Episode Transcript
[00:00:00] Speaker A: I talk to law students quite a bit and they generally express, you know, major concerns about, about their own future in a, in a legal world which may where AI technology is going to be playing a very significant part. They wonder, well, your lawyer's going to, what is the lawyer's job going to be? What is the lawyer going to do?
[00:00:18] Speaker B: Hey, what's up everyone? Kevin Daisy here. Managing Partners podcast. Welcome to another episode.
Today I got a really cool guest who I met through a previous guest. So I always like to reach out to my guest and, you know, ask for referrals. Great guests to have on the show, new topics to cover. And so I appreciate Mark Weber actually connecting me with, with David Ryan here and we'll be talking about some cool stuff, future of law firms in house departments. And this guy is just connected. He's in Silicon Valley area, breath of experience and so just excited to, to dive into what he's got to say today.
And yeah, so David, welcome to the show.
[00:01:01] Speaker A: Thanks very much indeed, Kevin. And hi everyone listening, don't be fooled by the accent. I am actually in Silicon Valley right now in Mountain View, a few hundred yards from Google's hq. This is where my firm is based. Been in the US for living in the US for 13 years, 14 years now. But the accident persists.
So I'm, you know, I'm very interested in having this opportunity to talk about my views on the, on how the legal industry is likely to develop over the next sort of five to 10 years.
It really starts with what's happening with in house legal departments. But before I jump into that, let me give you a little bit more background on myself. I'm, I'm a relatively late comer to the practice of law. I didn't start in my 20s, I didn't start until I was in my sort of mid-30s.
I am a barrister of the Inner Temple of England and Wales. Barristers are those, those people who leap about wearing wigs and capes in courtrooms.
Different system from the US of course.
I started working for a number of big companies in the UK as an advisor and one of them offered me a job here in California. So I came here in 2011. I worked for that company, household name global tech company for a number of years. But I realized that what I actually wanted was my own natural habitat. And the natural habitat of a barrister is a very independent one indeed. So leaving, getting a California law license and starting a solo legal practice were all very natural steps for me to take that. That solo practice has developed into a 35 person practice today and you know, during, during this conversation I'm sure we'll, we'll touch on some of the trigger points that enable that to happen.
[00:03:05] Speaker B: No, yeah, appreciate that. And interesting story backgrounds and you know, kind of where you've come from and, and so you know, so I guess the question would be so you're you know, business law background in corporate and I want to make sure everyone knows you know, the firm, your firm now, your brand and make sure they can connect with you if they want to check you out as they're listening along.
[00:03:30] Speaker A: So yeah, absolutely, I'm in Providentia. First of all the name, the name comes from the, the name of the Roman goddess of preparation for the future. So when I was scrambling around for a name for the firm that seemed to me to be very apt. That most of the time, if not all of the time, what we lawyers are doing is trying to prepare our clients for the future, whatever that may hold. We are not, not completely diverse in terms of our practice areas. We're very focused on IP and we're very focused on commercial and corporate law and we're, we're focused on compliance. Those are the sort of three central pillars of the practice today and the biggest of those being our IP practice which is largely focused on patent analysis, portfolio development, patent pre litigation and patent transactions such as licensing deals. Our clients typically fairly large companies although we do, and we do encourage startups to engage with us and we have a, we developed a subscription program for those startups that's kind of how sits at the moment. I see somebody knocking at the door. Give me one sec.
[00:04:45] Speaker B: Oh, you're fine. Yeah.
[00:04:47] Speaker A: I did ask not to be disturbed for an hour but never mind.
[00:04:49] Speaker B: They can join the show. That's life.
[00:04:51] Speaker A: That's always fun future.
[00:04:55] Speaker B: Well also I saw you know taking, checking your website.
You know you have some interesting offerings it seems like that are different offerings and look efficiency and, and cost saving options that I was seeing on your site.
[00:05:10] Speaker A: So yeah, I think that you know it's, it's very, you know, it's very difficult to take a solo practice and to scale it. Very difficult indeed. And I'm sure any of any of your listeners who've been in solo practice will recognize that fact.
