Legal Futures recently reported a big increase in demand for non-traditional legal services. Research carried out for Allen & Overy suggests that global demand for non-traditional legal services is expected to rise sharply over the next five years.
The report, Unbundling a Market: The appetite for new legal services models, highlights trends such as increasing demand for online services (predicted to rise by 9% to 37%), and for legal consultancy (by 6% from 24% to 30%). Other trends include the unbundling of legal services, as well as growth in the consumer legal services market and changes to the ways consumer legal services are delivered.
The report notes that the UK legal industry is ahead of the game in finding new and innovative legal services models, as pressure to find efficiencies has been much keener in the UK market. UK companies had adopted new legal services models earlier, says the report, due to increased pressure to deliver value in a price-sensitive post-recession economic climate.
While evidence of rising demand is clear on a global scale at corporate level, there appears to be less evidence of “rising demand” for the kinds of services provided by small and medium sized UK law firms.
What I believe we are seeing, however, is a changing environment where opportunities for non-traditional approaches to delivery of legal services may be appearing, and where some entrepreneurial businesses are starting to emerge.
These entrepreneurial businesses have arisen in response to issues with existing delivery models. Areas that have driven this change include:
The withdrawal of legal aid for family work has driven firms to find new ways to deliver legal services at a lower cost. Many are looking to operational efficiencies to save costs and unbundle services in order to offer legal services at lower costs or for a fixed fee. Funding and price are two different but related issues in consumer law (see next point).
Consumers are put off by the unpredictable costs of the traditional hourly rate model. There is also a trend for businesses to demand fixed (or banded) rates for all but the most complex or unpredictable cases. Delivering services profitably on such models has proved challenging for traditional law firms, and this is an area where start-ups, with a clean sheet for designing their service delivery can potentially have an advantage. An example of a start-up achieving success in this way is business legal services provider RiverView Law, which offers managed service solutions that free in-house legal teams up to focus on higher value strategic and tactical matters.
The rise of internet-based legal advice and direct access to barristers is another significant market-driven change. As barristers can now act directly for the public without the need for a solicitor referral, many are looking at affordable ways to facilitate this. One such method is through the internet.
Legal Futures reported on the first free online ‘community resource’ that enables direct access barristers to tender for clients’ work: CallMyBarrister. Since then, a senior partner who then became direct access barrister has now gone a step further and set up alternative business structure, which he intends to operate “on a ‘John Lewis’ profit share model.” (Reported in Legal Futures.)
The cross-sector trend of consumers demanding high levels of customer service and regular communication throughout a case is an additional consideration. Consumers are more willing than ever to take their business elsewhere if a company doesn’t deliver.
This trend is driving the need for a law firms to keep a much keener eye on cash flow and margins to ensure every aspect of their business is running efficiently and profitably. A good management information system is vital, in order to find these efficiencies and implement them operationally across the firm.
In addition to CallMyBarrister and RiverView Law, here are three more examples of innovation from entrepreneurial start-ups:
Various legal sector market and legislative changes are creating disruption to traditional delivery models, both in the UK and abroad, and in law firms of all sizes. More than ever, customers are demanding flexibility and affordability. Many, especially consumer, clients are accessing legal services and advice online as an affordable alternative to more traditional methods.
While most traditional firms aren’t offering online services, newer firms are coming in as competitors and offering newer online delivery models. It is still early days, and there have been some high profile failures. But this is standard market economics: early adopters do tend to have higher failure rates. But this doesn’t mean that the model as a whole is wrong, just that the methods and processes require some tweaking to get right.
If this is an area this interests you, you may want to check out a conference called Reinvent Law. Attended by academics and radical thinkers, it considers how law may be done in the future. I went in 2013 and would highly recommend it. The 2015 dates haven’t been announced yet but last year’s conference was in June.
Is your firm delivering legal services through non traditional models and methods?
It would be great to hear from law firms who have recently changed their service delivery model. How have you changed and what issues and benefits has this brought?
Does your management information system support the kind of data analysis required from non traditional legal services, or have there been teething problems?
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If you’d like to discuss how your law firm’s management information system could better support your operations requirements or business development activities, please contact us by email or call 0845 6806 843.
Blog post by Graham Moore, Managing Director, Exen Legal Solutions
Law Firm Practice Management System and Business Intelligence expert. Managing Director of Katchr.
If you’d like to discuss how large or small law firm software and legal financial reporting systems could help you run your practice more profitably, please give me a call on 03333 010 766.