Wow, I am breathless after watching Kent Zimmermann of the Zeughauser Group describe how “LPOs are Stealing Deal Work from Law Firms”! A few days ago I heard of a video on Bloomberg about how “LPOs are taking away a lot of work that law firms traditionally used to do” and how “one LPO [Axiom] did the whole [small M&A] deal for a large healthcare company on the west coast – they didn’t do just the due diligence, they did the whole deal!” Zimmerman goes on to say, “these LPOs and Alternative Legal Service Providers, they used to do just the diligence and e-discovery, but now they are going upstream,” and later in the video he says, “the US law firms are getting smaller and the LPOs are getting bigger”!

Hyperventilating, I thought, “Oh my God, I don’t want my company, Elevate, to compete with law firms! All those resources, trusted relationships, etc.” Then I paused and wondered to myself: “Wait, which LPOs are growing?” and “Is Axiom an LPO?”

I am qualified to comment on this. I have been at the heart of the LPO sector since it all started, having founded Integreon back in 2001 and been a buyer, seller, investor, and advisor to many of the LPOs and their investors and owners. In 2011, I sold my stake in Integreon when I refused to execute on the new direction the private equity investors wanted me to take the company. Instead, I used the proceeds to launch another alternative legal services provider, Elevate Services, which is focused on improving the efficiency of the legal sector. (More on that later.)

Here is a list of companies commonly referred to as leading LPOs: Pangea3, UnitedLex, Integreon, and CPA. I understand that one of these LPOs has seen sales slump from $20m in 2011 to $12m in 2012, and another has seen sales nosedive from about $150m in 2011 to $110m in 2012. So, there are at least two major LPO players that aren’t getting bigger at the expense of anyone. On the contrary, some are heading in the wrong direction – and fast! I understand that, amongst others, RR Donnelley/OfficeTiger has exited the LPO space and Bodhi Global has closed down. Frankly, if I were the leader of a law firm, I wouldn’t worry about LPOs growing at my expense.

As for Axiom, are they an LPO that’s simply bucking the LPO trend – growing fast by winning work from law firms? Watch the video and hear for yourself what Kent Zimmerman says. Coincidentally – or not – Axiom now has a war chest, having raised $28m just a few days ago. A great blog post speculating on the consequences of this was written by another pioneer in the LPO space, Kevin Colangelo, ex-Managing Director at Pangea3.

Or is Axiom really a quasi-law firm or law firm in all but name, rather than an LPO? Axiom’s own website states: “Axiom is not a law firm and does not provide legal representation or advice to clients. Axiom attorneys are independent and do not constitute a law firm among themselves.” Yet the Financial Times in 2012 ranked Axiom Legal the #2 Most Innovative Law Firm in Client Service, #1 Most Innovative Law Firm in Corporate Strategy, #2 Most Innovative Law Firm in Value Resourcing and #3 Law Firm in Strategy.

In fact, Axiom has been classified as a law firm by the FT Innovative Lawyer panel since 2010. Note that to be considered for the FT awards, Axiom would have had to submit its case studies as a law firm to be considered as such by the FT for the awards. (Full disclosure: I know how this works because while I was CEO at Integreon, I entered into an agreement for Integreon – the then-largest LPO – to be the lead sponsor of the FT Innovative Lawyer Awards from 2011 to 2013.) Further, another law firm, Pinsents, just announced their contract lawyer business that competes directly with Axiom.

So now to the reason I am writing this: I have been working for a long time on calmly and rationally helping corporate legal departments and law firms come together to find common ground on the idea of improving legal efficiency. That mission is done a great disservice by scaremongering headlines from Bloomberg and sound bites from Kent Zimmerman saying that the bogeyman comes in the shape of LPOs. Granted, not all LPOs are alike, (and I personally think of Axiom as more of a new model law firm or contract lawyer provider than an LPO), but Elevate is designed to succeed when both corporate law departments and law firms succeed.

Every day I work with GCs and their corporate legal departments who are trying hard to “do more with less.” They are seeking efficiency improvement wherever they can find it. Sometimes the answer lies in automation, sometimes in matter management and e-billing, sometimes in seeking AFAs from their law firms. Sometimes it’s working with LPOs, sometimes it’s working with Axiom (or similar quasi-law firms such as Clearspire or Riverview), sometimes it’s working with their law firms to change the way they staff a matter, and sometimes it’s identifying when ‘good enough’ will work in place of ‘perfect’ – you get my drift. They work really hard to serve their business clients and to meet the challenges of increasing demands, generally with no additional resources – often with less.

Also, every day I work with law firms who are grappling with working differently, reshaping their law firm, implementing legal project management (yes, all too slowly), partnering with LPOs (the kind that Zimmerman referred to as “appreciated” – not likely to be Axiom, I expect), engaging with clients using AFAs, etc. These firms know that the world isn’t returning to pre-2008, and they are genuinely trying to figure out how to better align with and serve their clients.

Improving legal efficiency is a journey. It is not at odds with quality and outcomes. Granted, not everyone is on-board, but many are – and the movement is growing.

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