Why law firms have left consulting to accounting firms over the last few decades is a mystery. Accounting firms quickly moved up the value chain and are viewed by clients as strategic partners leaving law firms behind. But Law Firms really should get into the consulting business as evidenced by the fact this morning’s news from thelawyer.com that Eversheds Sunderland’s consulting business brought in over GBP 26 million ($33 million) in 2017.
Today's announcement that EY acquired Riverview Law has been bouncing around my head all day and I've finally figured out why. This acquisition along with 3 other 2018 New Law transactions have legitimized New Law.
Last week brought additional news of another law firm forming a strategic partnership with an alternative legal service provider. This time it was Hogan Lovells, announcing a strategic partnership with an alternative service provider for access to a cadre of flexible lawyers. This is the second strategic partnership that Hogan Lovells has entered into with an alternative legal service provider. DLA Piper, Allen & Overy, and White & Case have also entered into strategic partnerships with alternative legal service providers.
From more work for employment lawyers, tax lawyers, and M&A lawyers to prior "in-house experience" possibly required to a bankrupt company owing major law firms close to $3.5 million in legal fees to tips on starting a virtual law firm to law departments thinking outside counsel fees are too high and wanting law firms to embrace technology these are the major legal industry trends we've been reading about this week.
Back in January of 2017, we made 8 predictions about the legal industry for the upcoming year. You can read that blog post by clicking here. That was also our first ever blog post (sniffle, sniffle)! Is that the digital equivalent of a rookie card?
We gazed longingly into the Nimble Magic Eight Ball and tossed out these 8 predictions about the legal industry in 2017:
If your law department or law firm is still delivering legal services the same way it was doing it 10 years ago, you’re behind. Change is happening because purchasers of legal service are demanding it and innovative legal service delivery models have entered the marketplace.
On October 25, 2017, we convened our 2017 Nimble Forum on Legal Industry Pressures, Operation Efficiency, and Pricing Strategies. Our first panel had a thought-provoking discussion on Legal Industry Pressures and identified 8 Key Trends in the Legal Industry. The idea of this Nimble Forum was spawned by our 2017 Legal Market Outlook Survey. You can get a complimentary copy of those results here.
Our great panelists for this topic were:
- Teresan Gilbert-Chief Intellectual Property Counsel at Lubrizol
- Nancy Berardinelli-Krantz-VP and Chief Counsel, Litigation at Eaton
- Bill Garcia-Chief Practice Innovation Officer at Thompson Hine LLP
- Rebecca Grunick-Senior Director at Black Letter Discovery
The 8 Key Trends identified in the discussion are:
1. Law Department Budget Cuts. Law Departments are expected to “Do More With Less.” Law Department Budget is not coming back. The law department is expected to act like every other department and create efficiencies and help provide some return on investment. Sometimes this means creating self-help tools to enable non-lawyers to do some of the work that the law department used to do. Other times it means finding ways to use technology to automate tasks. Law departments and law firms are sitting on a lot of unmined data. By gathering the data and interpreting it, law departments and law firms can make many more strategic and prioritization legal spend decisions, which transitions nicely to #2.
2. Legal Operations. Law departments and law firms are sitting on a mountain of data. Lawyers need to adapt how they work and start to see some of what they do as a repeatable process. Every litigation has similar steps, a similar process. Each acquisition transaction is different in some way but, in general, the overall process is the same. There are organizations like CLOC (the Corporate Legal Operations Consortium), that are pushing for standardization of legal processes.
3. Innovation. From alternative legal service providers to legal technology to CLOC there is a ton of innovation going on in the legal industry. Each is innovating legal service delivery. The widespread adoption of these innovators has been slower than in other industries because lawyers are typically risk adverse. Law firms that partner with alternative legal service providers are seen as innovative and progressive by purchasers of legal service.
4. Talent Development and Management. It is not enough to be a “good lawyer.” Within law departments, the lawyers also have to be legal operations specialists. Business acumen is critical. You have to be able to provide strategic data and metrics to your business partners. Many senior lawyers are aiming to avoid change because they think they’ll be gone before they are forced to. Many younger lawyers are hungry for change and innovation. What does the role of a lawyer look like in 5 to 10 years? Will law firms hire a non-lawyer sales force? How are law departments and law firms developing their talent pools? What is the succession planning for baby boomers?
5. Diversity and Inclusion. Purchasers of legal service are serious about their commitment to diversity and inclusion and are ceasing to do work with law firms that are not showing a similar commitment. Eaton has a goal of one-third of their North American outside legal spend going to diverse firms.
6. Feedback and Continuous Improvement. More and more law departments are conducting a formal annual review process of their legal service providers. Law departments want their law firms to reciprocate with client satisfaction surveys and performance review meetings. Law departments are looking for true business partners that add value, continuously get better, and provide business intelligence. This is the type of relationship building they are looking for and not tickets to basketball games and concerts.
7. Convergence/Consolidation. Tied to #7 and the annual review process is the consolidation of legal service providers. This is an ongoing trend and the law departments represented on our panel talked about how they removed up to 10 law firms last year due to performance issues whether that be efficiency or what was viewed as a lack of commitment to diversity. Consolidation of legal service providers allows the law department to wield more pricing power soliciting larger volume discounts.
8. Cost Certainty. Purchasers of legal service are looking for cost certainty. That is not going to change. Law firms continue to struggle with budgets. “I need a number not a range.” Law firms are failing to proactively offer alternative fee arrangements. Meanwhile, law departments are getting more sophisticated with their data. They know what most types of matters should cost because they’ve mined that data. Law departments are looking for cost certainty and creativity when it comes to pricing. Proposing hourly rate structures in RFP responses is viewed negatively.
If you thought this discussion was great, come to our next Nimble Forum on Hiring & Culture: Best Practices. We have another great group of panelists. Click Here for more information.
If you looking to improve your legal service provider selection process, take a look at the Nimble Guide to the Legal Service Provider Selection Process by clicking here.
Altman Weil recently released a special report "10 Years of Law Firm Mergers". Click here for a copy of the report.
Tons of interesting insight provided by the report, such as:
- 78% of the acquisitions were of small firms of 2-20 lawyers. Smaller acquisitions can be done quickly and are a low risk way to buy market share.
- 49% of the acquisitions in the U.S. were in the South (Florida and Texas mostly) and the Middle Atlantic (New York and Pennsylvania led the way). Geography is an important dynamic.
- Since 2013, there have been more than 80 acquisitions per year. 85 acquisitions closed in 2016.