Tag Archives: legal market

The New Legal Economy

In an article, published in Law 21, on 20 September 2019, Jordan Furlong shared his insights on the emergence of “the new legal economy.” In it, he describes how the legal profession first evolved from being the profession of lawyers into a legal market. And now we are seeing the next major transformation, where a new legal economy is starting to take shape. Several evolutions indicate that this indeed seems to be the case. Let’s have a closer look at what’s happening, and what the implications are.

Less than a century ago, the legal profession consisted only of lawyers, and they were the only ones offering legal services to legal consumers. Then, in the last decades we saw how a new legal market came into being. Two evolutions played an important part in that. The first one was that law firms started being managed like companies, which meant that more and more non-lawyers started playing a part in law firms, and that lawyers started changing the way they worked. A second evolution was the rise of Alternative Legal Service Providers, where the market was disrupted by non-lawyers offering legal services.

Evolution 1 – the de-lawyering of law firms: As law firms became commercial legal service providers, they started focusing on service delivery, on productivity and profitability. Running a law firm these days requires skillsets like project management, data analytics, design, business basics, digital basics, risk prediction and management, talent management, strategic planning, financial management, vendor management, technology support, knowledge management, growth and development management, communications, litigation support, workflow automation, and others. Law firms now often have law librarians, legal knowledge engineers, legal data analysts among their staff. Some bar associations are even considering allowing law firms to have equity partners. In this new market, law firms must serve more clients and serve them more efficiently, holistically, empathetically, and cost-effectively. This evolution has led to changes in who works at law firms, and in how lawyers work.

Evolution 2 – Alternative Legal Service Providers (ALSPs): In recent years, we have also seen a sharp increase in non-lawyers providing legal services. The services they offer at this stage typically focus on litigation support, legal research, document review and e-discovery. In less than three years, the number of law firms in the US that use the services of these ALSPs has tripled. By now, more than 1 in 4 law firms already uses their services. And a recently published survey by Thomson Reuters revealed that about 52 percent of corporate Canada either already uses alternative legal service providers for litigation support or will do so within the next five years.

Apart from these two main evolutions, there are other changes affecting the legal market as well. These include “the rise of legal process improvement and outsourcing, the technology-driven commoditization of legal work, the growing sophistication of large law firms and law departments, and the slow but steady liberalization of legal regulation.”

Furlong notes that throughout all these market changes, one thing has remained largely constant, and that is what lawyers do. The market evolutions described above are changing the how lawyers work, and to some degree who is active on the legal market as well. But thus far, it has had relatively little impact on the what lawyers do. And now that too is about to change.

Traditionally, lawyers did mainly two things: offer legal advice (including the drafting of contracts, etc.), and litigation. With the progress being made in Legal AI, we are seeing ALSPs who are offering legal advice, and are offering services like automated and smart contracts. (Though a German court has just ruled that automated contracts still have to be supervised by lawyers).  And more and more, legal consumers are going out of their way to find ways to avoid litigation. Both of these changes directly affect what lawyers do.

Furlong: “The old legal economy consisted of paying lawyers by the hour to do every legal task that needed to be done. In the new legal economy, systems, software, and structures are going to integrate, automate, delegate, and eliminate countless legal tasks by which lawyers once made a living.”

Because of this, it becomes essential to redefine what lawyers as well as law firms are and what they do. In this context, Furlong says three important questions must be answered:

  1. What now constitutes “legal work”?
  2. How will legal work be done?
  3. What will lawyers do?

Something to think about.

But rest assured that we here at INFORMA keep on closely following all these evolutions to be better able to serve you.

 

Sources:

The changing shape of the legal market

I always keep a close eye on how the legal market evolves. In the last ten years, we have witnessed quite a number of evolutions that have disrupted the traditional legal market. In a presentation at Lexpo 2016, held in March, Chris Bull gave an interesting overview of ten ways in which innovative business models have changed the market. (Chris Bull, An uncharted world: 10 ways in which innovative business models have changed the shape of the legal market forever, presentation at Lexpo 2016. Available on video at http://lexpo.com/videos). Here are the highlights.

  1. Investment

Ten years ago, a law firm typically consisted of partners who co-owned the firm. Now we see law firms that have external investors on board who are not lawyers. These can be insurance companies, accounting and consulting companies or plain capital investment companies.

  1. Corporation

As the correlate of the first evolution, we find more and more law firms in a more traditional commercial corporation model. Where ten years ago, law firms were partnerships, many law firms have adopted a corporate structure of a Limited company. In this corporate structure, law firms often have directors (CFOs, COOs, CIOs, etc.) who are not lawyers.

  1. Outsourcing

Law firms tend to focus more on specializing in certain fields than before. As a result, anything that is not part of their core business is subcontracted to third parties.

  1. Insourcing

Another way in which the legal market has been disrupted is by an increase in the insourcing done by the customers of the law firms. Bigger corporations tend to have bigger legal departments and do more in-house than before.

  1. Agile Firms

In the last ten years, we have also witnessed the emergence of ‘agile firms’. Four aspects set an agile firm apart. A) Role: ‘role’ has to do with who plays what part/role in the company. Apart from the partners, agile firms tend to use more paralegals, and temps, and have a larger diversity in who works full time or part time, etc. B) Place: where does the firm operate from? These days, many firms operate in a multi-site set-up. At the same time, people spend less time in the physical office and work more from home. There even are ‘shared service centres’ for lawyers. Traditionally, law firms were located in the city. Now they may just have an office there, where the main site of operation has moved to the outskirts of the city because it’s cheaper. C) Time: more and more firms are using flexible hours. Some companies have moved to a system where work hours are counted on an annual basis instead of per week or per month. D) Source: where do you find your people? Recruitment is no longer a matter of just prospecting at law schools.

  1. Start-ups

Over the last ten years, we have seen a tendency where bigger firms merge. In spite of that, the number of law firms remains more or less the same. As big firms merge, people also leave to set up their own start-ups. These start-ups typically operate differently.

  1. Legal Tech

Legal tech has dramatically changed over the last ten years. New on the scene are online offices, which can take one of two forms. On the one hand, there is the ‘Remote Office’. Here, lawyers are still involved and do the actual work. They don’t necessarily ever meet the customer in person but operate through a website front. On the other hand, there are offices that are entirely virtual: the AI office. Here no lawyer is involved. Everything is done through and by the website, using an Artificial Intelligence engine.

  1. Fixed Price

The traditional law firm worked with timesheets and billable hours. But because of market demands, more and more firms offer to work for fixed prices. That way the customer knows exactly in advance how much what will cost.

  1. Group Structure

Traditionally, law firms were single legal entities. Now we also see group structures that can be national or international. There may even be a holding company.

  1. Collaboration

Over the last years, there also has been a sharp increase in collaboration between law firms. These can take the form of collaboration networks, franchises, membership groups, purchasing groups, joint ventures, and/or firms using a common brand name.

All of the aforementioned changes have a dramatic impact on how the firm operates. But for CICERO LawPack 10, this is not a problem. It is designed to be able to handle things like multi-site set-ups, corporate accounting, etc.