Did the cost of legal IT kill Clearspire?
I and others have been writing on this Blog of late about the Legal IT curve. My view was that Big Law is so behind the legal IT curve and this could be detrimental to its future. However, this past week a New Law firm, Clearspire, who, on the face of it, was well ahead on that legal IT curve closed its doors. Why it folded is not clear.
Two Questions Re: #Clearspire Closing: (1) Why? (2) How unique is their services platform? Answers will be telling for #NewLaw future.
— Patrick Ellis (@pmellis) June 6, 2014
One reason could be its spend on legal IT.
Sorry to hear that @clearspire has closed. Still shocked they managed to spend $5m developing their IT system http://t.co/T5dvoKHYum — Alex Hamilton (@AlexHamiltonRad) June 5, 2014
It would appear that this spend was $5 million and involved two and a half years of research and development. For a law firm with 25 lawyers that is $200,000 per lawyer spent on IT. The aspirations of Clearspire were much greater than a firm of 25 lawyers. In January 2013 the stated aim was to “expand its nontraditional legal services model across the country with the addition of 50 to 100 former BigLaw lawyers each year for the next five years”. That didn’t happen. If it had then the spend per lawyer on legal IT would have gone down considerably from that $200,000 figure.
However, $5 million seems one heck of a lot of money for any law firm (especially a new start) to be spending on legal IT. What was special about this IT? I have not been able to glean a lot about its USP if it even had one. I found an article that suggested CORAL, the system developed by Clearspire, provided a “highly secure technology platform to collaborate real time with clients and team members, post questions, review briefs, and more”. Perhaps we need to know what the “and more” is as everything else can already be done with off the shelf platforms at a fraction of the cost. As Carolyn Elefant said in a comment to that article:-
What is so revolutionary about Clearspire? I have been implementing flat fees, client plans and online secure portals for at least a decade as have many of my solo and small firm colleagues.
It has been suggested that CORAL did not even assist document management!
@AlexHamiltonRad They had no interest in document assembly, so not sure how “NewLaw” they really were.
— Ken Adams (@KonciseD) June 5, 2014
The Clearspire business model which involved amongst other things “no central physical office, but regional centres and a powerful ‘best-in-class enterprise IT platform'” is one being played out by other NewLaw firms but perhaps with substantially less spend on the IT element. With legal IT providers having invested huge sums in perfecting proven legal IT systems over the years is there really any need for a NewLaw firm to reinvent the wheel?
Such systems (especially the cloud based ones) can now be purchased on an affordable per user basis allowing the IT to grow as the law firm grows rather than the IT having to pay for itself once the law firm reaches a critical mass, which seems to have been the Clearspire model. What law firms need to spend time and money on is making sure these off the shelf systems are working to their full potential within their own four walls (even if that is virtual walls).
.@annleegibson @NicoleBradick @gnawledge @ronfriedmann Dewey wasn’t the death knell of BigLaw; Clearspire isn’t the death knell of NewLaw. — Jordan Furlong (@jordan_law21) June 5, 2014
So in my view Clearspire may have got it wrong with the huge investment in its own legal IT system. It is not the start of the end of NewLaw but perhaps a lesson for would be NewLaw firms. Law Firms survive on providing legal services to customers (aka clients). Law firms, new or old, need to concentrate on that. Technology is a tool to assist that process. When setting up a law firm I wouldn’t try to create a PC or phone from scratch. Pier Giorgio Perotto and Alexander Graham Bell beat me to it. The same is true of legal IT systems. There are plenty out there that work very well indeed. Usually it is the law firms or individual lawyers within those law firms that are simply not using the systems anywhere near to their full potential.
Clearspire has died – long live Clearspire! http://t.co/ZPrzt4NGn0 via @legalpost @mekowalski
— Mitch Kowalski (@MEKowalski) June 6, 2014
Arising from the Clearspire ashes appears to be CORAL. The law firm has gone but the legal IT will live on. As Mitchell Kowalski states:-
So, while some will mourn the loss of a New Law trail blazer, the fact that Clearspire will remain as a legal IT company and grow, bodes well for lawyers across the world.
Perhaps. But what is unique about CORAL? If it didn’t sustain the pilot NewLaw firm Clearspire does it really bode well for lawyers across the world? I am told we will will find out at the end of the Summer.
@TheTimeBlawg @pmellis @legalpost Wait for the end if the summer guys…… 🙂 — Mitch Kowalski (@MEKowalski) June 6, 2014
The Clearspire website tells us:-
Our law firm was a laboratory– a proof of concept that demonstrated just how innovative today’s lawyers can be. In the process, we redefined client satisfaction, lawyer efficiency, and pioneered the model for the future of legal services delivery.
Now, the time has come to scale. We’re taking Clearspire to the next level with a mission to empower not a law firm, but all law firms.
We are actively working to ready our class-leading Legal Services Delivery Platform for you! Stay tuned to these pages in the coming weeks and months for updates on our global deployment of The Next Revolution.
If it didn’t empower one law firm how will it empower all law firms? But perhaps ‘The Next Revolution’ will have a price tag less than $200,000 per lawyer 😉
I have made assumptions in this post. I had to as there is no information yet from the horse’s mouth as to why Clearspire folded. I may be wrong. Whether I am or am not do you think law firms should create their own legal IT systems from scratch rather than buy in existing third party ones?
NB: This post is part of a series of blog posts on the Legal IT curve. See also:-
- Big Law is so behind the Legal IT curve
- Big Law Little Law (Guest Post by Mark Gould)
- Legal Technology is not all about tablets, cloud and getting there first (Guest Post by Rupert Collins-White)
- Legal IT and agility (referencing a blog post by Jeffrey Brandt)
- Big Law and the Dinosaurs (referencing a blog post by Nicole Black)
- LawTech Futures 2014: The one with the http regret
- Big law, small law, new law, old law… it’s bigger than that (Guest Post by Ben Wightwick)
From an outside view, it certainly sounds like they spent far too much on their systems, though, as they intended to be more than 4 times that size, they may have built excess capacity which, in essence, means a spend of only $50k/lawyer. That isn’t as bad as it sounds when you’re talking about all of the CapEx and 3 years OpEx upfront, which it could have been. However, more important to note is how proud they were of building their own, unique platform; that is where they wasted money (akin to some firms trying to build their own custom finance or DMS solutions rather than opting to buy a purpose-built product) – there is no value in re-inventing the wheel.
Thanks for the article, great point and a reminder of what is the main line of business for law firms. We see it repeatedly: full-service commercial law firms home-growing their IT (and it lasts on avg. for 6 years).
On a side-note, can not really subscribe that @Clearspire was from the very conceptualization was a mere lab for the IT, without the true reason of staying in the legal services business. Then again, they might have it all planned from a start, hoping for all the buzz that a closing of a NewLaw would generate for the coming software. But that would be some serious masterminding on the play 🙂
In any case, interesting turn of events.
Actually, most commercial law firms buy very standard, purpose-built systems – very few “home grow” their IT. Had Clearspire spent their money on existing legal IT, they would not have spent so much.
Rightly, we do not have access to the details of the Clearspire situation. It matters not. In a sector of 100s, perhaps 1000s, of NewLaw start-ups, the demise or re-positioning or whatever of one, is simply an indication of the market at work. Fast following and fast failure are important market dynamics.
Thanks George, you are right about the odds for success, however these cna be influenced by introducing the Lean method in the development. You can see some interesting discussion started by the commentators here (some pointing that the product-market fit was not discovered by Clearspire – talking about their both Law and IT/BizDev counterparts)