With AI tech enabling clients to keep more work in-house, law firm revenues will be squeezed, threatening the viability of the industry’s traditional business model, explained Rob Otty, co-founder of Orellium Advisory Services. However, at the same time he says technology will also enable African firms to increasingly compete on the global stage.
“The legal sector must recognise that it has to change fundamentally,” Otty said. “If you don’t adapt, then we will see a slow decline of the law firms that don’t make the changes.”
Against this backdrop, Otty – a South African, now based in London, who has more than 30 years' experience in the legal sector and was previously global chief operating officer/finance officer at Norton Rose Fulbright – set up Orellium to help guide firms through this transition and identify potential new growth opportunities.
“Most law firm leaders will recognise that things are changing, but most don’t know how to change their business without causing significant disruption to their existing commercial model,” he explained.
Otty says many are looking at it from the starting point of protecting their margins, which often results in firms simply ramping up lateral hiring and pressuring fee earners to pedal faster and bill more hours to maintain margins – an approach that will become increasingly unsustainable.
“Firms will need to start having honest conversations and be more realistic about their business model going forward,” Otty shared. “They are going to have to reshape their business and they are going to have to invest to make those changes.”
There is little time to dawdle either if other firms are already making those changes and if clients increasingly expect their law firms to adopt a different way of working and pricing their services.
“If you let your competitors get ahead of you and they’ve reshaped their business and are now doing things more effectively and efficiently, then closing that gap becomes increasingly difficult,” stated Otty.
The current environment is also creating an opportunity for African firms to potentially leapfrog more established players on the international stage by embracing technology and pivoting faster to new markets.
“One of the benefits of what we’re seeing at the moment in the sector is that the democratisation of knowledge, skills, technology and access to information creates an opportunity for the continent of Africa – and more particularly the lawyers in Africa – to springboard themselves and accelerate their progress globally in a way that has just not previously been accessible to them,” Otty explained.
One potential immediate opportunity for African firms created by the increased use of generative AI technology is providing outsourced fact-checking services for law firms and corporate legal departments to ensure any AI-generated content is accurate.
“This is a fantastic opportunity for an African firm that is geared appropriately with young, hungry lawyers that can do that work, and they can charge it out at a cost which is meaningful in the big, developed jurisdictions,” Otty said.
Those firms can then use that service as a platform to open the door to potential work further up the value chain, he added.
While Otty continues to have close ties with South Africa and the rest of the continent, Orellium will have a global focus given that the challenges law firms face are universal.
“We see an opportunity to span multiple jurisdictions and be a key provider of expertise not just to law firms and legal departments, but to adjacent sectors as well,” Otty shared.
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