New business models for legal services is a favourite topic for conferences and industry publications. Countless commentators (including us!) have proclaimed that NewLaw is coming and predicted how it will transform the industry.
For many years, there was more talk than action. But that’s starting to change. Almost 40% of respondents surveyed for the Association of Corporate Counsel’s 2018 In-House Counsel Trends Report had worked with a NewLaw provider — a sharp increase from 2016, when only 26% were familiar with NewLaw.
This article is not another hype piece about NewLaw. It’s an article about tenders and requests for proposals (RFPs). But — before you stop reading — it’s also an article about the future of our industry. In particular, we want to start a conversation that we believe the industry needs to have: now that NewLaw has actually arrived, how can we all work together to unlock its value?
NewLaw Has Arrived
First: a quick overview of NewLaw (in case anyone missed the hype). In recent years, a range of alternative legal business models, built on the now widespread paradigm of ‘NewLaw’, have quickly gained ground in the Australian market. This paradigm was made popular by George Beaton, who emphasised how NewLaw was different from the traditional law firm model on key ‘continuums’ — such as alternative billing over hourly rates, corporate brands over personal brands, and disruptive technology over sustaining technology.
At its core, NewLaw is a philosophy rather than a business model. A large part of this philosophy is continual innovation and adaptation, informed by design thinking and emphasising the value added by technology. NewLaw providers (which include both innovative law firms and alternative legal service providers) are united by a common goal: to provide legal assistance that is responsive to the needs of users and to continually test — and, critically, improve upon — prevailing legal traditions and practices.
Let’s Talk About Tenders
Tenders rarely come up in the same context as NewLaw. Tenders evoke thoughts of large-scale bureaucracy, driven by strict compliance rather than fresh ideas. However, despite the negative connotations, tenders hold a powerful position in our industry. The evolution of legal services will largely be determined by how money changes hands. Great innovation is irrelevant if no one buys it, and tenders control the flow of a huge amount of legal spend. (Here, we are using ‘tenders’ to refer to requests for proposals for specific projects, as well as broader panel processes.)
Design thinking (a popular framework for NewLaw) recommends asking ‘what is the need?’ before talking about problems or solutions. In that spirit, we should start by pinning down the true purpose of tenders. While it is easy to fall back on points like ‘compliance’, ‘risk management’ and ‘transparency’, we see those as side-benefits, not the main game. In our view, the central purpose of tenders is to give organisations access to those providers that will deliver the most value.
Over the years, tendering processes have remained static. Yet when we reframe their purpose in this way, it becomes clear that tenders cannot afford to stay the same while the industry evolves around them. Tenders must also evolve so that they can help organisations benefit from innovation and new business models. But, in our experience, tenders are not keeping pace with our rapidly changing industry.
Tender Areas of Tenders for NewLaw
The features that make legal providers NewLaw are the same features that are currently creating roadblocks in responding to tenders. In this section, we share the top four hurdles we’ve confronted in our tender travels as a NewLaw business.
1. Tenders Look for Individual Capabilities Within Subject Areas
The capabilities section of a tender is where the legal provider shows off their ‘product’. The product of a traditional law firm is its lawyers. Unsurprisingly then, tenders generally require providers to demonstrate their capabilities by listing which lawyers in their firms are experts in various subject areas.
NewLaw covers a broad cohort of business models and this challenge impacts each differently. Some providers will still be able to wheel out their legal experts. LegalVision, for example, has over 80 lawyers across our business (and we’re growing!). But others, like software businesses or process outsourcers, would be ruled out when the tender asks for individual CVs, even though they could deliver value to an organisation’s legal function without having any practitioners on their payroll.
But the bigger concern here is not whether NewLaw can satisfy tender requirements; it’s that the tender requirements restrict innovative providers from demonstrating their unique value propositions. The true value offered by NewLaw is driven by capabilities like technology, process and design, which sit above and across a traditional classification of legal practice areas.
2. The World-View of Tenders Is Still ‘Hourly Rates Plus Value-Adds’
In reviewing tender responses, businesses usually judge the value of legal services according to the discounts offered on standard hourly rates, as well as any ‘value-adds’. Importantly, these value-adds are seen as separate from the core offering of law firms —lawyer hours. But ‘value’ is built into every aspect of NewLaw service delivery. By asking NewLaw firms to separate the ‘value’ from the ‘service’, tenders demand a comprehensive decomposition of the NewLaw DNA.
