In an era of belt-tightening, online legal services providers offer a cheaper alternative to conventional law firms, writes Oliver Brice

During the past 12 months there have been numerous articles in the legal press concerning the growing discontent over the levels of private practice lawyers' fees. However, driven by the greed that has gripped the City over the last 10 years, the majority of City law firms have failed to take any notice.

While most in-house lawyers would agree that high quality specialist legal advice doesn't come cheap, many City law firms are charging clients top whack rates (of anything between £275 to £550) for general commercial or transactional overflow work.

You never get sacked for instructing a 'magic circle' firm

Sophisticated buyers of legal services, such as in-house lawyers, are able to look beyond the brand image when instructing a firm. But those who are less knowledgeable in this area – finance directors, for instance – commonly are not. The perception of risk in seeking or instructing an alternative provider, and lack of knowledge and awareness of the legal market, means unsophisticated buyers tend to pay far more than is strictly required for legal services. If companies are willing to pay these rates, then why should law firms reduce them or revise their billing methods?

Before the age of the internet, companies had little choice but to take what was on offer. Comparing costs and value was much more difficult. But the ease with which services and information can now be accessed and exchanged has brought a much-needed transparency to the issue of legal fees, laying bare the reality of where the money is really going.

My company, Virtual Law, is one of several businesses that provide clients with an outsourced legal service, allowing them to benefit from the value-added services provided by in-house lawyers, without incurring the overheads.

The company acts for large multinational organisations which have their own in-house teams, but do not wish to pay City rates for general commercial overflow work. It also assists small and medium-sized companies that cannot afford or justify the overhead of employing a full-time in-house lawyer.

Like private practice law firms, online legal services providers are regulated by the Solicitors Regulation Authority. However, that is where the similarities end. There are no expensive City offices (a large overhead that is ultimately paid for by clients themselves). Meetings take place at clients' offices, saving the client valuable management time which could be better used running their own business.

Virtual Law has a relatively small in-house team, therefore, it commonly sub-contracts work to its own network of consultants, or 'Virtual Lawyers'. These include practising barristers, ex-partners of City firms, former in-house lawyers and Indian legal process outsourcing clerks. Legal secretarial and IT department expenses are unnecessary, again allowing the resultant cost savings to be passed on to clients.

But cost isn't the only benefit to clients of this technological advance. A more fundamental upside is that since the majority of the lawyers we use have business experience in the real world (ie outside private practice firms), they are usually more commercially aware and astute than their private practice counterparts and have a better understanding of non-legal pressures that may be exerted in a given situation.

Transaction management

Cost saving is what underpins the raison d'etre of a virtual service. For large transactions or disputes, these can be substantial. The transaction management facilities of online legal services providers assist clients in reviewing and assessing the legal market. One of the main problems of the UK legal sector is that it
is almost too competitive, with more than 200 firms practising in London alone and well over a thousand nationally. The result is that clients are unable to quickly and easily assess their options to determine which firm best suits their needs.

Via my company's transaction management service, clients' management teams are able to review the legal market and ensure that the selected firm has the necessary experience, expertise and, importantly, the right fee rates and structure. In layman's terms, we act as a broker for the client. Once the right firm or lawyer has been selected, the online provider will then manage and oversee the particular transaction to the extent agreed with its client. Importantly, clients are not charged for this service, rather it is financed by a transparent referral fee (agreed with the client at the outset), which is paid to us by the selected law firm.

There is a quiet revolution in the legal world which will meet with resistance from certain quarters, but the benefits to clients of this alternative service are enough to drive this technological advance forwards.