As early as 2013, Bruce MacEwen of AdamSmithEsq.com was writing about what he described as “the Hollow Middle” within the legal market. A somewhat controversial label at the time, law firm leaders have come to increasingly recognize that they must at least attempt to occupy a unique niche within the legal market, lest they be overlooked by potential clients.
For some firms, this has meant gravitating toward a more budget friendly model where they rely on price as their key differentiator. Others have made great efforts to attempt to position themselves as experts in one or more practice areas to better appeal to clients’ needs for experience and expertise that exceeds their own capabilities.
In the recently released State of the Legal Market Report, lead author Jim Jones, a senior fellow at the Center on Ethics and the Legal Profession at Georgetown University Law, adds further context to this discussion with his introduction of the Dynamic Market Model. He describes this model as “a continuum of quite different legal services being offered by different groups of providers, some of whom are traditional law firms and some of whom are not.”
“The services offered at various points along this continuum are subject to very different ‘rules’ related to pricing, staffing, infrastructure and process support, use of technology, drive for efficiency, and the like,” Jones writes. “Service providers along the spectrum also experience different forms of competition and different competitive threats to their market positions.”
Jim Jones, of Georgetown University Law, describes his Dynamic Market Model as “a continuum of quite different legal services being offered by different groups of providers, some of whom are traditional law firms and some of whom are not.”
It is a stark realization that the top of the market is a relatively narrow portion of the total. This portion of the continuum relies on unique legal expertise and enjoys relatively low pressure on prices or competition from non-law-firm vendors.
The broadest segment of the continuum is what the report calls “comprehensive legal services,” which accounts for about 60% to 70% of the total market. More typical of this portion of the continuum are “run the company issues,” as compared to the “bet the company” issues that are found in the higher end of the continuum.
And finally, the continuum highlights ancillary legal services. These are services which may have typically been performed by law firms, but which are increasingly becoming the purview of alternative legal service providers (ALSPs). This end of the spectrum sees the most competition and also the most pressure on price. Clients seeking these services also place a high value on efficiency and cost effectiveness.
Something I find interesting about this model is how rapidly it is shifting. As we discussed in the recent Alternative Legal Services Provider report, market share among ALSPs has seen sizeable growth in the past few years. This suggests that the ancillary support services portion of the continuum may be expanding quite quickly and starting to infringe on work that had more typically belonged to the comprehensive legal services category. This expansion will put even greater pressure on those firms who rely on the comprehensive legal services category for their survival.
Some firms will try to make inroads into the upper echelon of the model. There will always be work in this upper tier, but it will be a finite supply; and there are already a large number of firms competing for this work. Firms in today’s “hollow middle” will have to change how they compete within the comprehensive legal services tier as they face pressure from more of their work potentially becoming commoditized, and deal with the reality that a relatively small portion of work in today’s legal market is truly unique.