Commercial law firms have a limited “window of opportunity” to adopt new delivery models which is unlikely to “remain open forever”, a report has warned.
The report, by Jomati Consultants, also revealed that four City firms are on course to receive almost £8m in government grants as a result of opening low-cost centres in Belfast and Glasgow.
Jomati said its evidence suggested that any firm employing more than 400 lawyers could benefit from low-cost centres and legal project management, while the barrier to entry for contract lawyer services appeared to be even lower.
The report, Re-engineering legal services: how traditional law firms are – finally – learning to embrace alternative working practices, is based on 30 interviews with lawyers and other professionals involved in the area, along with additional research. It found that most firms had introduced new working practices in a “piecemeal way”, though law firms adopting a ‘big bang’ approach were “not impossible” to find.
“Ultimately, it is quite possible that a select group of otherwise traditional law firms may succeed in transforming themselves into entities which operate in a fashion that is largely indistinguishable from their new market entrant competitors,” Jomati said.
“But, given the challenges of implementing just one operational reform within an existing law firm structure, such an evolution is likely to take years, rather than months. In that regard, it is arguably helpful that overt client demand for law firms to undergo such significant operational change remains – for now – sporadic.
“Firms therefore continue to enjoy a window of opportunity to explore their options and, if necessary, introduce those reforms deemed most beneficial to their practices.
“But, as alternative providers continue to become ever more established, and an ever-increasing number of law firms also seek to capitalise on the efficiency improvements they have introduced, it is unlikely that this window of opportunity for reform will remain open forever.
“At some point in the future, it is likely that client sentiment will change, and delivery models that are currently regarded as ‘nice to have’ will become a ‘non-negotiable must have’.”
Jomati said that as the number of firms setting up low-cost centres (LCCs) continued to grow, and savings became more apparent, there was “a real danger” that firms which did not explore their options would become progressively less cost-competitive.
“Clients may not be demanding that law firms establish LCCs, but they clearly do care about the ultimate outcome of this phenomenon: law firms’ ability – or not – to offer more for less.”
The report set out how four City firms were on course to receive almost £8m in government grants for setting up LCCs. Invest Northern Ireland has agreed to pay Allen & Overy £3.36m, Baker & McKenzie £1.28m and Herbert Smith Freehills £942,000 for setting up in Belfast. Meanwhile Scottish Development International has agreed to provide Ashurst with £2.4m to back its LCC in Glasgow.
On legal project management, Jomati said many firms had discovered that what was in theory a simple concept required “significant resources and training, the deployment of unfamiliar technologies, a degree of trial and error in relation to ‘what works’ – all in the face of internal cultural resistance, often from partners”.
The report went on: “For these firms, the end result – legal work that is more precisely scoped, more robustly priced and more appropriately staffed, is clearly worth the effort. Nevertheless, it should now be appreciated that, in order to reach these desired outcomes, implementing such an initiative is often a significant project in its own right.”
On contract lawyer services, the report found: “After a slow start, the UK legal profession in particular has begun to embrace the concept with some enthusiasm.
“It remains to be seen whether contract lawyering will become a viable business proposition for a large number of law firms and contract lawyers alike going forward, given that – by its very nature – the demand for contract legal services is unpredictable.
“Nevertheless, it is just possible that law firms may have stumbled on a way of working that suits them, their clients, and their own personnel, some of whom are in search of a better work-life balance.”
Tony Williams, principal of Jomati and former managing partner of Clifford Chance, predicted “ever-increasing convergence” in the way legal services are delivered.
“After a slow start, there’s now a real sense of momentum among traditional law firms to update many of their long-standing working practices,” he said.
“Unlike legal sector start-ups, established law firms don’t have the luxury of starting with a blank sheet of paper when deciding how they should operate, going forward. Instead, they must deliver – often significant – operational change while also keeping their existing clients and fee earners happy.
“Despite this challenge, it’s likely that there will be ever-increasing convergence in the way that legal services are delivered, as approaches previously considered alternative gain widespread credibility and acceptance among traditional law firms. That has to be good news for clients, law firms and fee earners alike.”