The, the advantage, if there is one is that is the, is the opportunity to kind of reinvent the wheel and to find a way of differentiating one's practice from those other practices out there that are competitive.
The way that we've approached that is to have a, a Sort of a multi program model and those programs effectively consist of a traditional outside council program, an ALSP type program which is the provision of secondes to client companies and a managed services program which you won't see on the website, at least not yet, which again is aimed at solving particular problems that clients have which don't involve legal services necessarily. And I think that when, when we sort of get tuned in to how, how the practice of law and how the legal industry is going to develop in the short term, you know, the, the conclusion I came to was that it's just not going to be enough to simply be a practitioner of a certain type of law that in order to be really useful to clients, particularly the in house departments of, of companies who are big enough to have in house departments, that you need to be able to provide more than a sort of simple point to point legal service.
[00:06:49] Speaker B: Yeah, interesting, interesting. So yeah, Wayne, me and you spoke a little bit about, you know, some of this when we chatted a couple weeks ago and I've heard talks, you know, at legal conferences and you know, the billable hour and you know all these different things about, you know, what law firms need to be looking at at especially your corporate firms, corporate attorneys bill by the hour and how they're going to look in the future and survive. Right. And so I just want to kind of dive right into that. And your thoughts on what the future of in house looks like and firms like yourself, how you can take advantage of that and grow yourself?
[00:07:29] Speaker A: Yeah, absolutely. I mean this may sound, you know, severe but in our view now single department platform is starting to burn. And the reason for that is there are a number of reasons for that. The first is what we call the more for less problem. Elos gcs every day now are being faced with how do they deliver more legal services at less cost.
And that's not new but it's been a pressure that's been building for a number of years now, certainly for the last five years at least. They need, that means that they need certainty and predictability around costs.
The sort of open ended traditional commitment of hourly billing really flies in the face of that.
They need to find alternative ways of sourcing legal services.
If they are well developed and advanced in their thinking, they will have been through processes where they have driven down external law firm costs, where they've reshaped their in house legal departments, where they've streamlined their internal and external capabilities and they've under undertaken needs analysis which show them how to, how to disaggregate Work streams for example. But even if they've done all of that they're still, they're still left with, with the basic problem of how do they, there's work that needs to be done in house lawyers who need to be supported and what is the most efficient way of doing that? Now, you know, in the, in what I would term the old days, that was a kind of a one to one relationship between corporate legal departments and big and fairly big law firms. That's that the market is shifting away from that right now we would see the supply side. Yes, big law firms and middle sized and small law firm firms are still part of the supply side. But there are, there are others in that our, who provide services and products to legal departments. And those fall into two categories. One is legal technology and the other is, the other is, you know, alternative lawyer supply services or staffing agencies for lawyers. And what that means is that there's basically been a market shift from a seller's market where the only show in town were law firms selling their services to in house teams.
But that's shifted away into a, into, into the opposite basically into a buyer's market. That's a big change of thinking. It means that, it means that the internal corporate stakeholders are thinking more about providers of external legal services from a utilitarian point of view than from then, from thinking of them as artisans. There's always going to be room for artisans of course for you know, narrow, deep experts in particular fields and there are hundreds of those fields. But it doesn't mean that if, if ABC Company needs XYZ law firm to advise on a, a narrow or complex point of law or some new regulation, it doesn't necessarily mean that all the other work needs to go to that law firm as well. And that's, that's really a big change. Change that makes sense. You know, the, the, there are a lot of these things going on simultaneously but they all, they all point in the same direction. You know, in house legal departments. I'm very close to them because I've worked directly with them in my, worked within one and I've worked directly for them as outside counsel over the last 15 years that I've been here and I've seen the same thing before in the uk but there are a lot of things driving this big change we've mentioned More for less, we've talked a bit about, right, sourcing or outsourcing.
