Five drivers of change in the legal services market
A prediction: By 2020 there will be less involvement by lawyers in many of the tasks that until now have made up their staple diet’[1].
What are the key drivers of this predicted change? Summarising the Future of Legal Services research completed by the Law Society of England and Wales (‘Study’), this Innovation Insight outlines these factors.
The Study states that ‘[i]t seems inevitable that solicitors and lawyers face a future of change on a varied scale, depending on area of practice and client types. Business as usual is not an option for many, if indeed any, traditional legal service providers’.
The Study highlights the following drivers of change, and comments that there is considerable overlap among them: none of these drivers operate in isolation.
1. The business environment
Globalisation is said to have helped the big firms with strong client relationships to increase their global footprint.The Study further suggests that the developing markets, such as China and India, along with the emerging ones of Indonesia and Mexico, will continue to bring out more cultural and legal differences that impact how business is undertaken.
2. Private client purchasing behaviour
Considering the lawyer to personal client relationship, demand for legal services will continue (people will still get divorced, commit crimes, die etc).However, the Study notes that, currently, there is a ‘. Further, for even knowledgeable clients (something which is the same here in NZ). Generation Y and the Millennials are beginning to make their mark on the economy, and their significance will only continue to grow. Currently, there is a significant gap between how traditional law firms communicate and connect, and the expectations and methods used by Generation Y and the Millennials.
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3. Business client purchasing behaviour
The Study suggests that demand for legal services in the business arena will increase due to the business environment becoming more complicated.But also, it notes that buyers of corporate legal services (e.g. the c-suite and in-house counsel) have an increased bargaining power due to shifts in the power relationship with law firms.These shifts include greater access to information allowing comparison of costs between providers, an increased willingness to unbundle legal services, and a growing availability of alternative providers.
4. Technological and process innovation
Technology enables change to occur.The Study suggests that technology impacts the provision of legal services in five ways.It enables lawyers to become more efficient at procedural work and that work able to be commoditised; reduces costs by increasing efficiency (e.g. AI systems); enables new law firm models to be established; generates new work around new ways of doing things, cybersecurity and data protection etc; and supports changes in clients’ decision-making processes and purchasing behaviours.
5. Increased competition and new entrants into the legal marketplace
Historically the legal marketplace has been protected with barriers to entry because of the specialised nature of legal work, the level of rivalry between top firms and the difficulty of displacing law firms from established client relationships.However, these barriers are coming under pressure from legal technology companies, accounting firms, niche providers, unregulated providers and clients themselves.In the lawyer to business marketplace legal technology companies and accounting firms are the two main competitors. (Note:The Study was published in 2014, and to date even more top tier accounting firms have entered the legal market). Also, an increasing number of in-house counsel are likely to be taking work back in-house and opting for unbundling of their legal needs (where they seek expert advice only at key stages).
The Study concludes that these drivers of change bring both challenges and opportunities for those providing legal services.Opportunities include using technology to continue to improve efficiency and user-experience, along with finding different answers to challenges around scope of work, teams, pricing, management of business risk and strategic innovations.
Finally, the report predicts that:
“If a business is not reinventing itself to adopt to changing market conditions then it is highly likely it will go into decline or be taken over by those that are better adapted to the new environment. This is no less true for law firms than for any business".
[1] The Legal Services Consumer Panel, 2020 Legal Services Report, The Law Society of England and Wales, 2014.