The offices of Cognition LLP could fit into the foyer of most Bay Street firms. The only art on the wall is a Van Gogh print (it hangs beside a Toronto Maple Leafs air-hockey table). A small sign is taped onto a steel door: “Old ways won’t open new doors.” It’s a fitting motto for the nine-year-old outfit, which is part of a new breed of small, nimble law firms thriving at a time when traditional corporate firms are seeing their profits squeezed or—as in the case of Heenan Blaikie—even outright collapse.
“Our thought process was, wouldn’t it be great if there was a law firm that acted more like a startup and didn’t carry the overhead that traditional firms did?” says Rubsun Ho, who co-founded Cognition with Joe Milstone in 2005. Both had Bay Street pedigrees, but saw a need for providing small and medium-sized businesses with legal services. Today, they employ more than 30 lawyers. Significantly, they’re expanding to serving larger clients, such as Rogers, Loblaw and Torstar, attracted to their cheaper rates for quality service.
The rise of lean law firms such as Cognition and Vancouver’s Miller Titerle LLP mirrors the transformation taking place in other professional services, from management consulting to corporate recruiting. These fields have historically defended their exorbitant rates because their work was complex and vital to a company’s future, like defending against a class-action lawsuit or bringing on a new CEO. Consulting firms such as McKinsey and Co. or corporate lawyers like Skadden Arps built almost mystical reputations, despite the fact it was often difficult to put a dollar value to the results.
But the rise of in-house counsel and internal consulting units, as well as digital alternatives such as LinkedIn, have given clients more leverage to demand better rates and to call in specialists on a case-by-case basis. Law, which is the furthest along in this evolution, presages the way for other professional fields.
Big law firms have conventionally offered up every kind of legal service, from doing routine corporate filings to navigating complicated acquisitions. But increasingly frugal corporate legal departments and advances in areas such as cloud computing and Big Data are forcing the unbundling of legal work. Rather than offering up an all-you-can-eat buffet of legal services, providers are increasingly focusing on serving up their skills à la carte. For entrepreneurial lawyers, it means new ways to practise their trade. And for non-lawyers, the turmoil is giving them access to what has traditionally been one of the most opaque, and lucrative, markets out there.
Legal staffing agencies, such as Robert Half Legal, connect companies with freelance attorneys and paralegals to handle routine work such as document review and patent renewals. There are also companies, such as Toronto-based Legalwise, that focus on sending similar work offshore to India. Among their clients are big law firms looking to bring down costs.
Other companies are springing up to provide software to legal service providers. Conduit Law, which is five minutes down the street from Cognition in Toronto’s Entertainment District, has most of its lawyers work out of their clients’ offices. In order to keep everything on track, they use a cloud-based management platform from Clio, a Vancouver-based technology company. “We have skipped the heavy-duty investment in hardware and hardware support,” says Peter Carayiannis, president of Conduit Law.
The rapid change in the legal industry has been more pronounced in the U.S. and Britain, where large outfits such as Axiom and Lawyers on Demand employ hundreds of lawyers. Canada, which has been protected by a relatively robust economy and a conservative legal establishment, has lagged. But Canadian corporations are becoming increasingly comfortable using alternatives to big law. “The Canadian corporate market is a little bit more savvy when it comes to negotiating fees, a little bit more discerning and, frankly, a little bit more demanding,” says Carayiannis.
Despite the new competition, don’t think big law firms are going anywhere. When it comes to high-stakes, complex legal work such as IPOs, mergers or class-action lawsuits, big firms will continue to be a company’s first choice. “Sometimes you can pay $1,000 an hour and get good value out of it,” says Cognition’s Milstone. “But for a lot of stuff, we can do it better, cheaper, faster than a traditional firm.”
More firms like Cognition are popping up every day, the latest being Avo-kka, which bills itself as providing “virtual counsel.” Bay Street firms will always have a place, but the legal world is no longer one-size-fits-all.
“Rather than a monolithic, monotone legal market, it’s going to be a mosaic,” says Carayiannis.