11 June 2001
The rollercoaster ride of lastminute.com's share price is emblematic of the bursting of the dotcom bubble but last month the site's chairman claimed that it would achieve profitability in key markets within the next year. The UK's biggest e-tailer, Amazon.com, also says that it has turned the corner and expects to start making operational profits in the fourth quarter.`Interest in legal online offerings never approached the dizzy heights of goldrush e-tail mania or the lows of dramatic meltdown that claimed scalps such as Boo.com. The legal market is still immature and fragmented, with the business-to-business and the business-to-consumer sectors largely made up of law firms merely dipping their fingers into online offerings.`The high-volume high street market, the middle ground pitched at small and medium-sized business and the top-end corporate law services all use different e-strategies, but commoditisation is a common theme. With document assembly software such as the market-leading HotDocs system developed by Capsoft, lawyers have no real excuse to continually reinvent the wheel when providing clients with services that can be easily automated. Russell Shepherd at Capsoft warns that ultimately, developments in technology mean that "lawyers who are glorified form-fillers, and who charge excessive fees for routine production of documents, are going to have a hard time".`Richard Cohen at Epoch Software Systems set out to exploit the opportunities presented by the internet for the delivery of commoditised services, with the development of Desktop Lawyer and LawAssure. Cohen is a partner at north London high street firm Landau & Cohen, and he comes from something of a dotcom family. His teenage son caused a stir in the Jewish community with a starring role in a recent BBC television documentary. The programme showed the young Mr Cohen develop a successful Jewish online publication before selling out and venturing into the rather less salubrious world of internet pornography portals.`Meanwhile at Epoch, Cohen senior developed document assembly software Rapidocs to deliver online legal services, traditionally the province of high street solicitors. Initially, he offered the Rapidocs system to other law firms for use with their own online legal offerings, a strategy he has now largely abandoned due to lack of interest.`Of Epoch's two main products, Desktop Lawyer is the business-to-consumer strand, offering a variety of straightforward legal services from will-drafting to divorces and conveyancing. LawAssure is a business-to-business venture which provides financial institutions such as Royal & SunAlliance and German insurer Arrag with the document assembly software and legal content for delivery via their own websites. LawAssure is an obvious victim of the dotcom downturn, and the company will post losses of £6.1m this year and has just laid off 20 staff. But as with the e-tailers, Cohen claims that the company has turned the corner and is now operating in the black.`He believes that it will be increasingly difficult for other companies not backed by big brands to break into the market. He says: "There was a window of opportunity for global expansion between September 1998 and February 2000, but it was an aberration and it has now gone. It's now impossible to complete initial public offerings without revenue stream." The company has not really cracked the business-to-consumer market - it is not Desktop Lawyer but LawAssure that is actually making the bulk of the money. Cohen still believes that the high street end of the market will eventually come to be dominated by companies such as his, but concedes "it's not happening as fast as I anticipated, and is possibly five years away".`But for high street solicitors at the coalface, Stephen Sidkin, IT and e-commerce partner at London firm Fox Williams, has some more comforting words. He believes that online law offerings at the high street end might conversely enlarge the market. While saying that Desktop Lawyer-type offerings "must be a real concern for high street firms", he also says that for all but the most basic requirements, the local service advantage of solicitors' firms is a pretty strong card. But in a more bleak and politically controversial bit of crystal ball gazing, he hypothesises that in a possible future without legal aid, the type of commoditisation offered by online legal services might become essential to keep down costs.`The Law Society is playing catch-up with online legal developments as the e-commerce working party decides how professional standards should translate to the virtual world. Some lawyers worry that firms such as Desktop Lawyer provide legal services but do not come under the society's jurisdiction.`Some websites are not just providing basic legal services at cut prices, they are actually giving them away. Legalpulse is a site set up last November by ex-Camelot director Gill Switalski and Mishcon de Reya partner Michael Cover offering a range of free legal documents aimed at small and medium-sized start-ups. Switalski says that the site is the number one for hits on major search engines such as MSN and Yahoo! and that it has 6,000 registered users.