Jim Jones’s (Hildebrandt Institute) PLL Summit presentation “State of the Legal Market 2011” outlined a series of factors which combined with the financial downturn created the “perfect storm” of disruption in the legal marketplace. The Corporate Executive Board issued a report to member General Counsel that was recently reported in the press giving the “In House” perspective.

The factors outlined below are forcing firms to rethink their strategies in the “post crisis world.”

  •  Increased access to Information about law firms. Blame it all on Steve Brill. He tapped into the thirst among lawyers to read about themselves and their competitors. He threw open the floodgates which exposed competitive law firm data to the world. There is now a cottage industry of competitors in the US and abroad creating ranking lists, exposing profits per partner, measuring associate satisfaction, prestige, diversity and pro bono commitments. This wealth of data has armed clients with competitive information and leverage in negotiating with competing law firms.
  • The drive towards commoditization. Contrary to popular opinion, the quality of work product goes up as firms move from totally custom “bespoke” solutions for clients through the standardized, systematized, packaged, commoditized continuum.
  • The growth of enabling technologies. Firms have been able to develop self service subscriptions for clients such as Linklaters Blue flag online services for compliance, Allen & Overy Online transactional document services. and commercial products from Practical Law Company which provides lawyers with checklists and templates for drafting. 
  • Emergence of New Service Providers. Legal Process Outsourcing companies, compete with law firm directly because, clients can chose to use them for certain projects rather than a law firm. But law firms can also take on large projects without having to invest in hiring long term staff. Projects like ediscovery and document review are now routinely outsourced through the hiring of temporary attorney or by hiring a PLO company such as Pangea3 and Integreon
  •  Law firm profitability in the boom years was driven by the ability of firms to raise their rates 6-8% each year Client pushback was inevitable. The economic downturn made continuous price increases unsustainable.
  • Changed basis of competition. Following the 2008 crash, the supply of lawyers exceeded the demand. Organic growth requires stealing market share from other firms.  
  • Clients begin to demand lower costs, alternative fee arrangements and higher efficiency. Firms begin to work implement workflows. 
  • Positioning Strategies. Firms are forced to develop more sophisticated strategies for positioning the firm’s practices, implementing technologies and processes to improve delivery and change the talent model to emphasize training and development/

The Corporate Executive Board recently released a report “Five Forces that will Change Legal.” As reported in Corporate Counsel “Five Forces that Will Change Legal..  The report was based on interviews with 100 Corporate Counsel and highlights 5 factors that will impact corporate legal departments.

Regulatory Issues will converge and the regulation of issues will fragment across international, national and local jurisdictions.

Increased focus of global regulatory compliance. Issues such as data privacy, anti-trust, executive compensation and corrupt practices are gaining importance globally, but there is no harmonization between local, national and foreign regulations, making it difficult for companies to have standard global policies and practices.

Information Grows Exponentially. Ediscovery requests are getting bigger as more and more data is collected within corporation. This will change how corporations manage their internal data.

Competing Demands for Corporate Transparency and consumer privacy will collide. Data security infrastructure will have to accommodate the competing of national and local regulations regarding privacy.

Corporate Legal Department Center of Gravity will shift. As corporations become more global they will need to manage their risks locally which may require legal departments to decentralize.

• Changing Legal Services Market Competition, GC’s will; chose among firms and LPO’s competing for the same work.

The Conclusion is that like law firms, legal departments will have to rethink staffing and talent management strategies, and embrace changes in their approaches to process and technological infrastructure to enhance efficiency.

 Implication for the library and knowledge managers

• Increased importance of our Competitive Intelligence capabilities to support strategies

• Increased importance of regulatory monitoring will mandate the development of knowledge resources to aggregate, distill or analyze comparable regulations arising form local and national authorities.

• Escalate migration from Knowledge Management tools to Knowledge Process Improvement that delivers real efficiencies to clients. Shift focus from knowledge harvesting technologies and “search” to implement knowledge regimes which integrate knowledge tools into best practice workflows.