The New Practicality

Since this blog's overarching interest is in the trends that are surfacing and shaping the business of law, on occasion it's helpful to step back and see how some of the individual topics we've been tracking are coalescing as a whole.

Law.com ran a piece the other day by Ari Kaplan which hits on two of the trends we've been watching, and the article not only confirms our observations, but it inspires a new term: The New Practicality.

The two tenets of the New Practicality are:

• The present state of staffing/hiring dynamics are impacting the majority of those entering the profession.

"There is a real awareness that the hiring landscape is forever altered, but it is too soon to determine what the contours of that new normal will be," says James Leipold, NALP's executive director. "Law schools face real challenges because the demand for new graduates is going to be compromised for a while," he adds.

"One sobering statistic about associate employment: In its annual study of associate attrition the NALP Foundation found that 32 percent of associate departures in 2009 were the result of firm downsizing -- compared with 0 percent in 2006."

No matter how you look at it, that is a significant number.

• There is an emerging demand for practical skills.

"The interest in practical skills, such as firm citizenship, professionalism, project management and client development, is being driven by a new culture of efficiency and higher expectations."

"... Chris Simmons, managing partner for the Washington Metro Region of PricewaterhouseCoopers aptly characterized those new duties: "What you think is the hard stuff (technical proficiency) is really the easy stuff, and what you think is the easy stuff (soft skills) is the hard stuff," he said. "Financial pressures in law firms are requiring individuals to prove their relevance," he added."

What is interesting is that the driving force behind the New Practicality is not just the economy; it's really the vertical access to information provided by the internet.

To the layperson, even twenty years ago, the practice of law was something that took place behind closed mahogany doors and drawn velvet curtains. Most people didn't have access to or the understanding of what lawyers were actually doing. Most clients only saw the final product.

The internet changed that by providing access to information that, to some degree, opened a window of transparency into the inner workings of law firms and legal departments.

While the economic turmoil of '08 caused clients to tighten financial demands on their attorneys, clients wouldn't have known to turn the screws if they hadn't become more savvy consumers via the changes brought on by the digital world of the internet.

Previous economic pinches didn't result in a New Practicality, because clients didn't realize there could be any other options.

Ethics Opinion on Cloud Computing

After a request from a member of their bar association, The North Carolina Bar studied the ethics of using cloud computing -- also known as Software-as-a-Service or SaaS -- in a law firm, and they've finished drafting a proposed Formal Ethics Opinion on the matter.

The American Bar Association's Legal Technology Resource Center describes SaaS computing as the following:

"SaaS is distinguished from traditional software in several ways. Rather than installing the software to your computer or the firm's server, SaaS is accessed via a web browser (like Explorer or Firefox) over the internet. Data is stored on the vendor's data center rather than the firm's computers."

The North Carolina Ethics Opinion clearly states the central question:

"SaaS for law firms may involve the storage of a law firm's data, including client files..., on remote servers rather than on the law firm's own computers and, therefore, outside the direct control of the firm's lawyers. Given the duty to safeguard confidential client information... may a law firm use SaaS?"

The Ethics Opinion concluded that SaaS computing is acceptable by lawyers and law firms, provided that:

1) "Steps are taken effectively to minimize the risk of inadvertent or unauthorized disclosure of confidential client information and to protect client property, including file information, from risk of loss...

Although a lawyer has a professional obligation to protect confidential information from unauthorized disclosure, the Ethics Committee has long held that this duty does not compel any particular mode of handling confidential information nor does it prohibit the employment of vendors whose services may involve the handling of documents or data containing client information. "

2) The law firm should be able to answer a number of questions, including:

• Who has access to the data besides the lawyer?

• Who owns the data -- the lawyer or the SaaS vendor?

• How does the SaaS vendor, or any third party hosting company, safeguard the physical and electronic security and confidentiality of stored data.

• Where is the data hosted? Is it in a country with less rigorous protections against unlawful search and seizure?

• If the SaaS vendor goes out of business, will the lawyer have access to the data and the software or source code?

• How often and on how many geographically distinct servers does the data get backed up?
  

As a Legal Process Outsourcing company with years of experience in data security on third party servers, the North Carolina Bar Association's opinion seems entirely pragmatic.

"...the Ethics Committee concludes that a law firm may use SaaS if reasonable care is taken effectively to minimize the risks to the confidentiality and to the security of client information and client files. However, the law firm is not required to guarantee that the system will be invulnerable to unauthorized access."

New Models for Legal Education

The recent trends in the legal world (e.g., an emphasis on project management, a bottle neck for new associates, growing demand for alternative pricing models) all involve not the practice of law, but the business of law.

Responding to those shifts, New York Law School and Harvard Law recently teamed to spearhead an initiative to reevaluate the way future lawyers are educated.

The American Lawyer reported that 75 law school deans, legal educators and lawyers gathered April 9th and 10th for a two-day conference called "Future Ed: New Business Models for U.S. and Global Legal Education".

In general, the two themes that emerged were 1) the need to augment existing curriculum and, 2) the possibilities of creating alternative curriculum.

In terms of augmenting existing curriculum, the consensus was a heightened emphasis on the practical skills clients require.

• Business Management Skills

• Financial Literacy

• Executive Communication

In a forceful concurrence with this idea, Chester Paul Beach, associate general counsel of United Technologies Corporation "hammered home the need for more real-world training. To cut down on legal costs, Beach said, his company absolutely will not pay for first- or second-year associates because "they're worthless." Lawyers need more "skill development" in school because, especially amid the current economic downturn, businesses are "not going to pay for people who can't add value."

The other theme to emerge was alternative education models, which might include:

• Accelerated Programs

• Experiential Learning

• Distance Learning

• Specialized Schools

The collective agreement here was that "there should be "multiple futures" to legal education. Every school can't be Harvard, and every school shouldn't follow the same system, said Joseph Altonji, from consulting firm Hildebrant Baker Robbins. Schools should specialize, he said, "because we need different kinds of practitioners."

"Altonji added that a model based purely on grades and LSATs for all graduating law students embarking into various careers "is just not working today."

A Return To Business, But Not As Usual

We are an optimistic species.

The ABA Journal ran a recent article titled "Managing Partners More Confident, Expect Increased Legal Work".

The upshot of the article is that a recent survey showed that the "confidence index" of managing partners is at a three-year high based on a belief that the worst of the recession is behind us, coupled with an anticipated increase in demand for services.

However, the article then slides in one other bit of information, almost as an afterthought:

"Managing partners aren’t as confident about revenue increases as they are about an increase in demand. The reason is client pressure to discount fees or offer alternative billings."

That's one heck of a caveat.

The literal translation might be: "Business demand will return to normal, but "normal" might have been redefined in the interim."

An interesting parallel can be found in the recent Detroit Auto Show. We all know the automotive industry is the poster child for the economic challenges of 2008/2009, so it was interesting to read this one-two punch from a recent Reuters article:

"In 2009, we discovered we have a new competitor that we have never dealt with before, and it's savings," Jim McDowell, American head of BMW's Mini unit, told Reuters. "Anything that throws major elements of uncertainty in front of the consumer are the kinds of things that could depress sales."

Followed by:

"But ultimately sales will increase because the car fleet is getting older and older," he added.

The parallels between the industries are apparent: Demand will return, but the nature of the game has changed.

The lesson here is that the impact of 2009 is not going to gently fade away. 2009 seems to be solidifying itself as a bell that can't be un-rung.

2009 was traumatic enough -- the ground shook enough -- that our perspective seems to have irrevocably shifted.