In my last Article I looked at the results of a survey that I undertook as part of my masters studies, on a random sample of Brisbane law firms regarding their usage of the Internet. Recapping, we saw that
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Large law firms are more likely to be connected to the Internet and to have a Web page than small firms. Connection rates are high for the legal profession overall, as they are for Australian businesses generally
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The two most frequently used Internet services amongst law firms of all sizes are communication services (email) and to a lesser extent information access (research)
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The e-commerce aspects of the Internet are not extensively used by law firms, although large firms are starting to explore these services
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Law firms of all sizes are using the Internet primarily to gain internal cost efficiencies and to improve the service that they provide to their existing client base. They are not yet using the Internet to pursue growth strategies.
In this Article, we will explore how the Internet is likely to change the way legal services are provided. Radical change to how lawyers practice will not happen in the short term, because Internet adoption amongst individuals and businesses is still in its formative stages, particularly when it comes to buying and selling over the Internet (e-commerce). However we do know that both functions are growing at an exponential rate, with connection rates doubling for Australian businesses in the two years from May 1997 to May 1999 and e-commerce rates increasing from 2% to 7% over a similar time period. As the Internet becomes a normal part of our daily lives, change will start to occur. This growth rate continues despite the setbacks experienced by Internet businesses this year. The widespread introduction of bandwidth as the year closes should also aid this growth as well as enhance quality of web productions (faster download, video streaming, sound, etc).
The ABS and Small Business Index show that most of us sense that the Internet will bring about fundamental change. Over 85% of the law firms in our survey stated that they believed that the Internet would fundamentally change the way they do business over the next 5-10 years, although most lawyers could not explain precisely how the Internet would change the way things are done.
For society generally many Internet commentators envisage that the Internet will change our daily lives and activities such as how we work, study and shop. Just how radical the change will be is anyone’s guess, but what we can predict with some assurance is that consumers will gain more control and power over vendors due to access to a myriad of information that is quickly and cheaply obtainable from the Internet. As information providers, this must effect us as lawyers.
As we feel the impact of these societal changes, we will need to adapt accordingly. Harvard Professors Christensen and Tedlow call the Internet a 'disruptive technology' because it is a technology that enables innovative companies to create new business models that alter the economics of their industry. (HBR Jan/Feb 2000 p.42) They say that this phenomenon is not new, and trace the advent of various disruptive technologies in the retailing sector over the last century, starting with department stores, who offered a large variety of goods at cheaper prices, thereby winning business from their 'corner store' rivals. In a similar fashion, they believe that cybermalls (collections of specialist retailers offering their goods through cybermediaries over the Internet) will again challenge conventional retail practices. We can already see many traditional retail businesses, such as Coles Myer and David Jones scrambling to develop e-strategies to cope with the challenges laid down by cyber competitors.
However, very little is written or known about the possible changes that the Internet will make to the professional services sector. Given that the Internet's main function is to provide fast and inexpensive access to information for users, it is imperative that information providers such as the legal profession address the issue now so that they have time to develop appropriate strategies to harness the Internet for their benefit.
In the last Article, we saw that the results of the study of Brisbane law firms revealed that they are using the Internet to streamline their work practices and to create cost efficiencies along their value chains from supplier through to delivery of service to the client. Many large law firms are doing this by developing client extranets, which allow a direct electronic link between the law firm and their corporate clients. This allows law firms to deliver fast advice and documents electronically and in turn allows clients to access status reports on their matters and other information. Other streamlining innovations are emerging such in areas such as litigation support.
Smaller firms are also streamlining their work practices by heavily utilizing email communication, particularly with their clients. Internet connected firms are also using online research to improve their services.
These electronic advances within the legal profession still show a primarily internal (efficiency) rather than external (growth) orientation. Whilst internal improvements are essential and
commendable, I do not believe that an internally focused strategy will be sufficient to enable law firms to survive and thrive over the next 10 years as the impacts of Internet technology permeates through law firms.
How the Internet will affect the legal profession can only be guessed at, but following the logical outcomes of moving to an electronic society, I would say that
the Internet has the potential to impact law firms in at least two significant ways:
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Traditional marketing strategies will change - as the Internet becomes a widespread and common tool to both access information and conduct transactions, traditional marketing approaches used by law firms may no longer be effective. Where a law firm is geographically positioned will no longer be as meaningful and traditional marketing practices (such as word of mouth and reputation) will be challenged by cyber branding and online strategic alliances that cross borders.
- The delivery of many legal services will change - Whether we like to admit it or not, many legal services particularly 'bread and butter' work such as conveyancing and debt
collection, are largely process driven. The Internet is quickly developing the technology to mechanise these services and deliver them electronically to consumers at a reduced cost with little practitioner intervention. Internet sites such as Legalmart in Australia,
Desktop lawyer in UK and uslaw.com in America are already experimenting with these services.
Bill Gates sees the Internet as separating process driven services from other services that remain personal or complex in nature. He envisions that the Internet will create a 'digital infrastructure so pervasive that it acts like a human nervous system, helping customers solve problems for themselves and reserving personal contact to respond to complex, high value customer needs.' (Gates Business @ the Speed of Thought (1999) ) Law firms who rely heavily on process driven work for income should shift the balance to other specialty areas more resilient to commoditisation.
Even personal and complex legal work will not be entirely immune, given the consumers increasing access to online legal information and their growing bargaining power.
English academic and lawyer, Richard Susskind says that the new digital economy will transform legal services from the traditional delivery approach to a new paradigm, as follows:
| Old
Paradigm |
New Paradigm |
| Advisory Service |
Information Service |
| One to One |
One to Many |
| Print based |
IT based |
| Time based billing |
Commodity Pricing |
| Restrictive/Defensive |
Empowering |
| Legal Focus |
Business Focus |
(The Future of Law: 1996)
Essentially, Susskind says that the traditional legal service, which is largely advisory, reactive and one-on- one in nature, will be severely eroded by the new developments in technology, and that lawyers will need to repackage their service so that it provides more generic preventative information but reaches larger audiences (one –to-many). He feels that while margins for this type of legal service will be lower, there is the potential to reach greater numbers of business and personal consumers who presently do not use legal services due to cost and accessibility issues.
This scenario appears to be playing out in other business sectors. One only has to look at the grab for market share in the financial services sector by large discount broking houses such as Comsec and Etrade (who have already captured 7% of stock transactions) to know that the legal profession is not immune.
In essence, we cannot assume that the way law has been traditionally delivered will remain the same over the next decade. My view is that there will always be a place for the traditional personal legal service, particularly for specialty areas or matters that need a personal touch. Even then, to justify the relatively high cost of these services, lawyers need to think about how they can use the Internet and advances in technology generally to add value to this service.
Whilst the Internet may pose a threat to traditional practice, it also provides Lawyers with the
opportunity to explore new ways of packaging and distributing legal services to better meet the needs of businesses and individuals. For instance, many markets within our ‘information society’ are yet to be fully serviced, particularly with legal services that are enabling and/or preventative in nature.
In the next Article we will look at the profile of the legal profession in Australia, with a focus on the nature and differences between small, medium and large firms. This will provide a foundation for developing e-strategies for the different types of law firm in the fourth and final Article.
Ann Janssen
BA.LLB (Hons)
Solicitor & Consultant
ann.janssen@legalmart.com.au
Copyright. July 2000. All rights reserved
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