Tectonic shift in the legal marketplace: Distinction between legal practice and legal delivery
Until recently, law firms had a virtual monopoly over the delivery of legal services. They handled all facets of a matter – start to finish. No more. In the US, for example, in-house legal departments and legal service providers now account for nearly half of total legal spend. Their market share is rising while demand for law firm services has been flat for three years and counting. The practice of law is not changing but the delivery of legal services certainly is. This tectonic shift in the legal marketplace highlights the distinction between legal practice and legal delivery. The practice of law refers to the core tasks and functions that lawyers perform. The delivery of legal services describes by whom, from what model, and at what price point those services are delivered. The terms are still (incorrectly) used interchangeably because they had been synonymous when law firms had a stranglehold on elite legal expertise and access to legal source materials. That is what law firms sold and what legal delivery was about. But now legal expertise is one of several components of legal delivery, and that has changed the buy-sell dynamic in the legal marketplace. Globalization, rapid technological advances, and the global financial crisis of 2008 have transformed legal delivery. The confluence of these factors accelerated the “disaggregation” of legal services – peeling certain high-volume, low-value ‘legal’ tasks (e.g. document review, legal research, etc.) away from law firms. Marketplace acceptance of non-firm providers has spawned a new generation of tech-savvy, process driven, and well-capitalized legal services companies. They have corporate models different from law firm “partnerships” and utilize technology, labor arbitrage, and process management to deliver an expanding range of legal services “faster, better, and cheaper” than law firms. Corporate legal departments have concurrently grown dramatically in size, internal expertise, and legal operations capability. In-house lawyers have superior knowledge of the client’s business operations, enterprise objectives, and risk profile than outside law firms. A growing number of corporate legal departments have morphed from legal consumers to the principal providers of legal services for their companies. Like elite service providers, top in-house departments combine legal with technological and process expertise. They are part labor arbitrage, part new delivery model enabled by technology and business process. This has often resulted in a more efficient and cost-effective delivery of legal services than the traditional law firm model can provide.
Legal delivery is now a three-legged stool consisting of legal expertise, technology, and process management. Law firms tend to excel in legal prowess but generally lag in technology and process – key delivery components. This is a principal cause of the market upheaval in the legal industry. Some suggest that lawyers will soon be replaced by artificial intelligence and other technological platforms. Lawyers will no doubt work alongside robots and will rely more heavily on technology. But professional judgment, persuasion, and the client relationship will ensure that lawyers are not replaced or marginalized in the legal delivery process. Lawyers will not disappear, but the traditional law firm model likely will – except for a cadre of brand differentiated firms that handle high-value matters at a premium price.
What Skills Must Future Lawyers Have?
Legal expertise alone is no longer sufficient for lawyers to be competitive in the new legal marketplace. Some key additional skills required of future lawyers are: