PwC discuss the future of legal services in a sharing economy
This article was written by Charles Michalowski-Cummings and Qi-an (Kian) Poon at PwC.
The ‘sharing economy’ describes a broad, macro trend that is reshaping how many services – and critically the outcomes they’re designed to provide – are offered and delivered. We estimate in our recent study with the European Commission that the sharing economy could be worth £140 billion in the UK alone by 2025. The most obvious manifestations of this new economic paradigm are the, by now, very familiar examples of Uber and Airbnb. But what’s less obvious is that the approach and technology developments underpinning the success of these familiar names is also creating disruptive propositions across sectors and services a long way from car sharing or accommodation. Legal services are a case in point.
The last decade or so has seen clients demanding lower fees and showing a willingness to investigate alternative providers for different types of work. This has prompted many large legal services providers to think more innovatively about how to deliver legal services to their clients, in order to reduce operational costs and maintain profit margins. There has been a shift away from the traditional ‘billable by the hour’ approach towards more value based client propositions.
But this re-evaluation is also leading to some novel propositions that take advantage of a sharing economy model and opening possibilities for legal services providers s to play in new and different markets. Just like Uber or Handy, new digital platforms are making it possible for clients and consumers to connect with lawyers and contractors on-demand. In some cases this is through directly submitting requests for work online, in other cases the platform provides a portal to a larger pool of lawyers or contractors.. There are examples of legal service providers now making use of these emerging models and offering clients a new way to access some of the services they need. Berwin Leighton Paisner’s Lawyers on Demand (LOD)1, for example, provides flexible, on-demand access to experienced professional resources who can work on an interim basis, or on one-off transactions. These new models also offer lawyers seeking more flexibility in their working life the chance to deal with high-quality clients without the commitment of a full-time career along a traditional path, such as Allen & Overy’s Peerpoint2.
At the other end of the legal services spectrum, the market for individual consumers and smaller businesses has been characterised by its relative opacity, with most consumers and SMEs instructing lawyers based largely on personal recommendations, sometimes with little insight into the quality of work they are likely to receive or the cost they should expect. The inherent transparency of a platform-based approach can empower consumers, enabling them to make more informed selections. Accordingly, platforms like Lexoo3 in the UK are creating new, more open, ways for consumers and small businesses to access quality legal advice and services.
Certain areas of work will lend themselves more obviously to a platform approach. These will, at least to begin with, tend to be the more commoditised, non-contentious and routine areas of practice. But a technology-driven model making use of flexible resources that can be ramped up and down in line with demand means that larger firms may be able to offer these services to a broader range of clients beyond their traditional market.
Leveraging their trusted brands, larger firms can make use of platform business models to capture new revenue streams while retaining their grip on the larger corporate market. What’s more, the ability to use a platform approach for internal resourcing of projects also offers larger firms a considerable cost advantage. On the other hand, if independent digital platforms are able to attract a sufficient volume of clients and contractors, they could significantly disrupt a substantial proportion of the traditional legal market.
Overall, the impact of the sharing economy on legal services is only starting to play out. But it looks certain to drive significant change in a profession that has seen little fundamental change to business models for many years. It’s a development that no firm can afford to ignore.