The Future for Law Firms: Virtual Law Firms, Legal Outsourcing and the Battle for Talent

Virtual firms, legal outsourcing. It’s the future, and it’s coming to your firm now. Futurist and author Ross Dawson shares his thoughts on where the legal industry is heading.

 

The impact of connectivity, particularly through artificial intelligence and globalisation, has meant greater choice and control in deciding how legal services are carried out. Future changes will go further – influencing the traditional model of how a firm’s services are structured and delivered, according to Ross Dawson, futurist and author of The Seven Mega Trends of Professional Services.

If you can’t beat them, join them

Since London law firm Hogan Lovells introduced its Mexican-Wave initiative more than 10 years ago, which involves outsourcing routine legal work to regional law firms, firms around the world have followed suit. How law firms respond to this growing opportunity will depend on whether they view the availability of this resource as a threat or a blessing.

Dawson offers a range of future scenarios for the traditional law firm faced with increasing competition from this offshore legal process outsourcing (LPO). First, they can wave their business goodbye as their competitors, who offer this cheap and efficient alternative, undercut their service.

“If you are a large firm with high overheads, you can’t compete on price,” he says.

Or firms can make the most of the opportunity to specialise in their chosen area of law, leaving the process-oriented work to their competitors and the LPO service providers. The final option is to embrace this external service and offer clients ‘the lot’. Law firms can choose to draw on this cheaper LPO resource to complement the firm’s full service, one-stop shop. Firms then manage both the client’s complex and mundane work – setting the firm’s best lawyers onto the complex work and outsourcing the rest.

Top lawyers in the box seat

The element that’s critical to this amalgam is the talent. Understandably, the traditional staff model is also facing a shaky future. Young lawyers have classically accepted terrible hours and a high-pressure work environment in the hierarchical firm structure in exchange for the gains of reaching partner status. In law, it’s seen as the price you pay. The problem with the traditional model is that partner profits are dwindling due to margins being squeezed, as well as the impact of globalisation and competition.

“We are seeing an increasing flow of lawyers who don’t want to work under the traditional legal model.”

Dawson predicts that the best lawyers will increasingly choose to leave behind the hostile working environment – and join emerging virtual law firms.

Talent the biggest driver

That means in future, firms will need to work to fulfil both the needs of more demanding and price-driven clients, as well as appeal to a talent pool of lawyers who have more options than ever before. It augurs the end of the traditional staff model.

“There is a cycle where you need to attract the best people to charge the highest fees and attract the best clients. If you’re not able to attract people with the right pay and conditions, that cycle starts to break down. Although they have the big clients, the capabilities and the solid foundation, large law firms also have the legacy of the partnership structure, staff practices and overheads.

Dawson predicts that clients will start to shift how they purchase legal services, not necessarily depending on the large law firms as they have in the past. But he sees it as unlikely that large firms will crumble, at least in Australia.

“What we are beginning to see here is that big firms are managing to transform themselves. But we’re also seeing the rise of smaller niche legal firms that are very well positioned.”

Increasingly it’s these nimble firms that are better placed to adapt to the new paradigm. “For the clients, they’re able to provide a quality service at an attractive price.”

Multi-party information search

Looking further into the crystal ball, Dawson confirms the role of social media in the legal landscape.

“All professional work will be determined by personal brands and presence that are significantly driven by social media, so these are critical capabilities for any lawyer in any firm.”

Finally, the big change for lawyers will be in how legal information is accessed. Dawson says that in the future he can see clients engaging an expert or broker to complement their online search for legal information.

“You’re not hiring a lawyer, per se. You need an expert as opposed to a search engine to say, ‘This is the most relevant reference. This is the info you need to consider.’ There is now also an opportunity for access to network experts who can engage clients in conversations and communities from which lawyers and their clients can discover the best information – a fundamental shift from the database aspect that has been so much of the legal information industry to date.”

It’s clear that in future, law firms will need to deliver the best talent at the best price. Enterprising practitioners would be well advised to adapt now, before traditional legal business models disappear.

Subscribe to Legal Insight

Discover best practice and keep up-to-date with insights on the latest industry trends.