Law firms are developing their own tools and software to better serve clients
In 2019, law firms face a choice: Continue with the old-school model of providing clients with traditional legal services, or jump in to the digital age.
Clients, legal technology experts say, want cheaper, more streamlined ways to get their legal advice and ensure their compliance with the law. Whenever possible, they want technology-based solutions.
“We are at the heart of an information business in the greatest online information age the world has ever seen,” says Scott Rechtschaffen, chief knowledge officer at Littler Mendelson. “How can we be oblivious to that? How can we not recognize that we need to provide services online?”
Technology companies have seized the opportunity to create products to assist with legal compliance, law practice and related matters. Companies unaffiliated with law firms have in recent years begun providing online legal services, practice management software and litigation finance tools, to name a few. But, as Rechtschaffen points out, who knows legal issues better than lawyers?
In the last couple of years, BigLaw firms and boutique practices have increasingly shown an eagerness to enter into the technology products and services market. To further these goals, law firms are creating subsidiaries and joint ventures specifically focused on creating and selling a variety of technology-based legal products and services.
“Law firms that want to get into the business of building and selling technology products need to get out of the old business model and become more nimble,” Rechtschaffen says. “By creating a stand-alone technology-based company, a law firm can maximize its expertise while also creating an enterprise where sales and marketing professionals can be motivated. In addition, a separate company can entice top talent by creating an equity opportunity that would not be available in a traditional law firm setting.”
Rechtschaffen adds that risk-averse law firm partners may not want to invest their own money in a technology venture.
“When you create or partner to create a stand-alone technology company, you can seek outside investment to help with building products to market,” Rechtschaffen says.
What clients want
Rechtschaffen’s firm, Littler, was among the first to try to capture the technology needs of clients. In 2015, Littler launched ComplianceHR, a joint venture with Neota Logic, a technology provider, to offer a suite of technology-based products and services relating to employment law compliance. Since then, ComplianceHR has provided services for more than 100 Littler clients, says Lori Brown, CEO of ComplianceHR.
“Providing self-service, on-demand tools is good business,” Brown says. “More so than ever before, clients expect law firms to provide sophisticated technology solutions, allowing them to preserve their dollars for more strategic matters.”
There are several examples of law firms creating
technology-based subsidiaries. Earlier this year, Actuate Law, a Chicago-based boutique technology firm formed by a team of ex-BigLaw partners, announced the launch of Quointec, a subsidiary dedicated to developing technology and services for corporate clients. The law firm maintains a substantial ownership stake in Quointec, which is focused on resolving legal and compliance issues facing corporations. And last year, Reed Smith announced the launch of GravityStack, its legal technology spinoff. GravityStack creates and licenses technology products and manages services for law firm and legal department clients.
“Clients like knowing that lawyers have had input into the products,” says Bryon Bratcher, managing director of GravityStack and director of practice support at Reed Smith. “And lawyers can see the trends in the industries in which they work and say, ‘This is something we need to build.’ ”
GravityStack sells and provides services for Periscope, a software platform that streamlines and brings transparency to the e-discovery life cycle. Periscope organizes data and allows clients to have real-time views of costs, productivity and quality of document reviews. Currently, GravityStack has about 40 employees, including sales and technology staff.
GravityStack’s products are always used by Reed Smith attorneys before being released to clients, Bratcher says.
“We’ve heard that part of the reason our law firm clients go with us is that our solutions are battle-tested already,” Bratcher says. “In addition, we know their business better than a tech company does because we live it with our parent company.”
In February, Wilson Sonsini Goodrich & Rosati launched SixFifty, a wholly owned software subsidiary created to develop automated legal process tools.
The company’s first product will be SixFifty Privacy, a tool for businesses to assess and plan their compliance with the California Consumer Privacy Act. SixFifty’s software developers worked closely with Wilson Sonsini’s privacy law experts to ensure its quality and applicability, says Kimball Dean Parker, president of SixFifty.
Law firms that have created technology subsidiaries can leverage the expertise of their lawyers for marketing purposes. In addition, subsidiaries can have built-in access to a law firm’s clients.
Clients using SixFifty Privacy are happy, Parker says, because they gain access to the wealth of knowledge of Wilson Sonsini’s expert attorneys without paying their normal client fees.
“Companies that have to comply with [the CCPA] may think they will have to spend hundreds of thousands of dollars,” Parker says. “Our tool will help companies fulfill some of the main obligations under the law for considerably less than companies probably expect to pay.”
Parker says SixFifty is now moving on to create other products related to access to justice, such as tools for tenants involved in disputes with their landlords and attorneys handling asylum cases.
Dara Tarkowski, founding partner of Actuate Law and chief innovation strategist of Quointec, the firm’s technology arm, warns that law firms too entrenched in the old way of providing legal services probably will miss out on the opportunities available by creating tech-based subsidiaries.
“Creating a technology-based subsidiary is not part of the traditional way that law firms conduct business,” Tarkowski says. “There are forward-thinking law firms that get it, and there will be more that will ultimately embrace this new model so they can leverage technology in the way that clients need. But there will also be some firms, particularly BigLaw firms, who will just drag their heels because this model does not fit in with their traditional mindset.”
This article was published in the June 2019 ABA Journal magazine with the title "Home Grown: More law firms are launching tech-focused subsidiaries or affiliates to build tools and software to help their lawyers better serve clients."