Technology is driving force of legal shake-up

A seismic shake-up of the legal profession is altering the very structure of the traditional law practice

The business of law in Britain is being convulsed by the most fundamental evolutionary spasms experienced in the best part of a century, with technology driving much of the change.

Beasts such as alternative business structures with their concepts of multi-professional partnership and external investment were either unknown or universally disparaged as recently as a decade ago. Now they are part of the new normal.

On its face, the legal profession in England and Wales – the jurisdiction that sets the mood music for the rest of the UK’s lawyers – appears to be in rude health or at least if the pure yardstick of lawyer numbers is the measure.

Statistics show the two senior sides of the profession are booming. Today, there are around 127,600 practising solicitors in England and Wales, a whopping 54 per cent more than at the beginning of this century.

And the bar, which is routinely written off at the junior end as being on its last legs, has experienced similar growth. Currently, some 15,000 are in independent chambers, 45 per cent more than 14 years ago.

Yet those numbers belie tectonic rumblings beneath the surface. Many suggest the bubble will ultimately burst, if the air is not already leaking. A combination of corporate client pressure and enhanced technology is forcibly changing the very structure of traditional legal practice and the shape of the law firm of the future.

Lawyers
Since the start of the century the number of practising solicitors in England and Wales has grown by 54 per cent

It is beyond doubt that the heads of corporate legal departments were the big winners of the 2007-8 global financial crisis. Provided their companies survived the economic turmoil, general counsel (GC) were catapulted into positions of unprecedented power over their supplier law firms.

Whereas partnership committees at large commercial practices historically issued almost pro forma annual notification of hourly fee rate hikes, in the fallout of the financial crisis, general counsel suddenly found themselves with the whip hand.

“General counsel must always be aware of exactly who or what their money is buying,” Bruce MacMillan, senior commercial legal adviser at Visa Europe told the recently published GC Excellence Report.

TECHNOLOGY FOR SURVIVAL

And while law firms may have an image of being lumbering elephantine creatures taking decades to change pace and direction, some global senior partners are getting the message. They recognise that the old models are moving to the history books and modern technologies are the passport to business survival.

“There’s an incredible pressure, quite rightly, from clients to get more for less,” says Rob Day, the former London managing partner of King Wood Mallesons, the Sino-Australian global firm that merged with City player SJ Berwin in October 2013.

According to Mr Day, who has returned to the rank of corporate partner: “A lot of people, particularly with the ABS [alternative business structure] changes in the UK, have cottoned on to law as a business rather than law as a profession. And so you’ve got people coming in with a kind of an outsourcing mind-set. You’ve got the big accountancy firms moving back into the market and you’ve got boutiques that have spun out of some of the big firms trying to target particular niches of activity.”

There’s an incredible pressure, quite rightly, from clients to get more for less

Others point to the emergence of so-called virtual legal practices – sometimes ABSs, sometimes pure outsourcers – that have forsaken bricks and mortar to operate almost exclusively online or by providing bespoke services to in-house legal departments.

Relatively recently launched examples of the breed include Riverview Law, Axiom, Obelisk and Keystone Law. “They are offering general counsel something different – they can set up whole teams that can work on a specific project for years for a fixed price,” says Anthony May, co-founder of London-based professional services search consultancy Hedley May.

And forward-thinking global players are not sitting on the sidelines. They too are involved in cutting-edge restructuring to provide enhanced value-for-money options to clients.

Examples include Freshfields Bruckhaus Deringer, which is the latest UK law firm to plan the launch of a low-cost services hub, or so-called near-shoring centre, in Manchester. Allen & Overy and Herbert Smith Freehills have already created near-shoring operations in Belfast, while Ashurst has made a similar move in Glasgow. Indeed, Allen & Overy has gone a step further with the launch at the end of 2013 of Peerpoint, which provides contract lawyers to clients.

“Running law firms is essentially no different from running any other business,” says Nigel Savage, the former chief executive and president of the University of Law, who is now a non-executive director at Fletchers, a Merseyside personal injury and clinical negligence practice.

“A successful business must first control its costs and become more efficient, and then, secondly, drive revenue growth. Lawyers have done quite well at the former, but with notable exceptions, they are only just beginning to address the latter.”

He maintains the exemplar for efficiency is the personal injury sector. “It has had everything thrown at it in the last 20 years, and has consistently adapted its business models to fit the market by embracing technology and business process improvements. And now the corporate law firms are catching up with these trends.”