This month the ninth FT Innovative Lawyers report was presented, with a thorough analysis of the European legal sector. The report provides rankings and trend reports, inter alia evidencing the following distinctive trends:
- The legal market is recovering from the financial crisis and growth and profitability are accelerating at the big firms in Europe.
- Client demands are however still increasing, and law firms should not let the current financial success make them complacent about further innovations.
- In-house lawyers are striding ahead as the biggest drivers of change in the legal industry.
- Leading law firms in Europe are reforming their offerings and structurally changing from the center. The highest scorer in the FT 50 ranking of law firm innovators this year has embraced changes such as different delivery models and online legal services.
- The traditional law firm model is under pressure and large firms are now focused on rebundling and repackaging their services under the firms’ own brands by breaking down legal matters into smaller parts to be resourced in more cost-efficient ways, by the use of outsourcing, paralegals, contract lawyers, project management and technology.
As a summary of the analysis, the report finds “overwhelming evidence that models for the delivery of legal services have changed, clients have higher expectations, and in-house section of the profession has grown exponentially – one in four lawyers in the UK now practices in-house. Law firms’ use of technology is still low compared with other industries and is an area to watch.”
The trend towards integrated services is well established but firms are losing ground to in-house legal teams through the use of technology.
As concluded in the report, “the requirement for corporate legal departments is to generate revenue as well as to trim costs. This can be seen in developments that ingeniously reduce the cost of bought-in legal services and even potentially cut out the traditional role of lawyers completely.”
Since 2008 there has been a significant shift in the status of in-house lawyers. The voice of the client has become a strident call for change, and as the FT report shows, it is the company legal department that is most able to alter the way lawyers work.
Still, however, the profession has difficulties to accept the concept of disaggregation. For most law firms, the idea of offering legal advice in a way other than through a highly trained, highly paid human being is unthinkable.
Another trend is the increased single-supplier relationship between clients and law firms and the new kind of loyalty incentives. Client loyalty is moving away from individual relationships (maintained over dinner, playing golf or attending races) towards the firm’s aggregate knowledge and data sources. Law firms will increasingly need to “capture clients and be able to serve them across their business needs from top-end legal advice to every-day legal matters to implementation.”
Technology is still having a less significant impact than predicted (other than making lawyers more mobile and able to work longer hours), but is taking up in the in-house segment of the profession. Some of the technological innovations with the biggest impact are made in-house, with a growing number of legal functions using automated contract management tools and processes, and developing devices with the potential to affect private practice. One such example is Hewlett-Packard’s new M&A tool, which captures years of experience from internal lawyers to systematize the process and help the business make better judgments on acquisitions. Tools like this will substantially reduce the need for external counsel for process advice during a transaction, thus could potentially affect the whole M&A legal industry.
There are firms that already have realized the direction in which client demand is heading and have started to act accordingly. The firm that most demonstrates this change is Allen & Overy, which received the top rank in FT Law 50 for the fourth time, for being “at the forefront of willingness to use it premium brand to cover a suite of delivery models from quality lawyering to online legal services through to contract lawyers”.
Other firms, such as Eversheds, Berwin Leighton Paisner and Pinsent Masons have also followed Allen & Overy’s lead and travelled the path of disaggregation and are, reportedly, beginning to look at integration.
There are also other firms that are thinking outside the box and using new technologies and practices to help clients make substantial cost savings and to find better ways to deal with the enormous mass of information their organizations collect.
For example, Radiant Law combines high-value legal advice with process outsourcing in an innovative way to expand their contract management service.
Top of the FT ranking for Innovative law firms in client service are Bird & Bird and Berwin Leighton Paisner, who both have used state-of-the-art technologies to allow its clients to save significant sums in litigation costs via virtual legal counsels respectively within a structured team. Other firms are also attempting to use big data to provide a better service to customers. CMS has created an innovative desktop tool allowing lawyers to review vast amounts of documents and to ensure a consistent use of contractual clauses. Axiom has instead created an online portal allowing clients to keep track of the progress of the firm’s work and a guide to decision-making.
Some other trends shown in the report are the stronger and more sustained recovery in US and the dominance in cross-border transactions by US-originated deals, and how the disruption thanks to the Legal Services Act is not just by new entrants, but also that law firms themselves are seeking to innovate their business model to help them diversify and stand out.
Here is the complete list of the standout rankings of FT Innovative Lawyers 2014:
FT Law 50: Law Firm Innovators 2014
- Allen & Overy
- Linklaters
- Baker & McKenzie
- Eversheds
- Berwin Leighton Paisner
Most Innovative Law Firm’s In Corporate Strategy
- Shillings
- Bird & Bird
- Gómez-Acebo & Pombo
- Wiggin
Most Innovative Law Firms In Client Service
- Bird & Bird
- Berwin Leighton Paisner
- Axiom
- Shoosmiths
- Herbert Smith Freehills
- Radiant Law
Most Innovative Law Firms In Dispute Resolution
- Simmons & Simmons
- Allen & Overy
- Baker & McKenzie
- Pérez-Llorca
- Weil, Gotshal & Manges
Legal Industry Pioneers
- Parabis Law
- PwC Legal
Most Innovative Law Firms In Finance
- Linklaters
- Baker & McKenzie
- CMS
- Garrigues
- Shearman & Sterling
- Skadden, Arps, Slate, Meagher & Flom
Most Innovative Firms In Corporate & Commercial
- Hogan Lovells
- Latham & Watkins
- Macfarlanes
- Slaughter and May
- Eversheds
Most Innovative Law Firms In Value Resourcing
- Allen & Overy
- Olswang
- Axiom
- Berwin Leighton Paisner