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Some weeks ago my colleague Janet Conley of the Fulton County Daily Reportwrote a front-page story for our sibling publication The National Law Journal. In it, Conley reported that after several years of employing outside bill-auditing agencies, insurance companies were not renewing their contracts. They had discovered, Conley wrote, that using third parties was harmful to their relationships with outside counsel. The law firms were pleased; they had won a famous victory. Wrong. Conley added a fact that should chill the heart of any managing partner: The auditing firms were goners, but the audits would continue. Thanks to new technology, they would become part of the in-house counsel’s ordinary quiver. It’s not just insurance companies. I sat down recently with a general counsel for a major securities firm who single-handedly props up a dozen Am Law 200 firms. He was chortling over his new toy: an electronic billing system that will allow him to receive timely (monthly, weekly, daily, hourly) reports on the manner in which his vast litigation docket is being handled by his cartload of firms. He could program it so that a little warning would sound every time a firm assigned a fourth associate to a matter that only called for one. And self-respecting firms are going to agree to this? he was asked. “I think so,” he said, smiling just a little. But what about new firms you might want to hire? Will they go to the bother of installing your software system and agreeing to the monitoring? “Only,” he said, “if they want my business.” Then he laughed. No one was laughing two months ago in Chicago as an Am Law 100 partner watched his three-decade relationship with a client wither on a computer screen. His client had signed up with one of the new auction sites — an eBay for lawyers — and the general counsel expected his incumbent firm to participate. It was a live auction; firms bid against each other for the sort of work that previously had gone to Mr. Chicago. On this day he found himself in a marketplace — a veritable souk — where his peers and his inferiors were cutting the price as the clock ticked down. The truly interesting race was between the falling hourly rate and the blood leaving Mr. Chicago’s face. Mr. Chicago won that race, but nothing else. Technology has helped set the stage for a power shift from the vendor who controls a scarce resource — legal services — to the client who controls an even more precious resource this year — legal fees. After more than a decade of client threats and boasts, will that shift really take place now? In the short run, I’m not betting on the clients. They may have the power, but too many still find it too dicey to use. Rather than take the risk of floating like stud ducks ahead of the flock, they would rather follow the model of the purchasing agents who thought that no one would ever be fired for buying IBM. And absent client demand, as AmLaw Tech‘s annual surveyshows, only a small minority of firms will invest in client-focused technology. Don’t kid yourselves. Eventually even these ducks will fly, because that’s where the world is moving. A quick summation of this view can be found in a new book called “The Customer Revolution” by Patricia B. Seybold, a Boston-based consultant. Her point is that thanks to the Internet and other technologies, customers now have — or will have — access to more information that allows them to make more informed decisions. With that information they will demand better service and better prices. In Seybold’s view, customers will be in charge, and the businesses that thrive will understand their customers’ businesses, anticipate their needs, monitor their reactions, and, you should excuse the expression, figure out how often they can enhance their clients’ “value chain.” Get past the business-babble, and Seybold’s analysis clearly applies to the law business. In the simplest way, consider the two anecdotes about bill-monitoring and price-auctioning. Thanks to technology, the customer now has real market information about law firm pricing and the unquestioned ability to do something about it. Once that sort of customer revolution starts, not even a prep-school friendship can turn it back. But Seybold doesn’t counsel despair, only change. In the new world, if a vendor supplies a customer with “a great total experience,” the relationship actually can get stronger. She has, of course, many steps to get there, but you can read those for yourself. The important question is whether a firm will become customer-centric or a memory. Feed the ducks or watch them fly away.

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