NewLaw also prices work according to the benefits delivered through legal services. The focus is on flexibility, transparency and certainty. NewLaw pricing is therefore not just about the number of hours clocked up by lawyers. Technology and processes are an intrinsic part of the service and can be tricky to unbundle from purely ‘legal’ assistance.
For businesses, value-based and alternative billing can be hard to assess in a vacuum. These principles really only come to life in the context of a specific matter. Hourly rates are a much simpler metric for procurement teams looking to quantify their cost savings. But if a firm with the lowest hourly rate just ends up taking twice as long to do the same work, the ‘value’ is lost.
3. Tenders Expect a Lengthy Track Record
One of the difficulties for NewLaw firms, when invited to demonstrate the capabilities of their younger brand, is that businesses look for a comprehensive timeline of relevant work. When assessing tender responses, length of experience can sometimes converge with depth of experience and there can be a temptation to preference providers with longer histories.
Demonstrating strong technical capabilities is, without a doubt, critical for both traditional firms and NewLaw firms. But assessing proposals through a time-based lens creates a significant handicap for NewLaw providers, who, by name and definition, are newer to the game.
4. Tender Compliance Requires Huge Investment
NewLaw providers are lean organisations without big teams dedicated to tender responses. But, with the high stakes of landing a big client, tenders are often handed to key team members — which means less time for innovation, product development and growth. The compliance elements of a tender create a huge burden. A tender might be the first time a NewLaw business is introduced to the exciting world of ISO standards and business continuity plans.
Of course, compliance measures are essential, and no client should engage a provider who poses a material risk. But NewLaw firms could be forgiven for deciding it’s not worth the hassle, especially when they’re already facing the hurdles we’ve discussed, and it might all amount to nothing anyway. That, however, would be a serious loss for the provider, the client and the industry.
Recommendations for Rethinking Tenders
The good news is that each of these challenges gives clues for how forward-thinking clients can reap the rewards of NewLaw. The emergence of technology platforms dedicated to legal tenders suggests that clients are willing to change. However, many of these platforms are focused on making the existing way of doing things more efficient, rather than asking whether the current approach is fit for purpose. Meaningful change will need to come from the mindsets of clients themselves. We offer four recommendations to help make that change.
1. Redesign the Process
A perfect place to start is to adapt your tender process to accommodate the different business models of NewLaw. You should:
- make providers explain their capabilities without just relying on CVs;
- go beyond hourly rates in assessing commercial offers;
- ask providers to quote for a hypothetical project (and see who responds with value-based or alternative pricing); and
- consider experience, without closing yourself off to newer providers.
More generally, explore whether you can ease the upfront burden of tender compliance.
2. Have a Dedicated NewLaw Panel
If making these changes seems too unwieldy, why not just create a separate panel for NewLaw? This approach recognises the limits of comparing apples with oranges and opens a direct route to working with NewLaw. The NewLaw panel structure was successfully pioneered by a large financial services company in 2016. Now this company has access to a leading legal process outsourcer, contract lawyer service and tech-driven firm, all within the comfort of a formal panel structure.
The next challenge will be to use the NewLaw panel once it’s set up. Old habits will make it tempting to send all work to the traditional panel of familiar firms — but that will remove the benefits of your progressive panel structure.
3. Go ‘Off Panel’
By being prepared to go ‘off panel’, you can try out new providers without redesigning your tender process or panel structure. Testing alternative providers in this way would allow you to find out what NewLaw looks like in practice. This strategy can work for discrete or one-off pieces of work, giving NewLaw providers a chance to showcase their unique capabilities while still allowing businesses to maintain existing relationships for ongoing matters.
4. Reward Partnerships
A final option is to reward traditional firms that partner with NewLaw providers. By working with a NewLaw firm that partners with BigLaw, you can get to know a new provider without losing the comfort of a long-standing relationship with a traditional firm.
Where to From Here?
It’s time to shift the conversation: we should accept that NewLaw has arrived — and start talking about what we should do now that it’s here. Hype aside, the potential of NewLaw is extremely exciting. But we will only be able to realise that potential if we are prepared to change some fundamental industry practices. Tenders are an essential way for clients to access providers that will deliver the greatest value. They must evolve at the same pace as our industry.
This article was originally published in the Australian Corporate Lawyer (Autumn 2019) magazine.
Amritha Thiyagarajan (Senior Lawyer) co-authored this article with Thomas Kaldor (Head of Legal Transformation).
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