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Can Cloud-Based Law Firms Rival Traditional Model?
Monday, April 11, 2016

Recently, a partner at a midsize full-service law firm told me about the road that led her to make a lateral move to her new firm with a nice office address, friendly co-workers and all the usual workplace amenities. She talked enthusiastically about her new firm’s reputation and clients, but she also waxed enthusiastically about what almost was – how she thought long and hard about joining a particular, fast-growing cloud-based (or “virtual”) law firm instead.

This particular cloud-based firm – like others of a growing breed – is not made up of a couple of lawyers in a single market who work from home. This is a full-service commercial law firm with dozens of attorneys in multiple markets around the country handling a full range of practice areas, from criminal defense to estate planning to mergers and acquisitions. Attorneys with this and other “next generation” law firms generally work from home and collaborate using computers and other technologies, which, in 2016, are fully capable – and have been for many years, if we’re being honest here.

So why have cloud-based law firms not exploded yet on the landscape? Likely, in part, for the same reasons that, according to an American Bar Association (ABA) Annual Technology Survey from 2015,  almost a quarter of attorney respondents did not yet even use social media in their law practices. Lawyers and law firms are notoriously risk-adverse and have been slow to embrace technology. Against this backdrop, it’s not surprising that cloud-based law firms are but a tiny spec on the legal services landscape. But the industry can no longer ignore the fact that technology is continually changing the way law is practiced and how law services are delivered. The cloud-based model is clearly growing and delivering real value to clients in the legal space.

This begs the question: Are traditional law firms prepared to – or even of the mindset that they the need to – compete with cloud-based firms?

The Pros of the Cloud-Based Law Firm Model

Established cloud-based firms such as FisherBroyles and VLP Law Group are succeeding in attracting business that requires high-level experience, but not necessarily the bench strength of a traditional firm. In addition to highly competitive pricing made possible by the dearth of expensive overhead (real estate, in particular), a key selling point for most cloud-based firms is their exclusively senior-level focus on client matters.

“The traditional law firm model is antiquated,” says James M. Fisher II, founder and managing partner of FisherBroyles, which was founded in 2002 and is the oldest and largest national, full-service law firm structured on a cloud-based model. “We just reached the size (about 150 attorneys) that proves that the business model is viable and legitimate, and it’s here to stay. Instead of taking on high fixed costs and instead of training lawyers on the clients’ dime, we have cut out so much of the inefficiency that we’re able to pay our lawyers more, which in turn attracts top talent, and we still have enough room left over to charge our clients less.”

According to a recent report from the Center for WorkLife Law at the University of California, Hastings College of Law, non-traditional providers of legal and legal-related services – cloud-based firms being one subset – are increasing their market share and gaining a foothold against traditional brick-and-mortar law firms. Other non-traditional legal service models cited in the report include firms that provide lawyers for temporary or part-time work; companies that combine legal with general business advice, such as the guidance typically provided by management consulting firms; law firm “accordion companies” that provide networks of trained and experienced lawyers to meet short-term staffing needs at law firms; and law firms that are simply doing things differently such as offering specialized services under unique fee arrangements.

And who can blame lawyers like my inspiration for this article for opening their eyes and minds to this growing industry segment? Law firm partners are working longer hours in high-pressure environments where the hierarchical firm structure is promising dwindling profit returns. One doesn’t need a bookie’s inside track to predict that many of the most experienced and accomplished lawyers who’ve done their time amid the typical law firm culture will increasingly choose a lifestyle change by joining cloud-based law firms.

On the issue of lifestyle, personally, I can relate. All of us at Jaffe work exclusively in a virtual environment and have been dedicated to that model and lifestyle agency culture for years. Yet, in whatever city each of us happens to be based, we are able to communicate and collaborate effectively and efficiently across geographies with both co-workers and clients. 

The Cons of the Cloud-Based Law Firm Model

Ok, so what about the cons and challenges for cloud-based law firms?

Some might argue that there’s no substitute for face-to-face interaction – both with co-workers and with clients. Yet, I’ll wager that lawyers with cloud-based firms meet up with their clients just as much as their brick-and-mortar-based counterparts. And robust technology solutions make interacting with co-workers and colleagues virtually (no pun intended) a non-issue.

There also are state laws and requirements involving physical office spaces or addresses, as well as advertising stipulations related to the “virtual” nature of the business. But these types of issues all appear to be fairly navigable for a firm committed to a cloud-based model.

Marketing a Cloud-Based Law Firm 

Another question is how do we – as legal marketers – best serve this burgeoning segment? In one respect, lack of infrastructure creates support needs for cloud-based firms that most large brick-and-mortar firms handle with in-house staff. From where I sit (in my home office), there’s probably not much difference between the best practices and unique approaches for marketing the services of cloud-based and traditional firms. Though, possessing an understanding of and appreciation for the “virtual” model is important for effectively communicating not only its relevance in today’s technologically savvy marketplace, but also its obvious benefits to clients, as well as some of its advantages for clients and other stakeholders that are perhaps more nuanced. 

It will be exciting to see how cloud-based law firms continue to grow and evolve, as well as how much of a competitive threat they ultimately pose to the legal industry status quo.

“My predication is in the next five years we will not be referred to a cloud-based law firm – we’ll just be referred to as a law firm,” adds Fisher. “At some point this model is going to become so ubiquitous that it’s not going to be necessary to call it cloud-based.”

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