of Thomson, which owns Westlaw, starting to compete with its customers (law firms):

“In some sense Thomson Reuters will be competing with its customers—but that is a fair turnabout because, as we have pointed out earlier, many of the new technologies being adopted by the legal industry have allowed them to in essence compete with the legal publishers of the world.”

But let me suggest that when we look back on this five years from now, that neither of those will be considered the real story—the real story will be that law has entered the Age of Legal Entrepreneurship.

Here are the salient facts:

• Pangea3 is a relatively new business, started only a few years ago.

• Pangea3’s model is based on what’s happened in the Business Process Outsourcing space outside law, not the traditional norms of law, and it challenged some of the conventional norms of law.

• Pangea3 made money.

• Pangea3 got focused investor financing, in this case from the primo venture capital firm Sequoia Capital, and the investors made money.

• A large established player felt what Pangea3 was doing was important enough to want to make it part of their offering.

In Silicon Valley this combo is an everyday occurrence, but in law it’s The New Normal.

Somewhat under the covers there are a bunch of other entrepreneurial ventures in law (full disclosure: my company Legal OnRamp has commercial relationships of one kind or another with most of these, which is why I know about them):

Integreon is actually the leader in legal LPO (if you’ve seen this movie before you know that the market leader in a new category usually stays independent and builds a big company, and the smaller players get snapped up early by the megaliths), they have investor funding, are growing rapidly, do process-sophisticated quality measured work onshore and off, and do it outside law as well.

Juridica has a new model for funding business litigation, so companies can resolve disputes more rationally without having to take a short-term financial hit, and a very sophisticated model for assessing the probable outcome of litigation.

• My confrere Pat Lamb started a new firm, Valorem Law, which has deeply thought through a new model on how to deliver and price litigation services. I am lucky enough to be on Pat’s advisory board, and I can tell you that he is dramatically more serious about implementing proven ideas to deliver superior value—especially ideas from outside law—than anyone else running a law firm in the U.S.

• Indiana University law Professor Bill Henderson just started Lawyer Metrics to develop better ways to evaluate and train lawyers.

What every one of these ventures has in common is that they’re looking for ways to improve the quality of legal services while reducing the costs, they’re doing it by leveraging lessons from outside law and challenging conventions in law, they hope to grow quickly and make money, and they’re quite steely-eyed about reality. Most folks running law firms ask “what can’t I do because some of my partners might object?” Pat Lamb and other legal entrepreneurs ask “what should we do?”

Welcome to The New Normal of Legal Entrepreneurship.

A profoundly related story appeared in last Sunday’s New York Times, marking the 40th Anniversary of Southwest Airlines.

Remember that Southwest started just as the airline industry was being deregulated, but all airlines still followed almost exactly the same strategy and had identical pricing. Southwest re-invented the model, using only one type of plane, changing the way passengers boarded, making crews friendly, flying only shorter hauls, and offering fewer on-board amenities. All these changes allowed it to be more efficient and in many respects deliver superior value. All of Southwest’s innovations were completely transparent to competitors, yet competitors couldn’t change their cultures and legacy structures sufficiently to match Southwest.

Competitors asked “what can’t we do?” while Southwest asked “what should we do?”

Southwest attacked cost and delivered quality. And now 40 years later, Southwest built on a nichey starting point to become a major U.S. airline competitor.

“Can’t happen in law?”

Wow … that would be a pretty insular statement, and not an especially prudent one.

Paul Lippe is the founder and CEO of the Legal OnRamp, a Silicon Valley-based initiative founded in cooperation with Cisco Systems to improve legal quality and efficiency through collaboration, automation and process re-engineering. Lippe formerly was an executive at the electronic design automation company Synopsys and later was CEO of Stanford SKOLAR, a medical digital library and e-learning company sponsored by Stanford Medical School.

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