The legal services sector has experienced a series of significant changes, driven by the liberalisation of ownership restrictions under the Legal Services Act and the introduction of alternative business structures (ABSs). Other factors impacting on the competitive landscape for law firms of all sizes and profiles include the global financial crisis and stricter national and crossjurisdictional regulatory regimes. For example, provisions of the Bribery Act apply outside the UK.
As consultant Simon Thompson, former chief operations officer at Linklaters, observes, although the legal services sector is undergoing unprecedented change, various parts of the industry are affected in different ways. The shift of global trade to the Far East has driven international expansion for magic circle and other large firms, many of whom have launched new offices in the Far East and Australia. The domestic market had been shaken to the core by the introduction of ABSs and competition from commercial entities.
For the first time ever, law firms will require a strategic approach
Last year saw the emergence of new ways of accessing legal services. Retail organisations, including the Co-op and WH Smith, and new ventures such as QualitySolicitors entered the market. There was a marked increase in online legal services. This commercial approach has led to a sharp focus on finance, including new funding options for law firms and other legal services providers. Third party litigation funding is maturing and thus far it has focused on business and industry, and is proving particularly attractive to investors who recognise the advantages of uncorrelated risk in a turbulent economy. Legal budgets remain under pressure and corporate clients in particular are expecting external counsel to deliver more for less in a market that is still reacting to long-anticipated changes.
This applies equally to magic circle firms operating in new jurisdictions and markets and high-street practitioners facing up to commercial competition for the first time. This supplement highlights the key areas of change. It features expert guidance from leading commentators and identifies some of the tools and tactics that are helping law firms work more efficiently while retaining the “trusted adviser” status that differentiates them from their commercial competitors. As Professor Richard Susskind, who predicted the transformation of the legal market in The End of Lawyers? observes, for the first time, law firms require a strategic approach. This involves identifying and focusing on core markets, taking different approaches to routine and specialist work, and finding new ways to deliver services efficiently and cost effectively while developing, enhancing and maintaining trusted client relationships. Legal technology is a key driver and a catalyst for change.
Business intelligence and financial analysis tools support strategic decision-making and automated processes, and workflows boost productivity and mitigate risk. Outsourcing non-core services offers significant cost savings while maintaining profit margins. But as Mr Thomson and others have commented, although efficiency measures are important, law firms trade on knowledge and expertise. Working relationships are key, and collaborating with clients and understanding their requirements, supported by the latest technology, needs to remain an integral part of law-firm culture. So any law-firm strategy should include the role of the in-house counsel, the biggest purchasers of legal services, in shaping the new legal services landscape.