e-business - Continuity through flexibility
02 December 2013
A&O’s online legal service group has grown rapidly using a unique business model. And there’s more to come.
Victoria Wells usually starts her working day with a short commute: she climbs the stairs of her North Yorkshire farmhouse and goes into her study. There she buries herself in the legal complexities of the over-the-counter derivatives market.
Working Monday to Wednesday – with alternate Tuesdays in A&O’s London headquarters – Victoria is one of the longest-serving members of A&O’s fast-growing affiliate business, Derivative Services LLP, providing a range of valuable, subscription-based online legal services, now seen as market-leading by a growing cadre of clients.
But Victoria’s working life, while tailor-made to fit her and her family’s needs, is not atypical for the lawyers working for the business. All 18 lawyers in the online services group are women and all but one work flexibly from locations across the UK and as far afield as Dubai.
Colleague Claire Farley, who is responsible for developing a range of cutting edge regulatory services, including Rulefinder, the global shareholding disclosure product, divides a four-day working week between the London office and her home in Cambridgeshire. Another member of the team works between 9am and 3.15pm, to fit with the school schedule; yet another works a 21-hour week.
Even Marc-Henri Chamay, who heads the business and is the only non-lawyer in A&O to have achieved partner-equivalent status, usually manages to work about one day a fortnight from home, as do many of the support staff in the business.
Embracing flexible working is part of a business model that has brought huge benefits to Derivative Services. The group has achieved an average annual growth rate in excess of 25% in the last three years, reaching GBP7.5 million in ongoing subscriptions in 2013.
This flexibility has created an incredibly stable team, with only two lawyers leaving the group during its 12-year existence, and allowed the group to build a fast growing and loyal client base for some ten online products.
As Marc-Henri explains: “We’re very open about the way we work with clients because they know the quality of what we offer. By building a stable team, we’ve created a continuity of knowledge that’s vital to the high-end products we provide and that clients really value.”
Flexibility is also a great recruitment tool. As Victoria says, “It’s a key draw in recruiting fantastic lawyers to a job that is very interesting and involves high-calibre legal work that can be done from home. It offers a great balance for lawyers who want to stay in touch with cutting-edge legal work while leaving room for other important parts of their lives.”
Feeling the way
Derivative Services started life in 2001 as – the team freely admits – an experiment, and with an online product which none of the group really knew how to sell. It was called netalytics and had been developed as a joint venture with the International Swaps and Derivatives Association (ISDA).
In those days, A&O was regularly asked by clients to make summaries of the annual close-out netting opinions produced by ISDA covering, at the time, some 30 or so jurisdictions (the product now covers 63 jurisdictions). It was time-consuming work and, because it relied on small teams of lawyers working independently for different clients, didn’t always produce consistent results.
So the idea was to create a generic online product for the entire market. Clients could subscribe to it, knowing that all competing subscribers – whether A&O clients or not – had access to the same standard information for the same transparent cost. So netalytics was born – but how to find customers for it?
Victoria recalls: “We were completely naïve and didn’t know how to bring something like this to market.
“I remember the first ISDA conference we took the product to. We rocked up with a couple of laptops and a few laminated posters and probably looked a very sad operation. But the fantastic thing was we ended up being the best-attended stand at the conference because word got out that an A&O affiliate had come up with this great new product.”
A new business model
It was about this time that Marc-Henri joined the business. A Swiss engineer with an MBA, Marc-Henri had spent seven years working on the front line of IT innovation at Reuters, Merrill Lynch, the international bookseller Blackwell’s, and a dotcom start-up.
“I joined A&O when the dotcom bubble had completely burst. A lot of people moved into different sectors when that happened, but I was determined to keep working in this space. I was actually quite surprised to find law firms recruiting in this area; it was as if they were the only ones who hadn’t read the headlines!”
He admits that initial sales forecasts for netalytics were wildly over-ambitious and he quickly questioned the original idea of selling access to the product for a one-off fee. “Why would you do that when the product is being updated each year by a team of highly-skilled and experienced lawyers?”
