TechLaw.Fest 2021, a signature event focusing on law and technology in the SEA region was held on 22-24 Sep 2021 & connected the international legal community from private & public sectors. Codelex Legaltech is honored to participate and present at this prestigious event for the second year. At this year's event, our CEO Zolo Mundur talked about the application of sharing economy model or "uberization" in the legal industry. You can find our Tech Talks session and the presentation script below.
We are living in the age of the sharing economy. Many services and products we use daily are based on this model, including taxis, shopping, hotel, and many more. Before Uber, traditional and expensive taxis seemed like the only option. Uber and similar services transformed the taxi industry in only a few years and now we can commute much cheaper and faster with them.
Uber is just one of the many companies that shaped today’s sharing economy. They even led to the creation of a new word “uberize” or “uberization” – which Cambridge dictionary defines as “the act or process of changing the market for a service by introducing a different way of buying or using it, especially using mobile technology”.
The sharing economy has successfully tackled highly regulated industries and the question is: Can the sharing economy work in the legal sector? Now that we already see examples of this approach in the legal industry, we need to think about whether this approach has the potential to transform the industry and how it may change the industry.
1. Sharing economy basics
First of all, what is sharing economy or uberization? We hear these terms a lot and what does it really mean? Sharing economy is a system built around the sharing of resources. The idea is to share the use of idle assets and services or to facilitate collaboration. Sharing economies allow individuals and groups to make money from underused assets.
There is research that shows private vehicles are unused for 95% of their lifetime. So, if you have an unused car, why not rent it to someone who doesn’t have a car? On the other side of the game, people in need of certain assets or services can access them from various suppliers. So, consumers have wider options and don’t need to rely on a single source. Since the supply of goods and services is democratized, the prices of goods and services are usually much lower than traditional goods and services. For example, Airbnb rates are 30-60% cheaper than hotel rates around the world.
But the sharing economy has its downsides, such as regulatory uncertainty and lack of oversight, etc. But, I’m not going to talk about that today.
2. The next question is How sharing economy approach or uberization can benefit the legal industry
First, sharing economy approach matches unmatched demand and supply. One of the key features of sharing economy is to put latent products and services to productive use, so as to match the supply and demand, through some sort of matchmaking service. Before Uber, it would have been impossible to find a ride for the price you pay today because the taxi was much expensive. On the other side, car owners in need of additional income would be willing to offer you the ride much cheaper. The magic of uberization was to connect these parties through their platform.
The delivery of legal services has a substantial problem with distribution. While there are many unemployed law school graduates. there are many people who face legal problems but can’t afford lawyers. What a sharing-economy approach could do for the industry is to match demand with the supply by making legal services more convenient and affordable. So, even though you don’t have enough money, there is some lawyer out there who is willing to provide the service you’re looking for for the price you’re able to pay.
Another benefit that the uber model can bring to the legal industry is lowering the cost of legal services. Similar to the pre-Uber taxi services, legal clients are often frustrated by costs and lack of transparency and efficiency. Like when you’re riding in a taxi with a running meter and wondering if the driver is taking the optimal route, clients often wonder if all those billable hours are required. One of the problems with the traditional billable hour system is that it puts the interests of the law firm and those of the clients in conflict. The model pressures lawyers to bill as many hours as possible and many firms set minimum billable hours. This does not leave lawyers a strong incentive to spend fewer hours on a matter, just like taxi drivers don’t have a strong incentive to choose the shorter route.
Clients usually choose big law firms because of their expertise and credibility. Unfortunately, when they make this choice, they’re also inexplicitly accepting their partnership model and billable hours. This means, in addition to the expertise and credibility of the firm, clients need to pay for the firm’s expensive office space, staff, and other overheads. It is one thing to pay an experienced partner by billable hours, but clients have to accept paying their inexperienced staff also by billable hours.
In addition, the legal industry is facing a more-for-less challenge, so clients are now willing to spend less, yet they expect more results.
