Editor's Note: This article first appeared in the April editions of Corporate Counsel and The American Lawyer magazines as "More Money, More Tech, More Problems."

The storm isn't coming—it's here. Since the U.K. Solicitor Regulation Authority first allowed law firms under its jurisdiction to accept equity from non-lawyers back in 2012, debate has raged whether states in the U.S. should do the same. The fallout from those decisions threatens to have huge ramifications for the legal profession, but when it comes to the way law firms are engaging with technology and disruption, non-lawyer ownership is more of an accelerant than the spark lighting a "Mission: Impossible"-style fuse.

For starters, even without any game-changing ownership on the table, the U.S. legal industry is already changing. However, that disruption isn't being driven by regulatory evolution, but rather the age-old maxim that the customer is always right. Factors ranging from the rise of the legal operations professional to a trend that sees corporate law insourcing e-discovery, litigation and other technology-related tasks have given rise to a newly sophisticated client base—one that expects a more innovative approach to law firm services across the board.

Firms have responded by launching tech labs, dropping homegrown apps onto the marketplace and working more closely with alternative legal service providers in an effort to quickly bolster their technological prowess in a "buyer's market."

But its not certain that if those investments, and the additional ones that could come if ownership laws are loosened, will ultimately benefit firms. For some, such investments may not be able to overcome some of the natural barriers law firms are encountering to their technological growth, including a dependence on the billable hour model and siloed practice areas. And if firms keep evolving into technology hybirds, they may run directly into the path of the Big Four, who may benefit from the new opportunities a more relaxed set of equity laws affords.

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No Guarantees in Life or Legal

U.S. lawyers appear to be split when it comes to the potential ownership and investment regulations. In February, The American Bar Association's (ABA) House of Delegates passed a resolution urging state bar associations and lawmakers to explore regulatory innovations that could better facilitate access to legal services—but also stressed that it was not a recommendation to alter the standing ABA Model Rules of Professional Conduct.

Some states feel more strongly than others that loosening ABA Rule 5.4—the rule pertaining to ownership and investment regulations—could have a positive impact on lawyer's ability to leverage technology to improve legal services. Last August, the Utah Work Group on Regulatory Reform asked the state's Supreme Court to pursue a new regulatory scheme that would allow non-lawyers to own invest in legal businesses. The group claimed that this was necessary in order for attorneys to "fully and comfortably participate in the technological evolution."

But is that true? It's worth noting that even with traditional ownership laws still mostly in the upright and locked position stateside, many firms are already flirting or in a long-term serious relationship with technology.

The last year has seen a series of law firm developed apps hit the market, from Reed Smith's e-discovery-themed resource to Latham & Watkins foreign direct investment tool. Full-blown law firm tech subsidiaries in the vein of Wilson Sonsini Goodrich & Rosati's SixFifty or Parsons Behle & Latimer's tech subsidiary Parsons Behle Lab are also continuing to crop up.

"[Firms] are doing this kind of work, and we really haven't seen that much loosening of the [ownership and investment] regulations," says Zach Abramowitz, an analyst and consultant in the legal technology space.

That's not to say there's no room for improvement, though. Josias Dewey, a partner at Holland & Knight, thinks it's possible that allowing non-lawyers to become partners, for instance, could make it easier to recruit top talent in a highly competitive market where employers in legal or even other industries may be jockeying for the attention of the same cybersecurity consultant. While firms have always been able to offer salary-based incentives for those types of roles, an ownership stake may help tip the scales in their favor.

Opening the door to outside investment could also have its perks given how firms currently have to bankroll their technological ambitions. "It's difficult because if a law firm wants to embark on an aggressive program of developing technology internally, that pretty much has be financed from within," Dewey says.

Still, just because tech-savvy owners or entrepreneurs have the opportunity to invest in a law firm doesn't necessarily mean that they would. Tomu Johnson, of counsel at Parsons Behle and CEO of Parsons Behle Lab, thinks that independent legal tech companies are more likely to attract that kind of money and interest, while perhaps seeking out some occasional law firm input along the way.

The reason that investors or tech leaders may be inclined to give law firms the cold shoulder is tied directly to the billable hour model that has sustained firms for centuries but might be alien to someone used to generating revenue based on the success of a product and not the amount of time spent on a given matter.