[00:11:24] Speaker C: Today's episode is brought to you by Answering Legal now to switch my company Array Digital over to Answering Legal and It's made my life a whole lot easier. If I can't get to the phone, their 247 virtual receptionists take the call and take them through a full intake process so we never miss new business again. Now Answering Legal has been at this for more than a decade and they specialize in answering phone calls for law firms like yours. They even have a brand new easy to use app and they integrate with all the top legal softwares and platforms.
[00:11:59] Speaker B: So.
[00:11:59] Speaker C: So from our listeners today, we actually have a special deal of a 400 minute free trial offer of Answering Legal services that you can try out by going to answeringlegal.com array. You can also call 631-437-4803 and use special code Daisy. That's my last name. D A I S E Y. So go check them out and let's get back to the show.
[00:12:33] Speaker A: Technology is going to play a huge role here.
[00:12:36] Speaker B: AI, I assume, every time.
[00:12:38] Speaker A: Yeah, sorry Kevin, you were going to say.
[00:12:40] Speaker B: Oh, I was, I was going to say AI and new technologies assume playing a massive role.
[00:12:48] Speaker A: Yeah, it's going to be absolutely, absolutely. The great problem with any new technologies is, you know, whether they can actually be trusted to do the job that they need to be, that they need to do in this environment, in the environment of, you know, a law firm providing legal services to a client.
So, you know, for us that means we spend a lot of time testing technologies that we might become interested in before we actually put them to work. When you look at that through the AI filter, there are very vast number of offerings out there right now, you know, which ones are actually any good, which, how do you narrow that down to a manageable number that you would have time to analyze through demos and testing.
The way we do that is, is by, is with the counsel of our peers, by talking to our peers and other law firms, seeing what they're using, what they think about what they're using and shortlisting through that process. But certainly the tech enablement for, particularly for smaller firms, for all so called boutique law firms, tech enablement I believe is going to be absolutely, is already crucial. It's not enough to be working the old ways. Clients kind of expect that at this point in time, you know, they're savvy, they're using technology themselves in their in house legal work.
And so they expect that if there is a technology available which will significantly shorten the period of time that a lawyer needs to spend reviewing a contract, for example, that they're not being billed the number of hours it would have taken 10 years ago to review that contract. But they're being billed something akin to what it would take to do it, utilizing the best technology available. That's a really big change.
[00:14:39] Speaker B: Yeah, that can be massive. I mean, I, I think I saw, I can't quote this exactly, but something the, the bar association put out, like, it's like literally says, you know, law firms or lawyers should be embracing technology and utilizing technology. Like, you know, that's something that you should be investing in and leveraging for your clients. Of course, there's a lot of stuff, you know, with AI and things like that that you gotta be careful with and hallucinations and stuff for trials and stuff like that. So, you know, it's. But there are products out there that are just for this kind of work and that have been proven and tested and, you know, you can have it, you know, in house versus, you know, like your own systems to learn from your contracts and from your, your documents and things like that. So there's some interesting stuff out there for sure. But you know, the small firms these days too, like they came up with, they might have started during COVID so they're remote their, their capabilities, their overhead. You know, they might not have the big fancy office and, you know, they're using zoom for everything. And so there's just so many advantages, I think, over some of the bigger firms that are still stuck in some of their ways. So I definitely see that across the board. What is your thoughts on, like, you know, I saw a talk at some bar event, but it was, you know, talking about shifting for value pricing versus billable hour and like, what that would even look like.
[00:16:02] Speaker A: Yeah, I mean, there are lots of different pricing methodologies. The billable hour has survived so many professional statements and so many commentator statements that it's going to disappear, which have been continuing for decades. But. But yet it's still there.
It's still there. It hasn't gone anywhere yet.
You know, we do see, you know, AFAS is a common term now, alternative fee arrangements, which can mean fixed fees or the. A range of different things that can be negotiated with the, with the client on the other side. But essentially, even if a firm is being asked for a fixed fee, they're looking at what is it going to take us to do that work in a number of hours and then what is the margin that we need to apply to protect us from downside risk if we provide a fixed fee? So it's not really that big a deviation.
[00:16:55] Speaker B: Yeah, it's a different way of Putting it.
