In this recent ABA Journal article, the co-CEO of Pangea3 is quoted as saying, “No law firm should be doing commoditized work.” The assumed intent of this statement is to ease concerns that Thomson Reuters (TR) / Pangea3 is competing with law firms (a.k.a. customers). On its face, this statement may provide some reassurance. But after thinking about, I’m not so assured.
At first blush you might agree with the statement above and conclude that Pangea3 services are “low-level” and not work lawyers “should be doing” anyway. However, this all spins on the definition of “commodity” as it relates to legal services. Having analyzed and modeled 100’s of AFA deals, my view is that almost all legal work includes some commodity aspects to it. Large complex matters contain within them commodity-level tasks. And there are some recently complex types of work that are becoming commoditized. For instance, class-action certifications may be heading in this direction. Is that the “commoditized work” Pangea3 means?
More likely Pangea3 is pointing to work like first document review or coding in discovery. Much of this work is moving off-shore and already labeled as commodity. But looking back just 4 or 5 years ago, this work was done by associates at law firms.
What appears to be the likely evolution of this model, is to start by taking on work that is currently accepted as commoditized work and then moving on to other, traditionally complex services over time.
My prediction: With the TR brand and deep pocket, clients will be much more willing to send work directly to Pangea3. This will give Pangea3 a seat at the client relationship table. Once these relationships are secured and become trusted, a broader range of services will be offered and work will flow in that direction … away from law firms. As any work approaches a commodity definition, it will shift away from law firms.
Economics tells us all products and services tend towards commodities over time. So my prediction is not very novel. What is different in this scenario is that clients will be sending work to a corporate entity and not a law firm. A new type of competitor has entered the market and its validation via the purchase by TR will accelerate its growth into traditional law firm delivered services.
Having worked for a mandatory Bar for 18+ years, I suggest not much will be said or done about this shift, even though one might argue this is the unauthorized practice of law. Historically, when competitors encroach on the legal market, lawyers and their bar associations label the work “commodity” and walk away. One example is residential title work, west of the Mississippi.
So instead of alleviating concern, I think the Pangea3 statement actually elevates it. I know who will be defining “commodity” in this situation and it won’t be the lawyers, law firms or bar associations.