Johnson pointed out that law firms also don't typically have experience marketing themselves the way that a traditional company might, nor do they traditionally have research and development departments. It's not a setup that he feels is particularly conducive  to managing or addressing disruption.

"A law firm will have to be open to a completely new model for how it provides services, how it charges for those services and then how it researches what kind of services it innovates and then provides to the customer base," Johnson says.

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A Whole New World

To be sure, creating a completely new model for the delivery of legal services frankly sounds like a lot of work. But Is the effort worth it? Legal advice has long remained the bread and butter of the law firm model, and wandering too far from home—i.e. doubling down on tech subsidiaries or other high-profile forays into innovation—is an expensive gamble.

But money, or the promise of money, has a way of making people bold, and law firm leadership may be well on their way to viewing tech-based tools or services as the meal ticket of the future. Per Abramowitz, partners are cognizant that labs and subsidiaries are not yet in the position to generate the same level of revenue as their traditional business propositions. Instead, consider them to be the beginning of one long pivot.

Abramowitz hears this from those in the industry: "'We recognize that our law firm makes money one way and we recognize that we're going to need to start making money another way, and this is really our first step in that direction.'"

Just how successful law firms will be in those endeavors will likely depend on the solutions they elect to target. Dewey expects more and more law firms to continue to build internal development teams, but he wouldn't recommend them attempting to dip a toe into tech-heavy lifts such as contract management software since there are specialized legal tech companies on the market who are in a stronger market position to meet those needs. Instead, he recommends that firms concentrate on new and efficient ways to deliver their preexisting subject matter expertise.

"Those are areas where in some cases law firms may be in a better position than outside non-law firm vendors or companies to provide that or develop that technology. And you probably see that in areas like machine learning where you may need subject matter experts to train or facilitate the training of the models to perform the tasks that are needed," Dewey says.

However, Catherine Moynihan, associate vice president of legal management services at the Association of Corporate Counsel, believes law firms may be at a disadvantage because some of their home-grown tools either never leave the confines of the lab or are siloed inside a single practice area. "The really cool work that's being done in that subsidiary or lab isn't necessarily being imbued into the whole law firm where the core practice of law is occurring, so I think the jury is still out whether that's an approach that clients will appreciate," she explains.

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New Friends and Foes

Of course, not every law firm can afford a major overhaul. Even if ownership and investment restrictions loosen, some smaller to midsize firms may simply lack the budget or experiences necessary to appeal to new investors or self-propel their own technological revolution. Luckily, corporate clients may have inadvertently been laying the foundation for the partnerships that will allow such firms to remain competitive.

Moynihan noted a distinctive shift that has emerged in the relationship between firms and ALSPs. A pairing that once upon a time might have been the product of a corporate mandate is now self-actualizing as law offices look for cost-effective ways to leverage the technological efficiencies clients demanding.

"They've already got those embedded relationships instead of having them imposed on them by a client," Moynihan says.

The appeal of that arrangement? Linking arms with an ALSP is a quick way for a law firm to add much needed scale and expertise to their operation. Some are able to leverage the experience and insights they gain from working with an outside provider to eventually replicate the service in-house—which should be the ultimate goal.

But it's hard to make an omelet without breaking a few eggs, or in this case making a few enemies. As law firms look for ways to boost their technological services, loosening ownership and investment restrictions could eventually place them into direct competition with the Big Four.

Dewey of Holland & Knight spoke to a colleague employed at a U.K.-based law firm who told him that their cyber unit—which handles everything from system review to post-breach investigation work—had found their biggest competitor in the Big Four as its work grows increasingly independent of the firm's lawyers. "I think that will be a trend as well moving forward," Dewey says.

Johnson at Parsons Behle theorized that the Big Four and other legal service providers may begin picking off some of the run-of-the-mill, straightforward legal work that has served as law firms' primary source of income. Instead, firms will have to double-down on the sort of high level, intricate matters that other providers will be reluctant to touch.

"I think opening up those ownership rules is going to create competition that I don't think law firms are ready for—and how could they be?" Johnson says.