[00:16:57] Speaker A: Exactly. It's a different way of putting it. Value based pricing, I think is an absolutely fascinating concept. It's akin to we don't have a litigation practice, so we have, you know, little or nothing that would take us into this sort of contingency fee arena. But value, when you think about contingency fees where they do apply and the practices where they do apply, now, that's not very different from value based pricing, is it? Essentially, the lawyer's taking a share of the, of the, the settlement, if it's a settlement and they're risking their legal services in order to try and achieve that share. So they're essentially placing a value on what they're doing, which is paid out in that form.
Other forms of value based pricing away from, away from sort of contingency margins I think are a little bit more difficult to define than they would be in the accounting world. For example, if somebody solves a tax problem for you in the accounting world, it's very easy to see very directly what that value is. If, you know, if you've, if you're faced with having, if, let's just use some numbers, you know. But if you've got a tax bill for a hundred thousand dollars and you hire an accountant and the accountant says, I can make that $10,000 for you, and because that's, that's got a, that's got a $90,000 of value, then I want X amount of that value. That's a very straightforward and direct proposition that's easy to measure. It's a little bit more difficult than that with the practice of law because at the end of the day, you know, we can give advice. It doesn't necessarily mean the client's going to take the advice. And even if they do take the advice, how much of it is directly attributable to the lawyer's work compared to, you know, the negotiations that the client might have been conducting themselves, for example. But I do think you'll see the term value based pricing appearing more and more as we go forward.
[00:18:52] Speaker B: That's a good point. I mean, yeah, how do you, how do you put a value to it? Or you know, say you're protecting someone's intellectual property or you're putting together some like, how do you, you know, put a value to like the work that was done and you know, risk that was mitigated? How do you value that?
[00:19:10] Speaker C: I don't know.
[00:19:11] Speaker B: That's a good question. Not a model.
[00:19:13] Speaker A: Yeah, right. It's not an easy question. You know, we do, we Do a lot of work which essentially is risk mitigation in the, in the patents arena.
Very hard to determine what, what the actual size of the risk could be that was being mitigated.
You know, I suppose, I suppose you could use general rules of thumb about, you know, how much companies spend on litigation and if that litigation is, becomes unnecessary because something has been resolved, therefore the value might relate to the litigation costs that weren't actually spent. But it's not straightforward and it's not direct.
That's kind of key difference I think with tax advice, for example.
[00:19:59] Speaker B: Yeah, I mean, plus I think, you know, if you're depending on the company and their size and their revenue and whatever you're mitigating against, I mean could have a more value to a massive company than a small company. So I don't know. That sounds challenging. Um, like I do marketing for law firms. I, we still break things down by a cost and, and hours and, and man hours and people at the end of the day. So even if I put a package of a flat fee per month that's all calculated in there and then in our P and L, all that's being broken down by you know, man hours and all that stuff. So it's, even though it might look like a flat rate type of price, that's still all figured out that way.
[00:20:40] Speaker A: Yeah, yeah, yeah. I, I think we'll see, I think we will see change there where as we're going to see change in pretty much everything else too.
You know, if I'm reading the market correctly at the moment, we are kind of in mid cycle.
You know, the big in house legal departments have recognized that there are, that there are new sources of legal services and they're spreading their wings across those services. But you need to put that in context. I mean the globally the legal industry value is probably somewhere between a trillion dollars and $1.2 trillion.
You know, in terms of ALSPs, Alternative Legal Service providers, you know, their share is probably only something like maybe not even 5% of that at this point in time. You know, maybe $20 billion is probably, $25 billion is probably about the right, probably about right for the entire alternative legal service provider marketplace, which embraces everything from, you know, flexible lawyer lawyer businesses to technology products to innovation hubs and so on, I think. So that's. And there are a lot of companies in that space. So individually there's, there's nothing really, that's nobody really standing out from there. It's the same with legal tech, which is at an, at a much earlier stage. LSPs are about 20 years old. You know, legal tech is much newer than that, maybe 10, 15 years where now we're seeing, you know, in my inbox I'm seeing 10 or 20 offers every day. But right now that's probably on its way to becoming, you know, a 10, $20 billion market. So those aren't big slices out of a, out of a one point something trillion dollar industry. The, the, the area where I think, you know, all law firms need to watch out for is as the other companies known as the big four, the big four accounting companies.
