MINNEAPOLIS — After years of warnings, the revolution in the legal industry finally may be crashing law firms’ gates. Growing competitive challenges from the Big Four accounting firms and more nimble alternative legal service providers (ALSPs) should make many law firms question long-standing assumptions and re-examine traditional business models that may not be suited for tomorrow’s legal marketplace.
Already such vigorous competition is leading to high levels of talent- and client-poaching by rival law firms and other legal service providers, while some firms’ responses may be increasingly counterproductive.
These are among the conclusions of the newly released “2019 Report on the State of the Legal Market”, which is jointly issued annually by the Center on Ethics and the Legal Profession at Georgetown University Law School and Thomson Reuters Legal Executive Institute, relying on data from Thomson Reuters Peer Monitor. It reviews the performance of U.S. law firms and breaks down the new market realities that drive the need for firms to take a longer-range, more strategic view of their market positions.
You can download a free copy of 2019 Report on the State of the Legal Market here.
The report observes that the traditional law firm model, which has served law firms well for decades, is now largely broken apart because of new market realities, and it urges firms to “jettison some long-held assumptions and… imagine a new model of how the legal market now works.” The report also suggests firms embrace more dynamic models that adapt to specific client needs, firm strengths, and market competition, noting, for example, that “inter-firm poaching of both talent and clients [is] at unprecedented levels.”
James W. Jones, a senior fellow at the Center on Ethics and the Legal Profession at Georgetown University Law and the report’s lead author, notes that for many years, it was largely assumed by both firms and clients that legal work could only be performed by lawyers. “That no longer reflects the realities of the marketplace for legal services, where new competition, technology, and innovative legal service delivery models are rapidly transforming how legal services are provided,” Jones says.
Overall, the report paints 2018 as a largely positive year for the large law firm market, although it warns that there are many “mixed signals” about the future health of law firms. It cites, for example, that while demand for law firm services grew more than one percent in 2018, that growth was largely concentrated among the very largest firms, in particular the Am Law 50.
“As client needs, expectations and behaviors are changing, we are seeing many firms adopt highly innovative approaches to drive greater efficiency, predictability and cost-effectiveness,” says Mike Abbott, vice president of Enterprise Thought Leadership and Content Strategy at Thomson Reuters. “Clients have more choices than ever for meeting their legal needs, and leading firms are now tailoring their strategies and delivery models to provide legal services in the manner that most effectively intersects with clients’ considerations.”