For BigLaw, the Hits Just Keep on Coming
In a recent interview reported in Bloomberg BusinessWeek,* a top legal consultant said that partner layoffs at America's largest law firms are quietly picking up speed because a new form of competition is diminishing their billable work. Legal process outsourcers (LPOs) and other alternative legal service providers have been taking low-value work from traditional firms for some time, but now, according to the consultant, they are going after the crown jewels of large law firms - handling entire merger and acquisition transactions, not just the due diligence aspects of deals. For smaller deals, clients are finding that they don't need to pay $1000 an hour partner rates to get associate-level expertise. Instead, they are hiring LPOs to do the work, and simply ask higher priced outside counsel to oversee it.
BigLaw has become synonymous with big hourly rates. But technology such as document review software has put competitors like LPOs on the same service plane as large firms without the high rates, creating the impetus for alternative fees. Because of advances in technology, many tasks can now be done in a fraction of the time with a fraction of the number of lawyers. When lawyers charge by the hour and see their time reduced, and thus their revenue, there is an impetus to charge a fixed fee. This is anathema to the economic model BigLaw built, and it is similar to the transformation affecting every industry where technological innovation occurs.
It is inevitable that BigLaw will continue to falter. They may serve the 1% of the corporate world. But, there will be a large group of customers under-served, a juicy target for other lawyers. As technology is accepted, sole practitioners and small break-away groups from BigLaw will cater to the 99%, mostly consumer-oriented clients, but also smaller companies that don't fit the culture of BigLaw. There is a lot of work available for those firms that are flexible enough in their cost structures and use of technology to be competitive.
The common thread is that lawyers will need to pay close attention to the needs and wants of their clients. Large firms didn't grow without being attentive to client needs at first, and all lawyers will need to be more attentive in the future if they expect to attain and then retain the loyalty of their clients. And technology will be more of a differentiator in the future. The firms - like LPOs - that adopt technology to reduce the costs of their operation, and then passes those savings onto the client, will continually define the future of the legal profession.
*"Layoffs Coming to AmLaw 100 Law Firms," 2/11/13
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