You know, they're often, they're often grouped together with ALSPs, but they're actually, they're actually unique from that. You know, they, they do provide legal advice which ALSPs typically do not, they don't do it across a very wide range, but they are, they are significant. I mean Arthur Anderson, before it went sideways, was actually the 9th biggest law firm in the world. She has already got 3,4000 lawyers in over 100 countries around the world. We've been hearing more recently all about KPMG coming into this marketplace.
It's interesting to be in America now looking at these things and working in this environment because 15 years ago I was in the UK. The UK introduced something called the Legal Services act in 2007, which wasn't a deregulation of the legal industry, but it effectively enabled a whole lot of new players to enter the market, which they duly did.
So looking at the US now is a bit like looking at the UK in respects of the sort of structural characteristics of the legal industry. Twenty years ago here there's been very little deregulation compared to the uk. So in the us, state by state. Want to practice in California, you need to be a California licensed attorney. Most other states are exactly the same. That's beginning to change. We've seen some beginning of change in Arizona.
[00:24:09] Speaker B: Yeah, you can start a law firm without being a lawyer.
[00:24:12] Speaker A: Right, right.
I think we're going to see that in places like Nevada to, if, if it's not already happening. So that's, that's a significant change. You know, there's a lot of private equity money that's been flowing into the legal industry usually to finance patent litigations.
But I think that's going to be another wholesale change as if not as if the pace of deregulation increases in the us.
[00:24:40] Speaker B: That's a good point. Yeah. So that's, I know a gentleman I met, I was at a legal conference and. Yeah, you're a lawyer. He's like, no, I'm a digital marketer. And I was like, oh, me too. He said, well, but I own a law firm in Phoenix and he markets for him. You know, that's how he got started. But I was like, oh, okay. Yeah. First time I met someone like that. And then I know a private equity company. I know a private equity company that started their own law firm to not only handle their own legal needs, but as a opportunity to build and grow as a separate company as well. But they also own a bunch of companies that they need legal services for. So why not own their own law firm?
[00:25:19] Speaker A: Yeah. Yeah. And yeah, that's really very interesting. Isn't that a digital marketer who owns a law firm? And you know, on the flip side of that, you know, it seems that many of the, many of the bigger law firms are actually hiring more digital marketers and data scientists than they are lawyers these days.
[00:25:37] Speaker B: Well, yeah, there you go. So, yeah, interesting things happening for sure. And I, I thought I heard like, Utah maybe is another place that I want to say, I thought Utah passed or is on the list of make being next on.
[00:25:51] Speaker A: Yeah.
[00:25:51] Speaker B: You know, law firm ownership and not being a lawyer.
[00:25:53] Speaker A: Yeah.
[00:25:54] Speaker B: I think you reside in the state maybe, but you don't have to, you know, be a lawyer. Which is interesting. Yeah. This Diljer had like 20 lawyers that worked for him, but he wasn't a lawyer himself. So, you know. Yeah, interesting. It was a divorce firm. It was kind of random. But yeah, feed the lawyers with marketing and guess you got something that's scalable. So. But yeah, what if all the other states says that that's a trend? Then private equity enters, they can start to buy up law firms and groups and pull them together. Right. Personal injury, all of it. Right.
[00:26:27] Speaker A: Yeah, absolutely. I think it's very, it would be very easy for lawyers or law firms or law students. You know, I talk to law students quite a bit and they generally express, you know, major concerns about, about their own future in a, in a legal world which may. Where AI technology is going to be playing a very significant part. They wonder, well, you know, the lawyer's gonna, what is the lawyer's job gonna be? What is the lawyer gonna do? But I think that, you know, there's a positive side to all of this.
