In the recent 2020 Report on the State of the Legal Market, The Center on Ethics and the Legal Profession at the Georgetown University Law Center and Thomson Reuters Legal Executive Institute show us a legal sector that is about to change.

The report holds a lot of interesting financial data about the legal sector, mostly focussing on the US and UK markets. But it also contains research pertaining to the development of the operating model of law firms in the near future. In this LawyerlinQ blog post, we’ll take you through some of its findings.

Revolutionary Changes are afoot
Since as long as most of us can remember, the legal industry has operated on a model that has the law firm at the center. There have been changes, but no fundamental shifts. The research in this report shows that revolutionary changes are afoot. These will drive down future performance if firms fail to take account of a new model for law firm services that is emerging. Clients, non-law firm competitors, and even many law firms are now operating from a different view on the role law firm services should play in the legal ecosystem and how such services should be delivered.

Dramatic Change in the Role of Clients
In recent years, clients have found they have the power to push efficiency and cost-effectiveness in the delivery of legal services. That is changing the way they work with law firms.

From the LawyerlinQ point of view, a very interesting development is the disaggregation of services. Research shows that clients increasingly choose to create “virtual teams” of lawyers to handle particular projects. With lawyers from one or more outside law firms working with designated in-house lawyers and with other non-law firm service providers.

Other examples of the changing role of clients are:

• introduction of competitive procurement processes, in collaboration with corporate procurement departments;

• strict budgeting and billing processes, which require law firms to operate in more transparent and cost-effective ways;

• rise of legal operations professionals to manage external counsel;

• the shifting of work, previously done by outside law firms, to in-house legal teams.

Growth in Non-Law Firm Competitors
The number of non-law firm competitors in the legal market is rapidly growing. The legal arms of the big 4 accountancy firms are expanding in almost all sectors of the legal market.

An interesting development also is the increasing use of ALSPs (Alternative Legal Service Providers) among law firms themselves. Successful law firms choose to partner with ALSPs for cost, efficiency, and quality reasons. They do so because sometimes, it is to the firms and the clients’ advantage to outsource pieces of work rather than to provide the services on its own. This has resulted in the strategy of some firms to create so-called Captive Subsidiaries, that provide a variety of law firm related services.

Evidence of an Emerging New Model in the Legal Market
According to the authors, these and other developments described in the report, are evidence of a new emerging model for legal services. It not being “alternative” ways of delivering legal services, but replacing the prior ways. In other words; this new model is becoming the ‘norm’ and it moves away from the traditional law firm centric model. Legal expertise will no longer be the primary service clients procure on an hourly rate basis. Clients expect their law firms to be more collaborative (also with other service providers) and more open to developing multidisciplinary approaches.

Read about these and other interesting findings and benchmark numbers in the full report on the Thomson Reuters website.