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  Management Tips & Tricks

Is Your World Flat?

November 2007

Once thought of as solution for large corporations and law firms, today outsourcing is emerging as a critical part of effective business practices for any size firm. In this article, Ed Poll shares some lessons learned from the business world.

One of the earliest lessons we were all taught in school is that Columbus proved the world is round.  It has taken New York Times writer Thomas Friedman to popularize the idea, in his best-selling book, that today’s world is figuratively flat – that people the world over have the same aspirations and capabilities, and can achieve them anywhere in the world through digital and electronic technology that makes the “playing field” flat and level for everyone.

Recently I’ve had the opportunity to speak to managing partners of large law firms in Canada.  What I heard at these conferences illustrates the difference between winners and losers in today’s flat world:

  • In Montreal the former Canadian ambassador to the United States mentioned that Microsoft has set up a new software development center in Vancouver, British Columbia.  These were jobs that Microsoft outsourced to itself from its Redmond, Washington headquarters.  Why Vancouver?  The Canadian location allows the company to recruit more skilled programmers from other countries because Canadian immigration laws for technical professionals are less restrictive than those in the U.S.  And Vancouver will be a self-contained operation, by-passing the restrictive U.S. laws that inhibit Redmond personnel from freely crossing back and forth over the border.
  • I also heard about another cost disadvantage the “Big Three” Detroit automakers face.  These companies move components back and forth between their American and Canadian plants. Every time they do, the customs duties, the delays and inefficiencies caused by the border crossing adds to the final vehicle cost – to a tune of $600 to $800 per car.
  • Canadian lawyers told me that they deal with foreign legal issues far more often than their American counterparts.  Almost every managing partner of medium and large Canadian law firms said that their firms regularly interact with the European Union, international tribunals and foreign trade regulations.  They are surprised at how little most lawyers in the U.S. work with and understand these issues.

In their defense, American law firms generally are not completely oblivious to today’s new flat world.  The best example is that lawyers are starting to apply the flat world lesson by expanding their use of outsourcing and delegation to lower their cost of operation and thus increase their profit.   Even sole practitioners and small firm lawyers can effectively use this principle. Internet technology can connect U.S. law firms to the growing pool of highly educated talent in countries where the use of English is widespread, with India being the prime example.  Such offshore legal service providers can reduce by up to 80 percent the cost of such legal services as transcription, data entry, legal research, document review and patent searches.  But, this is still the exception rather than the rule and many lawyers continue to resist the way that global technology flattens the cost of legal service.  They do so at their peril because it ignores what their clients want.

For example, General Electric’s aircraft sales force negotiates deals around the world. They submit purchase contracts to their prospective customers. When terms or the words of the contract need to be changed to meet customer requests, the sales force formerly had to send the proposal back to GE lawyers for review and change. This process often took weeks and sometimes resulted in lost sales.  That is, until now. GE has created a “tool kit” of clauses available on the company’s extranet for use by its sales force to address situations just like this.  Allowing the sales force to make contract changes has apparently saved GE $12 million in legal fees as well as increased the speed of the negotiation process and their “closing” rates. As a result, GE’s sales have increased.

Think this is just an isolated phenomenon for one of the world’s largest companies, and not something that affects the typical lawyer?  What about “Do-it-yourself” Web sites that offer advice, research and forms in such areas as family law, probate, real estate closing, even filing a patent?  Clients and potential clients live their lives at Internet speed, and increasingly have little patience for the pace (and cost) of traditional lawyering. 

Consider another example.  Each year the American Bar Association’s Legal Technology Resource Center releases a Legal Technology Survey to assess how lawyers in private practice are using technology in law offices.  As reported in Law Technology News, the new survey asserted that only 11.7 percent of lawyers use trial technology.  Earlier surveys have given similar low usage rates for case management software (18 percent) and document assembly software (30 percent).  Lawyers contended that they distrust new technology and are overwhelmed by too many choices. 

I have surveyed law firms regarding their technology practices, and found that while the majority of large law firms upgrade their computers and software every two to three years, many small firms and sole practitioners go as long as six years between upgrades.  They cite cost; time to learn and implement the new technologies; and lack of certainty that new technology will increase efficiency and work quality.  None of these reasons is sufficient to clients who conclude that a firm’s outdated technology makes its costs higher, and its representation less competent.

Change continues to happen slowly in the law – precedent (stare decisis, in the language of 2,000 years ago) is still a fundamental driver of what we do.  Some lawyers will refuse to recognize that the world is flat and continue to cling to the ways and practices of the past.  These lawyers soon won’t have to worry about keeping up – because their practices will disappear as clients go elsewhere for service in today’s new, flat world.

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About the Author

Edward Poll, J.D., M.B.A., CMC, is a strategic law firm planner who helps lawyers increase their revenue, improve their profitability and enhance their satisfaction with the practice of law. He blogs at www.lawbizblog.com.

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