Gradually a new, subscription-based business model was developed, with flexible working built in to a broader three-point strategy. Firstly, all the products developed by the group are standard rather than bespoke; none of them is adapted for different clients: everyone gets the same thing. Secondly, clients pay a fixed fee so can be confident there are no hidden costs. And finally, the group operates at arm’s length to the main firm, so that A&O and non-A&O clients alike know they receive exactly the same high-quality service.
It’s this strategy that has allowed the group to develop a portfolio of online compliance and risk management products that are now regarded as essential to the day-to-day working of financial institutions, funds and companies.
Each of the products turns complex areas of the law – such as shareholding disclosure rules and restrictions on marketing and selling financial products – into easy-to-use, colour-coded guides to the myriad rules that apply in different jurisdictions.
Since 2006, the products have featured in the FT Innovative Lawyer Awards 11 times, winning no fewer than four ‘Commended’, five ‘Highly Commended’ and two ‘Standout’ awards.
Market trends have helped the business grow. The financial crisis, and the regulatory response that followed it, have undoubtedly made many institutions look to source reliable compliance and risk management solutions that are cost effective and which present information in ways that can be easily understood, by lawyers and non-lawyers alike.
That’s an important selling point at a time when the business of risk management is increasingly being done not just by in-house legal teams, but by non-lawyers working in compliance and, even, operations.
“I think a big part of our success lies in our ability to create legal content that can be distributed widely within institutions for a broad audience of risk and compliance people,” says Marc-Henri.
Client reception also speaks volumes for what the group believes is now the biggest and most comprehensive online legal services offering in the industry. The subscription base has grown from 40 at the start of the financial crisis in 2008 to 170 today, with an average subscription renewal rate of 97%.
Claire believes one of the great attractions of working for the group lies in the variety of work. “When I recruit people, I explain that you have the opportunity to take a legal product right from conception to launch and to develop it in the way you want it to go. That means deciding on the right content, ensuring there’s a real appetite for it in the market, and selling it.
“It’s not for everyone and some people do have a fear of making the leap from traditional practice to this kind of work, but that, for me, gives me much more latitude in my work than I ever had working as a regular transactional lawyer.”
And it requires the group’s lawyers to be self-starters, she explains. “We don’t sit around waiting for orders from on high about what we should be developing. It’s all about responding to what clients want and need. You don’t necessarily know how it will turn out in the end. Then you stand back two years later and see a market-leader.”
Clients regularly request new or extended services. Victoria gives a current example: new regulation will soon require the majority of over the counter (OTC) derivative trades to be done through clearing houses. “Clients are already asking when we will be doing Clearalytics,” she says.
Marc-Henri agrees that the close relationship with clients is key. “We commit to an ongoing relationship with clients, whereas a transactional lawyer often commits only to the transaction. We have to keep working hard to make sure clients are happy and getting value.
“But we are sticking to a clear strategy and that sometimes means making decisions about what you are not going to do – which can occasionally be a bit uncomfortable. If a client wants coverage of new jurisdictions that are not within our plan, we refer them on to A&O for that bespoke work.”
As traditional law firms continue to search for new ways to operate in a fast-changing legal market, the way that they put technology to use for the benefit of clients will increasingly become a key point of differentiation.
But does that suggest A&O’s online services group will continue to grow, and at the same swift pace seen in recent years? The team refuses to reveal specific growth targets for the years ahead, but it’s clear they see huge scope for further expansion.
As Claire puts it: “There are plenty of areas of the law that are ripe for development in the online space. The question is whether people will pay for it at the right level. We’re looking for areas where we can commoditise high-end legal data that clients will be prepared to pay for.”
Marc-Henri is adamant that the trend set since the financial crisis for online legal services is here to stay, particularly among financial institutions, although he admits that the corporate sector – where companies are often more sensitive about sharing information with competitors – will take longer to crack.
But he remains confident. “In general, the quantity and complexity of regulation means that the demand for searchable legal databases that provide you with precise information won’t go away.
“The difficulty comes around constant demands for greater detail and granularity. A few years ago, we thought doing a product that covered 50 jurisdictions was fantastic. Now we’re doing a product for over 80 and we’ll get pushed to go to 90. There’s an appetite for more and more of what we do.”