Many clients choose big law firms also because they don’t know if the solo practitioners or small law firm alternatives are reliable. In fact, what really matters for them is the quality of services than the “big” name. By adding transparency in the quality and pricing of legal services through a rating system, like Uber has, clients are able to choose lawyers based on their rating, rather than their “name”. The “uber” model also gives the option to compare pricing upfront. So, if 2 lawyers with the same rating and qualification offer the same service with different pricing, a client would choose the cheaper alternative.
Also, the transparency in rating can result in improvement of the quality of legal services, like it did to drivers. In Paris, for example, taxi drivers had a reputation for being impolite. But Uber has made that attitude impossible for its drivers. No one would want to pick a Uber with a below 3 rating.
This is not to say that the sharing economy approach will bring an end to law firm structure or that uber-like model will make the delivery of legal services perfect. Instead, what uberization can bring to clients is to create “an alternative” as it brought to the taxi industry.
3. Practical examples in the legal industry
We’re already seeing the application of the sharing economy approach in the legal industry with Alternative legal service providers and lawyer-client matchmaking services. In the past several years, the market size of ALSP increased dramatically and more and more businesses and individuals are now choosing ALSPs over law firms. The main reason is that these providers are often able to provide a more efficient and cost-effective option without sacrificing quality. Thomson Reuters emphasizes that ALSPs are now becoming mainstream and creating a $14 Billion Market. So, “Alternative” legal service providers are becoming less “alternative”.
Use of tech and innovation. What makes ALSPs different than law firms is that they don’t need to fit into the traditional law firm structure, which enables them to choose business practices to increase efficiency using technology or other innovation.
Nowadays, the cost is not the only reason to choose ALSPs. They also provide expertise services. More than half of law firms in the US use the services of ALSPs today as a form of subcontracting and many are entering the ALSP market themselves.
Another example of the application of sharing economy approach in the legal industry is a lawyer-to-lawyer legal document marketplace Lexub that we’ve created. You can think of Lexub as the Amazon or eBay of legal documents where lawyers around the world can freely trade their legal document examples and templates.
Let me tell you how we came up with the idea of Lexub. Our co-founder and I are both lawyers. When we practice law, we used to receive legal document requests from peers a lot. Someone would call and ask Hey! Do you have an example of this and this document? If you’re a lawyer, you might be familiar with this situation too. In such cases, we usually face a dilemma. On one hand, I don’t want to share my legal document example for free – because I’ve spent hours drafting that document. On the other hand, it is a bit awkward or I’m worried that I look greedy if I ask for payment in exchange of the document template. So, usually we share the documents for free or just say we don’t have the document if we think it is too valuable. This is a problem we faced ourselves on one side of the transaction – the problem faced by suppliers.
On the other side, solo practitioners and small law firms have limited access to internal knowledge base or services of legal publishers or research databases. So, when they’re working on an unfamiliar transaction, they face the need to ask peers or go online. This is a problem faced by the demand side.
Using a sharing economy approach, Lexub connects lawyers on the two sides of the transaction in an open marketplace. Lexub disrupts the old middle-man of publishing companies charging lawyers to publish and purchase precedent documents - and instead connects lawyers directly, democratizing the market and leveling the playing field, particularly for smaller firms. Lawyers have full control over the pricing of their documents. The market demand will show if the price of a document is reasonable.
With Lexub, we aim to democratize the supply of legal document precedents and create a connected, sharing economy ecosystem for lawyers. We believe that, after some time, this ecosystem can help lawyers around the world work more efficiently, aid value delivered to clients, and further connect the profession.
A tech-enabled, sharing-economy approach to the delivery of legal services can improve the provision of legal services. Looking ahead, I think we will see more examples of sharing economy in the industry.
Uberization will not bring an end to law firms. However, because of the competition by alternatives, law firms must be more efficient and future-proof themselves. Many firms have teams focusing on just that. Law firms should allocate some resources and consider implementing legal tech solutions that can help them work smarter, faster, and cheaper.
As for lawyers, they should keep an eye out for a more flexible and collaborative work style.