In this post on his Law Department Management blog, Rees Morrision—prolific consultant to law departments—quotes a survey in the July 2008 issue of Inside Counsel as saying “33.5% of in-house counsel reported that law firm services are a commodity.”
Here’s Rees’s take on this:
Loyalty rates of law departments to law firms suggest otherwise, and incessant fee increases by law firms suggest otherwise, and the infrequency of competitive bids suggests otherwise, and the rarity of fixed fees suggests otherwise, and slow adoption of offshoring suggests otherwise, and stymied document assembly suggests otherwise, and soaring profits per partner suggests otherwise, and proliferation of mega-firms suggests otherwise …
But what’s your point, Rees Morrison?
My point is that in-house lawyers respect the quality and individuality of craftsmanship produced by the particular firms they use, and that they do not look at those firms or their services as fungible.
I agree with Rees’s conclusion. It would be silly to claim that all law-firm services are a commodity. Now, if the survey had said “in-house counsel reported that 33.5% of law firm services are a commodity,” that would have made more sense. Some law-firm services are a commodity, some aren’t, and, crucially, some should be.
Consider transactional work: Devising strategy and participating in negotiations most certainly isn’t commodity work. Preparing a contract that embodies the deal terms isn’t a commodity task either, because usually it requires that someone revise a precedent contract of questionable quality and relevance—an annoying process with plenty of potential for screwups.
But contract drafting should be a commodity. Any given transaction likely resembles countless others like it, so why should drafters forever be reinventing the wheel?
This brings me to the assertion in Rees’s post that caught my eye—that among other factors, “stymied document assembly” suggests that law-firm services aren’t a commodity.
Document assembly doesn’t permit you to commoditize the full range of law-firm services in a given transaction. Instead, it allows you to turn drafting into a commodity task, leaving the law firm to focus on more value-added work. Document assembly has indeed been stymied, but not because it attempts to commoditize too much.
Instead, document assembly hasn’t caught on because for it to work, you need to marry optimal technology and optimal language. So far, no one has managed that. The focus has been on the technology, which until recently has fallen short. Now we have sophisticated and intuitive software such as DealBuilder and QShift, so the focus has shifted to contract language.
The language of mainstream contract drafting remains a chaotic mess. Automating contracts brings you face to face with that mess—creating optimal contract language isn’t susceptible to a technology solution. And deal lawyers may be good at getting the deal done, but they’re not necessarily equipped to wrangle contract language. I suspect that’s why companies and law firms that otherwise would be good candidates for document assembly have yet to take the plunge.
5 thoughts on “Are Law-Firm Contract-Drafting Services a Commodity?”
I have been saying, for nearly 20 years, that you save time and money in converting to document assembly programs if you convert to plain language first.
You can avoid having so many variables in document packages. You can simplify and make consistent the sentence structures. Simplify a document assembly by simplifying the documents themselves.
Computerized plain-language precedent systems provide greater uniformity of service, confidence in the product and a greater sense of security.
I agree with your argument. Document assembly should commoditize that which should be commoditized and allows attorneys to focus on that which should never be commoditized.
I also agree. Some contracts genuinely require no input other than the variables, and software that both reduces costs and produces safer and better drafted contracts is not hard to envisage. Given its non-prevalence, perhaps it is harder to execute than conceive.
In some areas where contracts are non-negotiated (e.g. contracts documenting repetitive intra-group financing in banks), in-house departments do already see contract drafting as commodotised, and expect (and receive) consistent, fixed fees to reflect it. However, there will always be some value on the working relationship and on the smoothness of service provided, so it is never entirely about cost. But I think this goes for any commodotised market to a greater or lesser degree, so law would not be unique in that regard.
Less than optimal contract language is a barrier to implementing document assembly. Automating drafting requires that lawyers come face to face with the inadequacies in their existing forms. However, there are other formidable barriers, as well. These barriers, not shortcomings of technology, have been and continue to be the major impediment (we have had excellent techonology for many years). At the top of the list I would put a lack of incentives for law firms to adopt document assembly. Lawyers are not facing the kind of pressure to change that would drive them to make the investment of time and money required. That’s Rees’ point as well, I believe.
Bart: Document assembly certainly does face other obstacles. I tried to limit this post to the point raised in Rees’s post, which I think was limited to the issue of commoditization. My reference in the post to “companies and law firms that otherwise would be good candidates for document assembly” was my way of cryptically acknowledging that other factors come into play. I discuss those factors in the introduction to the second edition of my book. Ken