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Disruption is heading in-house. Discuss

This debate has been framed as law firms disrupted while in-house teams drive change merely as empowered customers. Such a reading defies economic realities.

Alex Novarese, Editor-in-Chief, The In-House Lawyer & Legal Business

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A lively debate over coffee recently with Axiom founder Mark Harris took me back to the discussion that manifests most frequently in my line of work these days: the extent that legal services are transforming with new providers and tools.

While Harris highlights many genuine changes in the industry and buying behaviour we disagree on whether this represents a fundamental shift. He sees the rule changing, for me it remains the exception. To be clear, I am an admirer of Axiom as a pioneer that has been a positive competitive force. And as the architect of the world’s most prominent New Law brand, Harris is positioned to see the bleeding edge of change.

Axiom is now betting on huge advances in technology to revolutionise the way clients create and manage contracts. There can be no sensible dispute that sophisticated automation will ultimately transform how companies and legal professionals approach contractual positions, though what that will ultimately mean is far harder to predict. Utopians cast technology as slashing costs to handle existing work. Were aggregate liabilities stable that would likely happen. But not only can that stability not be taken for granted, the recent path of technology suggests quite the contrary. The proliferation of electronic data has, for example, seen the costs of disclosure in litigation and compliance in general explode as more information becomes open to capture.

Consider the notion of all companies grasping their technical assets and liabilities at all times via technology – that would be an exponential rise in inter-party liability. Will that save money? The counter argument of technologists is: ‘Be patient and costs will ultimately fall.’ With something as narrowly defined as litigation disclosure, that may be true. The vastly more complex ecosystem of the globalised economy is another matter entirely.

But the more immediate issue for general counsel raised by New Law service models and technology is what it will ultimately do to in-house teams themselves. In many contexts, this debate has been framed as one of conventional law firms being disrupted while in-house teams drive change merely as empowered customers. Such a reading defies economic realities and wider trends that have seen companies rethink functions like finance and HR in the face of new technology and options to outsource.

In-house counsel have come a huge way in recent years in sophistication and contribution to business but companies are in the business of business, not legal services and good lawyers are hugely expensive to hire. Privately, more GCs are now talking of the likelihood that disruption and technology will rapidly change the skillsets and size of in-house teams, perhaps leading to dramatic staff reductions. Is it sustainable for some companies to have legal teams that rival the size and cost base of major law firms?

The issues such discussions raise are complex and unpredictable and I won’t insult readers’ intelligence by pretending to have the answers. But these strike me as the kind of questions GCs need to be asking. Because I agree with Harris on one fundamental point: the pressure for substantive change in the legal services market is building. When that pressure finally overwhelms the defined order of the profession, I would not bet on an orderly outcome.

alex.novarese@legalease.co.uk