Traditional firms warned over business model

Traditional law firms may need to adapt their business models further than anticipated over coming years to meet rapidly changing client appetites for new legal service models

Traditional law firms may need to adapt their business models further than anticipated over coming years to meet client appetites for new models of legal service.

CEO of ‘insourcing’ service provider AdventBalance, Ken Jagger, says the group’s recent Brisbane office launch is evidence that clients are driving new demand for alternatives.

“The traditional models that the law firms have been running will have to adapt, and most of them will be able to adapt, but I don’t think there is any turning back,” he said.

“The days of general counsel just sending all their work to one law firm or a couple of law firms is gone; they are looking for different ways of meeting their legal needs.”

London-based DLA Piper co-chief executive, Sir Nigel Knowles, recently claimed that while economic recovery and sustainable growth are now regular features in commentary pieces and political rhetoric around the world, legal services in 2014 is likely to be “markedly different” from this optimistic outlook.

“Analysing the changes that have taken place, one starts and ends with a shift in client expectations and requirements," he said.

"Clients are more demanding buyers of legal services – this can be ascribed to a number of factors, including the consolidation of legal panels, a greater scrutiny on fees and the desire for global solutions (and corresponding global discounts).”

He claims this will render many firms’ business models obsolete.

“Let's not forget the rise and rise of alternative business structures (ABS) and their holistic approach to commodity work - this one-stop shop offering will drive business from the plates of other firms.”

AdventBalance's Jagger names insourcing, where senior lawyers are provided to in-house teams on demand, as well as legal process outsourcing (LPO) and growing in-house teams as examples that fall into the diversifying mix of legal services.

“But there is still a place for the very high level services that large law firms provide.”

Jagger says AdventBalance has passed the stage where it feels the need to prove its model.

“The model is completely accepted as a part of the legal landscape, and is just one of the ways general counsel can manage things and get the support they need.”

The drive to reduce costs in-house has been a core driver of AdventBalance growth, Jagger says.

“There is no doubt at all that in the last few years there has been pressure internally on the budgets of general counsel; of course, general counsel have a keen focus on value and we think we are providing high level lawyers at a reasonable cost.”

DLA Piper's Knowles also claimed that it was likely the legal industry as a whole would face massive consolidation.

“Commercial law is a $300bn global industry - no one firm has more than 1% of the market share and this has to change," he said in an article published in the London Evening Standard.

"The sector is still remarkably fragmented; there are simply too many firms (and too many lawyers) in the market offering the same services without any clear differentiation. Consolidation is an imminent certainty and, furthermore, I expect to see consolidation on a scale not previously witnessed.”

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