Monday, April 19, 2010

The Trend of Virtual Law Firms and Alternative Fee Arrangements

Solos and small firms are continually looking at ways to bring more value to their clients.  As you know, I have recently developed The Out-House General Counsel Membership Plan.  Many firms in the United States are going "virtual."  One of the leaders in virtual law firms is Bespoke Law out of Australia and England.  Jeremy Szwider is the Director of Bespoke Law and he wrote this piece about Virtual Law Firms and Alternative Fee Arrangements.

The recent downturn in our economy has presented new challenges to lawyers, and sparked a need for change in the legal marketplace. In our constantly evolving world, golden opportunities can present themselves and some professionals are facing the challenges head on.

One such example is Bespoke Law, the brainchild of Jeremy Szwider, which is a virtual law firm combining the principles of an in-house lawyer with a private practice model and has been described in the press as the “new third tier of the legal profession.”

1.       Time for change in the legal profession

Whilst business practices continue to develop to keep up with technology and the economy in general, the traditional private practice law firm remains steeped in old-fashioned ways. The economic boom during the past decade encouraged complacency in traditional firms as there was a high demand for legal services to support the constant flow of business transactions. However, the market has changed significantly in the past two years, and certain legal business models have cleverly adapted to such change in business needs.

The time is ripe for the legal profession to dramatically evolve by offering quality services in a much more cost effective and efficient manner. By considering lessons learnt from the commercial world and extracting the best concepts from both in-house legal departments and private practice, we have come up with an ideal hybrid solution. Bespoke Law recognises that business clients want quality legal services at value for money.

2.       A virtual law firm

A virtual law firm is a law practice providing professional legal services with the aid of a virtual environment and associated technology. Also known as “Law Firm 2.0”, virtual law firms have come to be associated with lower overheads than traditional law firms and are commonly serviced by experienced lawyers previously employed by large law firms. It is a relatively new concept in the legal world but has spread globally finding favour with clients seeking better service and value.

A virtual law firm does not require a formal office and offers clients easy access to cost effective legal services at the click of a finger.

Virtual law firms of 2010 have translated e-commerce principles into the legal domain by using the latest technology and online tools. With the luxuries of technology and online applications, virtual law firms can take the next step and foster communication channels with clients that are superior to the traditional law firm offerings. In addition to emails and mobile devices, clients can communicate with their lawyers via skype and instant messenger, and the boardroom concept is easily re-created with a mouse click. This is a much more cost effective and efficient process, and by not watching the clock, lawyers become even more approachable.

3.       Reduced overheads

Against this backdrop of efficiency is the concept that virtual law firms remove unnecessary overheads. Traditional law firms tend to decorate their high rise (or high rental) offices with fancy boardrooms, artwork and branded stationery. Clients are now demanding more cost effective legal services and virtual law firms are meeting such demands by removing overheads and administrative infrastructure leading to lower costs for clients.

Virtual lawyers have significantly reduced overheads by working from non-traditional offices. As such, virtual lawyers can charge substantially less for the same services provided by traditional law firms. With devices such as blackberries, iphones and laptops, virtual lawyers no longer need the permanency, or cost, of a formal office environment.

4.       Alternative fee arrangements

Alternative fee arrangements offer direct financial advantages to clients, and for virtual law firms, this is further facilitated by saving overheads. Under this financial model, a virtual law firm can rival its competitors with up to 30%-60% cost savings in fees.

Progressive legal businesses, including virtual law firms, are increasingly providing flexible fee arrangements. Lawyers considering adopting this model may consider a variety of value-based pricing models, such as retainers, capped fees, fixed prices, value pricing, staged costing and abort fees – all proffering more budgetary certainty and control over client’s legal spend.

In the economic downturn, clients are increasingly looking to outsource legal work offshore to obtain better value for money. The fact that virtual firms offer a cheaper pricing regime is in response to market demands and clients seeking this value proposition.

5.       A final word

There has most certainly been a shift in the pillars of the legal profession and traditional law firms are being challenged. With the economic downturn and the progress of technology, we are witnessing a revolution in the legal marketplace. Progressive virtual law firms, such as Bespoke Law, are evidence of this evolution and the creation of this new hybrid model of a law firm. The distinction between private practice and in-house is becoming increasingly blurred as more entrepreneurial lawyers set up practices incorporating the best aspects of both worlds. Virtual law firms are more than just a passing trend. They are part of the next wave of law firms, where legal services are not confined to an office space and virtually anything is possible. 

For more information about Bespoke Law contact Jeremy Szwider or check out their website at Bespokelaw.

1 comment:

  1. Jonny SApril 24, 2010 at 1:52 AM

    great to see this kind of business model entering the legal space, hats off to the Bespoke Law guys.