News

Thu, Nov 27th 2008, 20:07

Headline: Richard Susskind: Law firms must adapt to survive
Publication date: 27/11/2008

In my new book, The End of Lawyers? I claim that the future for lawyers could be prosperous or disastrous. I predict that those who are unwilling to change their working practices and extend their services will struggle to survive. In contrast, lawyers who embrace emerging technologies and novel ways of sourcing legal work will trade successfully for many years, even if they are not engaged in jobs that most law schools anticipate for their graduates.

Many of my conclusions follow from research conducted among in-house lawyers. Invariably, general counsel tell me they are now under three pressures: to reduce the size of their in-house teams; to spend less on external law firms; and to find ways of coping with more (and riskier) legal compliance work than in the past. Both internally and externally, clients are requiring more for less. From 2004-07, this was a background theme for in-house lawyers. In 2008 it has become an overriding imperative.

As a consequence, law firms will increasingly find themselves asked to reduce their fees and to undertake work on a fixed-fee basis. In addition, they will often be selected by hard-nosed, in-house procurement specialists, and not solely by in-house lawyers. The legal market looks set to be a buyer’s market for the foreseeable future.

At the same time, new competitors are emerging — outsourcers and entrepreneurial publishers, for example. Meanwhile, liberalisation of the legal market will bring external funding and a new wave of professional managers and investors who have no nostalgic commitment to traditional business models for law firms.

To cap it all, a number of disruptive legal technologies are emerging — such as document assembly, closed communities, legal open-sourcing and embedded legal knowledge — which will directly challenge, and sometimes even replace, the traditional work of lawyers.

For many lawyers, therefore, it looks like the party may soon be over. I anticipate that the market is likely to respond in two ways to these changes. First, new methods, systems and processes will emerge to reduce the cost of undertaking routine legal work. This will extend well beyond the back office of legal businesses into the very heart of legal practice. To achieve the efficiencies needed, I say legal services will evolve from bespoke service at one end of a spectrum, along a path that passes through the following stages: standardisation, systematisation, packaging, and commoditisation. Many new ways of sourcing will emerge — including outsourcing, offshoring, sub-contracting and co-sourcing — and these will often be combined in the conduct of individual pieces of legal work. I call this multi-sourcing. These changes will affect not just high volume, low value work, but also — and vitally — the routine elements of high value work.

The second response by the market will be for clients, in various ways, to share the costs of legal services. In-house lawyers, I suggest, will frequently work together, often as part of online closed communities through which they will find ways of recycling legal work. In areas where their duplication of effort and expense is considerable, such as regulatory compliance, they will collaborate intensively and so spread the legal expense among each other. At the other end of the spectrum, citizens will have ready access to online legal guidance and to growing bodies of legal materials that will be available on an open source basis.

Law firms face two challenges in these difficult times. The first is to steer their businesses through the short-term difficulties of the next 18 months or so. There are no magic answers here. The best will control costs without incapacitating their practices and will invest in determined and focused marketing. The bigger challenge, however, is the long term, when the recession recedes. I advise that, looking across a three-to-five year timeframe, each business unit within a firm should be subjected to stress-testing — a formal evaluation of how it can face the pressures the market will bring. Some will not withstand the scrutiny and may be seen as terminally threatened by new developments. Others will find opportunities for new and exciting lines of legal business. Either way, it is as well to know now.

The End of Lawyers? Rethinking the Nature of Legal Services was published on 20 November.