NPR: Why Law Firms Should Not Create Subsidiary Businesses

Note:  NPR = Not Patent Related

From an article in Law.com, it seems that Drinker, Biddle, and Reath has decided to spin off its lit support group and create a subsidiary company that handles eDiscovery for its own clients in addition to anyone else’s business they can get.  The way I see it, the odds are four to one against that being successful, and here’s why.

1.  It is difficult, if not impossible, to mandate the compliance of firm partners on any issue.  Ever tried to put together an Approved Vendor List for a law firm?  How’d that work out for you?  I thought so. The partnership business model simply does not support such a beast.  If a partner has a problem with a production from your own subsidiary vendor, he’s not using you again and you can’t make him.   If a partner has a friend at another vendor, he’s not using you and you can’t make him.  If a partner’s client insists on using their own vendor or he’ll fire you, he’s not using you and you can’t make him.  See how that works?

2.  Along the “if there’s a problem with a production” lines, the client may fire you as both the vendor and the law firm.  When you’re using a true outside vendor, the  firm has a bit of wiggle room in that they can say “Dude, it wasn’t us!  It was the vendor’s problem!  Fire them!”  That just falls right smooth apart if you and the vendor are on the same payroll.

3.  It’s already been tried, and it failed.  This is my weakest argument in that I cannot find the name of the firm that did this.  They’re in NY or DC though, and it didn’t work.  If past performance is any indication of future performance, than Drinker, Biddle, and Reath would do well to find these folks and see what happened so it doesn’t happen to them.  Which it probably will, which is why this is on the list.

4.  Psst…law firms?  You’re in the business of providing legal services.  That is what you do.  Yeah, I know, you want to “recapture revenue lost to legal process outsource companies” and “own the technology”  but that’s not who you are.  You do the lawyering and let the experts collect, process, and produce the documents.  This is most definitely an industry where horizontal integration is very ill-advised.  Stick with what you know, people!

The only possible way this can end well is if the Managing Partner mandates that you always and only use your own subsidiary and that you never make a mistake ever.  See #1 and #2 above.

It’s like that old football analogy, that I attribute to Darryl Royal because I’m a longhorn, but that someone recently told me really came from some coach at Ohio State, but whatever:  “Only three things can happen when you throw the ball, and two of them are bad.”

This decision to spin off eDiscovery as a subsidiary is equally positioned.  The conditions that will make it successful are highly unlikely to occur, and the bad things that out-weigh it are very likely to occur.

To say nothing of the fact that Drinker is using Autonomy:

After reviewing a number of software options, Lidbury said the firm decided on Autonomy, which is an HP company.

Huh?  How is this “owning the technology”?  You’re not owning it, Autonomy is.  What am I missing here…?

I think Leonard Deutchman, GC of LDiscovery Solutions is right when he says “creating an eDiscovery vendor model requires a large investment of time and expertise.”

Good luck.

Just sayin’,

IPTT

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