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A Cheat Sheet for 5 Recent Legal Industry Studies

A Cheat Sheet for 5 Recent Legal Industry Studies

The volume of digital information created everyday is eight times greater than that in all U.S. libraries.  It’s daunting to say the least and the legal industry too produces an impressive volume in the form of data, surveys and reports.

Over the last few weeks, there have been a flurry of legal industry studies published, and while we haven’t gotten to them all (yet), here’s a summary (with plenty of links for further reading) of five recent ones that stood out for us.

1. Not so latent market for legal services.

Hugh Louge, an analyst with Outsell, Inc., says law firms are caught in the middle amid new means to deliver legal services, according to a premium report titled “Information as a Legal Service.”  On the corporate end, GCs are bringing more work in-house while on the consumer end, demand for legal services is being met with alternative sources.

In an announcement about the report, he adds color saying, “clients are realizing that much of their legal needs can be met with low-cost information instead of expensive in-person advice. Information as a legal service is a new legal services delivery model that is profitable, scalable, and relatively easy to implement.”

Writing for Bloomberg Big Law Business, reporter Gabe Friedman gets Mr. Louge to place this in context:

“Baker McKenzie, for instance, has a subsidiary called LawInContext. It provides clients with the context that they need to make early decisions. Say a company is looking to expand into a new geographic market. They don’t need legal advice, what they need is information about the local tax laws, maybe the health and safety regulations. That’s all legal knowledge, it’s not legal advice.”

Outsell sizes this market at $98 million today, with a 15% growth rate each year and rising to $176 million by 2017, according to Bloomberg.  However, the market opportunity may in fact be much larger.  For example, Richard S. Granat previously suggested a “$45 billion latent market for legal services.”

2. IP litigation heating up?

“Patent case filings generally were higher in the first five months of 2015 than in the last eight months of 2014,” according to Lisa Shuchman writing for Corporate Counsel in an article titled, New Data Shows Patent Litigation Filings Up in 2015.  The study, based on data from Lex Machina, which also found filings in May 2015 were greater than all but one month in the last 18 or so.

If there’s an edge to be gained, the most recent CounselLink Enterprise Legal Management Trends Report found big law is has grown its market share in the IP litigation category to the tune of 61%. BTI Consulting estimated the U.S. market for IP litigation reached $3 billion in 2014.

3. Profitability analysis a top priority.

“Profitability analysis” is the number one priority for law firm pricing professionals, according to the “Pricing Officers in Law Firms” report by ALM.  Patrick Johansen, who pens Patrick on Pricing, said the survey is a “glimpse” into the roles and responsibilities in law firm pricing. “Profitability Analysis jumped to the top this year, bouncing last year’s #1 (Client Fee Discussions) down to #4,” he wrote in a breakdown of the ALM survey.

Profitability analysis may stem from shift toward AFAs.  “98% of law firms reported hiring a pricing professional because of alternative fee arrangements (AFAs), followed by cost pressure from clients (77%),” according to Mr. Johansen.

Indeed, a subtle increase in AFA adoption was an underlying trend in the CounselLink trend data. Though the percentage of overall matters structured under the other-than-the-billable-hour model remained flat, 76% of legal departments structured some work under an AFA. “Those law firms willing to engage AFAs and find a profitable model that also delivers value are more likely to find a receptive audience among GCs,” according to our own Kris Satkunas.

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4. GC aspire to CEO role as duties evolve.

One path to CEO might just flow through the Office of General Counsel. The Global Legal Post reported more and more GCs are “aspiring to the role” and “see themselves not only as top lawyers but also business leaders.”

The data is based on a survey by the same publication titled “The General Counsel Excellence Report 2015,” which was underwritten by TerraLex.  The survey reflected the views of 127 GCs.

Pricing and efficiency remained consistent trends, with 60% of GCs reporting regularly requesting AFA structures from outside counsel and three-quarters are seeking “more effective and cost-efficient service.”

However a shift in GC priorities underscores the evolving role for top corporate lawyers.  While regulation and compliance are still the top priorities, “last year’s rash of cyber incidents took its toll,” according to InsideCounsel Senior Editor Rich Steeves in an article titled, Survey says, GC roles expanding beyond just legal.  “The survey found that 31 percent of GCs are concerned with cybersecurity and privacy, which ranks third only to increased regulatory scrutiny and creating value for the company as top concerns,” he reported.

5. Demand hits pre-recession levels for some

The seventh annual Law Firms in Transition Survey 2015 survey by Altman Weil found “market demand has already returned to pre-recession levels in 32% of law firms, and another 41% of firm leaders expect demand to return in the next few years. Two-thirds of firms participating in the survey report increases in gross revenue, revenue per lawyer and profits per equity partner in 2014.”

The survey, which counted “the chairs and managing partners of 320 US law firms with 50 or more lawyers,” is makes a powerful suggestion in an otherwise frothy market, but it also found the landscape is not all rainbows and unicorns.

“I think the biggest take-away this year is conclusive findings that firms that are doing more in the areas of pricing, staffing and efficiency are enjoying better financial performance than firms that are doing less,” according to Altman Weil Principal Eric Seeger explained to The American Lawyer.

“Overcapacity” and “non-traditional competitors” – what Porter’s Five Forces might label as a “threat of substitutes” in legal – are placing pressure on law firms according to the study.

Law firms that report challenges also appear to be slow to adapt to the dynamics. “There is a clear correlation between strategic change and improved economic performance, but less than half of the firms surveyed are pursuing change strategies for lawyer staffing, efficiency of legal service delivery or pricing.”

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If you have a strong viewpoint on trends in the legal market, we’d welcome your ideas!

If you enjoyed this post, you might also like:
A Handy Reference Guide to 6 Legal Industry Studies

Photo credit: Flickr, Lindsay Holmwood (CC BY 2.0)

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About Frank Strong

Frank Strong
Frank Strong is the communications director for the LexisNexis software division located on NC State’s Centennial Campus in Raleigh. In this capacity, he leads communications efforts in support of software products for law practice and law department management and also litigation tools – across large law, small law and corporate counsel segments. With more than 15 years of experience in the high-tech sector, Strong previously served as director of public relations for Vocus, which developed marketing, PR and media monitoring software. He has held multiple roles both in-house with corporations, ranging from startups to global organizations, and has also endured the rigors of billable hours, having completed gigs at PR firms including the top 10 global firm Hill & Knowlton. A veteran of two year-long deployments, Strong has concurrently served in uniform in reserve components of the military for more than 20 years, initially as an enlisted Marine and later as an infantry officer in the Army National Guard. Strong holds a BA in Film and TV production from Worcester State University, an M.A. in Public Communication from American University, and an M.B.A. from Marymount University. He is a PADI-certified Master Scuba Diver and holds a USPA "B" skydiving license.
2 comments
James Bliwas
James Bliwas

Profitability analysis is increasingly important management tool. Yet many firms seem reluctant to use one approach used by most other businesses, including professional service firms such as accountants: Examining the profitability of specific clients and practices. Not doing so can be fatal. Indeed, numerous arguments over the profitability of offices and practice groups played a role in Heenan Blaikie LLP’s downfall. But finding a profitable sweet spot doesn’t have to be contentious.


It's possible now to measure the profitability of specific clients and practices, and not create a revolt in the partnership. But going through the exercise gives firms a much more precise way of responding to requests for fixed fee and other AFA pricing from clients.