Traditional law firms should look at structuring themselves differently in light of new independent research that shows the vast majority of in-house lawyers are looking to alternatives when purchasing legal services
The research, which is based on the views of almost 200 senior buyers of legal services around the world with a collective legal budget of GBP3.5 billion (A$6.3 billion), shines a light into the changing attitudes of in-house lawyers.
Although interviewees did acknowledge that traditional law firms will always have a place in delivering complex and international legal services in particular, choice is rapidly increasing.
Alongside the traditional firm sit a number of other providers, including contract lawyers, document review services, online legal services, legal consultancy, hybrid legal solutions and managed legal services that are rapidly becoming more popular.
One alternative provider, contract lawyers, have been used by nearly a whopping two-thirds (63%) of organisations interviewed over the past two years in preference to traditional law firms.
And it doesn’t look like a trend that will decrease any time soon either: When asked about their future preferences, the research revealed that many organisations intend to increase their use of non-traditional providers of legal services, with 74% saying they plan to use the most popular choice, contract lawyers.
David Morley, A&O’s senior partner worldwide, told Australasian Lawyer that the results are highly significant for law firms.
“They confirm a trend we have seen developing for some time. Clients want more cost effective choices for delivery of legal services with no diminution of quality. If the traditional law firm model can’t respond to that, they will go elsewhere,” he says.
Sophisticated clients largely did away with the traditional approach of sending all their work to one firm many years ago, Morley says, and we are now seeing the same thing happening again with alternative service providers and use of contract lawyers.
“High end, sophisticated clients will want to mix ‘n match a range of different solutions. Firms unable to adapt will inevitably lose market share. Conversely, we think it will be attractive to many of those clients for a range of different solutions to be provided under one roof.”
Firms need to decide what they want to be known for, whether that be as a global player or a focused boutique he says, adding there will be room for lots of different models in the future.
“However, the losers will be those firms that who are neither fish nor fowl.”
The A&O research shows that the largest increases in the trend towards alternative legal services usage are anticipated among organisations in the Asia Pacific region, as well as the Middle East and Africa.
Geoff Simpson, the managing partner of the Perth office told Australasian Lawyer that the trend for innovation in the legal sector is driven by a number of structural changes including increased competition, globalisation & new technology.
It’s also driven in the UK and Australia by liberalisation - allowing non-lawyers to invest in the legal business.
“We think will eventually flow around the world. The financial crisis of the last five years has also had an impact by forcing clients to reduce costs,” he says. “The Australian market is highly developed with many clients who are sophisticated users of legal services. Our survey shows clients are thinking along the same lines all around the world even if the trends are more advanced in some regions than others.”
In a video address after the release of the research, Jonathan Brayne, A&O’s UK partner says that although the unbundling of legal services after the GFC is one of the most pressing concerns for traditional firms, this research highlights ripe opportunities for them to incorporate such services into their current structure.
A&O is among a growing number of firms to offer alternative legal services to its clients.
As well as having an online services business that is “going from strength to strength”; the top tier firm is also growing its legal services centre in Belfast, and has recently launched flexible resourcing business Peerpoint.
“But for us innovation won’t come from A&O simply expanding into these new services and running them as separate high quality businesses under the A&O brand – the value for our clients will be in combining these services alongside high end law firm work,” Brayne says.
“For example, a matter may combine high end law firm work with consulting, contract lawyers and document review, and with technical and business processes to create a totally different joined up legal solution.”
There will soon come a time when firms won’t be able to call themselves “full service” simply by delivering a wide range of traditional legal practice areas in varying locations, he says.
Vitally, in order to achieve the best combination of cost and quality for clients, they will also need to offer a range of non-traditional services and delivery methods.
Asia Pacific findings include:
- Catching up fast with approaches in other parts of the world.
- Leading the way for use of managed legal services: usage is the highest of any region at 28%.
- 50% anticipate using hybrid approaches over the next five years.
- 66% find it difficult to coordinate multiple providers effectively.
- 44% have a preference for a one-stop shop model.