`In addition to mainstream content, Legalpulse has some quirky features such as online nanny contracts for the business executive who is too busy to leave their desk. But the amount of free content available is certainly not something that will amuse all lawyers. For Switalski and Cover it is part of a crusade against legal services that essentially just recycle in-house precedents for fee levels that they describe as being calculated on "the economics of the madhouse".`But on the back end of the Legalpulse operation is the money-making part, through which businesses that want more complex legal advice are referred to bricks and mortar law firms. Legalpulse takes commission on successful referrals, but it will not reveal how many it is making and it is unclear whether the site is generating any real revenue. But Switalski has pumped almost £500,000 of her own money into the project, which she claims will give her the opportunity to expand at an unforced pace and make the website a success.`At the top end of the market are two magic circle offerings - NextLaw from Clifford Chance and Blue Flag from Linklaters & Alliance. Both products are highly specialised, building on the firms' existing areas of expertise, and both predate the dotcom boom.`Sidkin believes that the attraction of online services for the big firms is that it gives them a global shop front, enabling them to reach out to clients outside the City. Whether the strategy actually works is unproven because neither firm shows any inclination to shout about how many online transactions they are doing. Linklaters is particularly tight-lipped on the subject.`NextLaw, which has around 400 multinationals subscribing, provides advice on legal and regulatory aspects of e-commerce. And whether or not the service is a financial success, Clifford Chance is sticking by its internet strategy. It has a transaction-based product in the pipeline that it says will be its biggest online offering to date. Linklaters is concentrating on spinning off the software developed for its regulatory advisory service Blue Flag. Earlier this year, the World Bank took the Blue Flag documentation and transaction management system for its in-house legal team.`In the wider world of e-commerce one of the most successful business models is the auction site, with companies such as eBay consistently showing a profit. Translated into the legal world, auction sites such as the PricewaterhouseCoopers-backed FirstLAW may in fact turn out to have a greater impact on the legal marketplace than online content delivery.`Law Society president Michael Napier believes that if it is properly managed, the digital revolution will benefit both lawyers and clients. He says: "Online legal services not only offer tremendous opportunities for the profession, but are a growing and alternative route for clients to obtain legal advice."`But so far, no online legal offering has really cracked the business-to-consumer market, the most established offerings in the business-to-business sector are very niche and there is no conclusive evidence that any of them are making significant profits. Although the future may hold ever-increasing commoditisation and global online brands, we are only just past year dot for law dotcoms.``Helen Power is a research analyst at World Markets Regulatory Analysis, part of World Markets Online``Online converyancing`One area where there does seem to be a definite push towards online legal transactions is conveyancing. Much of the impetus is coming from the Government, which, along with just about every other government in the developed world, says that it wants to make the country the best location for e-commerce. Although much of this is inevitably just e-spin, the UK is taking definite steps in the sphere of conveyancing. Last year's Electronic Communications Bill will allow electronic signatures, make government services available electronically and remove the requirement for conveyances to be completed in writing. The use of the National Land Information Service, which launches in mid-July, will also allow online local authority and utilities searches. All this, together with the fact that a Council of Mortgage Lenders' survey from last year shows increasing enthusiasm from lenders for online operations, makes online conveyancing one of the services most likely to take off.`Companies such as Desktop Lawyer offer conveyancing services, and this is also one of the areas where bricks and mortar law firms, such as internet veteran Fidler & Pepper, are most likely to dabble. Already established in this field is Hammonds Direct. The original Hammond Suddards partners, who held onto the business when the firm merged to become Hammond Suddards Edge, still own it. The bulk of its customers are lenders and financial institutions, but it also has legalmove.com, a business-to-consumer arm. According to partner Luci Dammone, the company completes an average of 4,000 conveyances each month, with the bulk of these coming from the business-to-business service. He believes that the company is well positioned to take advantage of the trend towards electronic conveyancing and predicts that it will be the dominant market player in 10 years time. In terms of the effect that this might have on the rest of the profession he says: "There will always be a market for the high street, but it is diminishing. Those who are unable to respond and invest will find it hard."