What’s Going On Here?
The legal marketplace is now more competitive than ever. But what’s changed?
What Does This Mean?
Law firms were all once coexisting as untouchable money making machines. A lot’s changed since. The behaviours of clients have started to adjust with companies now sending routine work to cheaper firms, saving the complex work for expensive, corporate firms. But the main change which has led to this relentless competition has been the increase in the number of alternatives to traditional law firms. The main two are competition from in-house teams and competition from the ‘big four’ accounting firms.
Why Should I Care?
Money’s tight for companies and they’re under pressure to reduce spending on legal fees. One way they have achieved this is by adopting a ‘DIY’ approach to legal advice, keeping it internal (where possible). Clients are beginning to unbundle jobs and identify any elements that they can keep in-house. Then, in cases where they need direction on complex points, they turn to law firms for the provision of that service.
Although it’s unlikely that normal businesses will ever be able to rely entirely on the expertise of their own teams, the reduction in demand for legal services is making a noticeable dent in the pocket of law firms.
The big four accounting firms (Deloitte, KPMG, Ernst & Young, PWC) take on much more diverse work now than just ‘accounting’. For the past 5 years, they have developed legal arms (you might have seen them at careers events) and emerged as the biggest threat to law firms. These firms are now one-stop-shops for all your corporate service needs. Another advantage they have over traditional law firms is their scale. They are global like no law firm is which allows them to quickly take advantage of changing regulations. In 2013, Deloitte Legal opened its own law firm in Shanghai because of a rule which allowed foreign accounting firms into the country but not law firms. However, again, it is unlikely that clients (especially corporate ones) will ever turn to these firms for all of their legal needs, due to the complexity of the work.
Although the need for traditional law firms still exists, they are still in competition with each other too! Law firms are now having to become even more efficient to keep costs low enough to attract clients and remain in the race.
Long story short: Find clients and keep them.
Article written by Idin S.
If you're interested in writing for Littlelaw, click here for more information.