Like many industries worldwide, the legal world finds itself upside down. Once the full-service law firm billing its clients by the hour dominated, now clients are demanding more focused legal expertise offered at competitive – sometimes fixed – prices.

After decades of rapid growth, the demand for traditional legal services has slowed enormously since 2008.[1] This sharp drop in demand is transforming the law from a seller's into a buyer's market.  The pressure for legal services at lower prices is attracting non-lawyers and less traditional law firms to the market.

In response to this, the traditional ways in which law firms provide and charge for their services will need to change more in the next five years than in the last 100 years if they wish to succeed.[2]

Three factors drive the sea change: non-traditional legal competitors, the influence of technology, and globalization.

The rise of non-traditional legal competitors

General practice law firms are facing new pressures from non-traditional legal competitors and outside service providers.

Accounting firms, consultants, and data-based suppliers are attempting to enter the legal market to provide legal services at lower price points. This has led to a new type of thinking about legal assistance which views certain areas of the law as commodities — such as bankruptcy, worker's compensation, and family law. This reality fosters a flat-fee approach for providing legal services.[3]

Boutique law firms specializing in single areas such as corporate and M&A, finance/capital markets, and tax advice are enticing traditional high value clients away from general practice firms.

Regional law firms are growing in numbers[4] because businesses often need legal advice in multiple locations and prefer working with one firm.

The effects of this new competition make it increasingly challenging to successfully operate as a general practice firm in a single location.

The influence of technology on the law

The practical impact of modern-day communication technologies is that a law firm no longer needs to be physically located in a city next to the courthouse and near the client. Firms can now exist virtually anywhere and provide the same advice and services as brick-and-mortar firms in high-rent areas.

Law libraries once stacked with books are now relics -- most reported cases, laws, statutes and regulations are easily accessible by anyone online.  This means that lawyers can no longer claim to have exclusive access to the "secret archives" of the law.

Technology makes it increasingly possible to displace lawyers who handle routine legal matters.  Computerized programs or low-paid workers located 10,000 miles away can often perform the same tasks at a lower price. [5]

The tidal wave of globalization

Growing numbers of businesses are no longer local and thus require legal advice from wider geographic areas. It is increasingly difficult for the single-office law firm to effectively respond in a cost-efficient manner.

Increasing numbers of companies conduct business both nationally and globally.  This drives demand for quality legal advice from a broad range of jurisdictions instead of just within a single market.

What this means for law firms

The swift, radical transformation of the legal market promises to permanently alter how companies work with law firms and lawyers — businesses are now in greater control over their choice of legal providers, and over the cost of legal advice and guidance.

These factors present those seeking legal advice with many more options and price points.

Options for legal advice in a global marketplace

While large international law firms have the advantage of excellent resources, reputation, status, and credibility – they rarely cover all key global markets and legal costs are uniformly high. Additionally, their service can be weakened by a “long chain of advice:” while the firm’s core is strong, its expertise in all jurisdictions may not be uniform.

An independent national firm can offer excellent jurisdictional and legal expertise for their area, a national culture closely akin to major national corporate clients, a short, personalized service chain, and an established understanding of and familiarity with national judicial and regulatory practice. That said, this type of firm will need some very good friends or a reliable international network to cover their needs in cross-border business and foreign jurisdictions.

Boutique law firms offer high competence in narrow, specialized areas, but do not provide general commercial or litigation expertise that is often needed by domestic and global businesses. This often requires businesses to hire a second firm.

When a business operates exclusively within a specific area, regional law firms can be a good alternative - however, their costs tend to be higher than local firms - and should a business need it, regional firms offer no coverage outside of their confined areas.

Legal networks and alliances

Faced with profound change in an increasingly global marketplace, many firms have joined legal networks and alliances. These relationships provide firms with local knowledge and insight by experienced local practitioners, a larger coverage area, and often lower costs than the fees charged by "magic circle" and larger international law firms. These networks can often be more flexible in their approaches than large international law firms, and there is less chance of a conflict of interest.

One potential disadvantage of legal networks is a lack of assurance that the quality of legal counsel is consistent, high-value. This means a network must continuously monitor and evaluate its member lawyers and law firms.

Meritas (www.meritas.org) is an example of a highly efficient and competent global legal network.  It has received an elite rating from Chambers, and is recognized for its quality assurance program requiring that each Meritas member law firm be recertified every three years— or replaced. With 176 member law firms in 76 countries, 7,000 member lawyers, and 220 law offices located throughout the world, member law firms provide a broad scope of legal services for businesses worldwide.

Conclusion

While there are a number of options available to businesses requiring legal advice, one of the most cost-effective global options is to work with an independent law firm that is a member of a high-quality legal network with a broad geographic reach.