You know, when, whenever, whenever there is change, there's also opportunity. We have some very, very big changes going on in this industry, all being driven by the three things that we've covered. The more for less challenge, liberalization, which is my word for deregulation of technology being the other big one. So those things are, those things are pushing change and they will mean that in, in 10 years from now or 15 years from now, many lawyers won't be doing what we would recognize today as, as a lawyer's job. They'll be doing things which are, they'll also be doing things which are adjacent to that. And there are quite a lot of opportunities there. I would say areas like enterprise risk management, governance, risk compliance, mental social and governance sustainability.
And the, you know, the one which, where we're very focused out of that list is the protection, enforcement and commercialization of intellectual property.
There's a lot, a lot beyond the actual legal practice around IP that would go to making that type of opportunity really, really fully mature.
I tell people not to, not to, you know, not to, not to quit. Don't, you know, don't give up. You know something. If something's driving you towards a career in the law, and more often than not that is a sort of inbuilt, inbuilt sense of social justice, then pursue it. Because as technology takes things away, it will also be opening up other avenues of opportunity.
[00:28:39] Speaker B: Yeah, agreed. You said, you know, tech enablement and leveraging technology more, but not replacing your, the lawyer. Right. There's going to be more opportunity, new opportunities.
You know, I think you specializing, you know, going deep into certain areas, niching down and focusing and have expertise. But I don't know, I see there's be a long time before lures are replaced, you know, so anyone thinking that that's going to be some abrupt thing, I don't think that's a possibility.
[00:29:11] Speaker A: Well, we've been, we've been around for a long time.
You know, our lawyers, our laws, what we use, a lot of it originally came down from ancient rome. So that's 2,000 years.
So I'm not sure we'll still be around 2,000 years from now. Uh, but I'm pretty certain we'll be around a hundred years from now and perhaps longer than that.
[00:29:34] Speaker B: Yeah, well, you know, there's even like technology and AI, there's, you know, new laws, new regulations. There's always something for lawyers to do. So.
And yeah, and then you go on the consumer side, there's, there's so many nuances and, and, and there's still the personal side of things too. On, on those sides like that engagement and having a lawyer actually handle your stuff. And so, yeah, I don't see it going anywhere anytime soon. Lots of opportunity. You know, lawyers need to be embracing this Stuff growing, using technology, understanding it, figuring out how to leverage it to help their clients. And I think if you help your clients, then you're going to, you'll prevail and you're going to, you're going to be successful. So interesting topics for sure. And I appreciate you sharing, you know, what you see and as you're growing your firm and, and all that stuff out there, so interested to see where it goes.
[00:30:23] Speaker A: Yeah, I agree. We should touch base five years down the road and see how much of what I've just said was correct and how much of it was nonsense.
[00:30:32] Speaker B: See what's happening. Yeah, it's gonna, it'll be interesting to see. I mean, my, my market and industry is changing a lot too. Yeah, you gotta stay on your toes, you gotta be agile, you gotta be innovative, you gotta, you know, be ready to, to change, you know, so you can't, you can't be stagnant these days, that's for sure. So that's for sure. Um, well, David, I appreciate you coming and sharing your perspective and coming from, you know, big law background and from the UK and what's the best way for folks to connect with you and, and reach out to you, to me directly.
[00:31:02] Speaker A: They can email me, I'm David prolawpc.com or go on the website providentialaw.com there's plenty of contact information there.
[00:31:13] Speaker B: Excellent. Yeah, cool site. I like your, how you've done that there. And yeah, if you, you know, want to connect with David, reach out to me. I'll make the connection if you're interested to learn or pick his brain or need his services. So David, appreciate it. Anything else you want to share before we go?
[00:31:29] Speaker A: No, I think that's more than enough. Kevin, thank you very much indeed for the opportunity. I've enjoyed talking with you this afternoon. Take care.
[00:31:36] Speaker B: I appreciate it and we'll see you soon, everyone. Hey, thank you so much for tuning in. I hope you learned a lot from David and what's coming and connect with him and we'll see you soon.
