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Ralph Baxter sees a future for Big Law that isn’t bleak. But it requires change.

By Roy Strom | October 15, 2018 at 04:50 PM

Ralph Baxter spent nearly 25 years as the leader of Orrick, Herrington & Sutcliffe before stepping away from the firm about five years ago. He’s since been involved to varying degrees with a host of emerging legal tech companies, including Lex Machina, Ravel Law and InTapp.

Baxter also launched a failed bid for a West Virginia seat in the U.S. House of Representatives, which ended in a primary defeat in May. Now he’s back to doing consulting work for law firms and other legal service providers.

Considering his own recent loss and some of the fears now gripping the legal industry, Baxter’s message is pretty upbeat. Law firms, he insists, can adopt new technologies and processes to create a future legal services market that creates a win-win-win for law firms, clients and lawyers. The key, he said, is developing new billing models that capture the efficiency from technology and move away from the billable hour.

“As you start down that path, everybody wins. The client will win. The law firm will win,” Baxter said. “There is a day ahead when you progress down all these paths where the law firms remain very profitable; the associates and partners are happier and more rewarded; the clients pay less; and they are happier with their law firms. Everyone benefits, but you do need to make some changes to get to that better day.”

Baxter spoke with ALM following the release of a survey Monday by InTapp, where he serves as a board member, that said law firms are broadly underinvesting in technology.

The survey of more than 300 firms in Australia, the U.S. and Europe showed that while the vast majority recognize the importance of using “intelligent automation,” a term InTapp uses to refer to data analytics and legal process management, very few have made investments in that area. For instance, 86 percent of law firms said automation is important to deliver insights and analytics to clients, while only 18 percent had made investments to embed that capability into their service delivery models.

Baxter said the survey was an indication that law firms need to take a longer-term view of the money they spend on technology. It should be seen as an investment in the same way firms invest in hiring associates, he said. A simple first step, he added, would be to develop ways to measure the return on investment for new technologies.

“Of course, you can measure the return of investment on technology. Every business in the world does it,” Baxter said. “I don’t know of any other business that measures itself on how much it pays its senior people. When the largest companies in the world provide updates on how they’re progressing, they do it through sales and profits. They don’t do it on how much they pay their senior executives. That’s what profits per partner are: How much you pay the most senior people in your organization. So, that’s part of the problem.”

Baxter said he believes that the demand for legal services is actually growing “significantly.” However, the demand for Big Law hours, which most industry reports use as a measure, is stagnant. He said that is because clients are turning to New Law service providers and in-house teams for more cost-effective solutions.

“That phenomenon that demand is being met by these alternatives to the providers that traditionally would have provided these services is a pretty glaring warning sign that the market of clients is restless,” Baxter said. “It is looking for a better overall solution to its need for legal service. And they will proceed at their own peril if they don’t modernize to meet that demand for legal services in a better way.”

Baxter cited UnitedLex’s recent expansion efforts, EY’s purchase of Riverview Law, and the growth of companies, including Casetext and NeotaLogic, as proof that newer ways to deliver legal services to clients are catching on. The upshot for law firms is that they need to be delivering more cost-effective and accurate solutions to clients.

“The answer to the question, ‘Who wins?’ as we proceed along is: Everyone,” Baxter said. “The only people who will not win are those who insist on holding onto models that are unnecessarily expensive, unnecessarily slow, unnecessarily opaque. Those who insist on holding onto elements of the traditional model that are not appealing to clients will lose. And everyone else will win.”