The 9 Trends That Continued to Drive Change in the Legal Sector in 2017

Relentless disruption, change and innovation are once again the key themes for lawyers this year. Increasingly sophisticated technologies along with pressures from clients, employees and regulatory systems are pushing firms to keep up. However, these changes are also delivering the opportunity to re-imagine legal services and better meet market demands.

The 2017 Australia: State of the Legal Market report, published by the Melbourne Law School and Thomson Reuters Peer Monitor®, identified the dominant trends for 2017, along with those that are likely to exert influence into 2018 and beyond.

Here’s a guide to the more significant trends that are set to shape the legal sector over these next few years.

1. Legal technology continues to grow and drive change

Nearly 750 companies across the globe now develop and sell technology for the legal market, according to Stanford Law School’s LegalTech Index, creating an environment of fierce competition in the legal tech sector – including in the Australian legal market.

Many larger law firms now have dedicated legal technology development teams that combine legal, project management, data analytics and IT skills. Allens Arrow and Gilbert + Tobin’s G+Ti initiative are examples of this multidisciplinary approach. Law firms are also starting to take a keen interest in the form of equity stakes in legal tech startups.

While the impact of process and collaboration technologies is already being felt, the effect of a third category of legal technologies, cognitive technologies is more uncertain. These cognitive technologies – a subset of artificial intelligence that deals with ‘thinking’ behaviours – have the potential to majorly disrupt incumbent providers.

2. Embracing innovation as a strategic theme 

Many firms are aiming to give ‘innovation’ real meaning by adding or elevating it as a major element of their business strategy.

Of course, by its very definition, innovation doesn’t involve any uniform approach. Firms are experimenting with innovation committees, ‘shark tank’-type innovation competitions, hackathons, app development and incubators.

Looking forward, the relentless pace of change is likely to continue to put pressure on firms to respond to client demand for new and innovative ways of accessing legal services – driving further innovation.

3. Cybersecurity a real threat

The breadth of highly sensitive information held by law firms is increasingly making them a target for cyber criminals. In 2017, the issue of cybersecurity and particularly the threat of ransomware has been highlighted, with some commentators questioning the cyber-resilience of the legal community. Reports indicate little more than 40 per cent of law firms plan to spend more on cybersecurity in the next 12 months.

Meanwhile, governments in Australia and around the world have had a busy year introducing and refining schemes for data protection and mandatory reporting of data breaches.

For guidance on how to navigate the aftermath of a data breach, download our free toolkit here

4. Good (and bad) news for law graduates 

While the larger firms increased their graduate intake over previous years in 2017, law graduates are still finding it more difficult to find clerkships and full-time employment in traditional law firm roles. And it’s no wonder, with 39 law schools now producing more than 7500 Australian law graduates each year.

The competition between graduates for legal roles is driving change though, with law schools adding more career-driven features to degrees, including:

  • Adding legal technology and app development to their curricula
  • Incorporating internships and other short-term contract models to improve employment prospects.

5. Global boutiques now number 20 

There are now 20 global boutiques in Australia, plus the Big 4 accounting firms. Global boutiques are firms like Clyde & Co, Jones Day and White & Case – Australian offices of international firms that operate (in Australia) in selected practices and have less than 30 partners.

Global branding, extensive client and referral networks, and superior support infrastructure are some of the advantages propelling the growth of these boutiques.

6. Boutique, specialist and focus firms filling a gap 

Boutique firms focusing on a specific niche are filling a gap in a competitive market, being well placed to respond to market demand and offer the more ‘open and authentic’ service that some clients now demand.

The specialist patent, trademark and intellectual property (IP) legal market in Australia has also been revolutionised, with about 70 per cent of the market now being serviced by ASX-listed companies.

7. NewLaw continues to grow – upwards and outwards

NewLaw isn’t so new anymore. The term was first coined by Eric Chin (formerly of Beaton Capital) back in 2013 to describe law firms “designed around virtual work spaces” and relying on BigLaw lawyers looking for more flexible work arrangements.

However, NewLaw held onto its upwards trend this year. Reports indicate in-house legal departments budgeted to spend around 9 per cent on NewLaw firms in 2017, up from 7 per cent in 2015.

The market for NewLaw services is also pushing outwards, with more NewLaw firms tapping into demand from SMEs and the general public in addition to bigger business clients.

8. Pressure from within as employees’ working preferences continue to evolve

One thing fuelling the growth of NewLaw is the continuing demand for more flexible legal roles.

The gig economy, which promises a win–win for firms and lawyers alike, is a reflection of the changing expectations of many lawyers around what a career in the law looks like – in terms of the number of hours worked, the pattern of hours worked and where those hours are worked from. And these expectations are also being felt within traditional firms, particularly as technology enables the working day of a lawyer to be re-imagined.

9. Pressure to go paperless from judicial and regulatory systems 

Lawyers are, in some cases, being required to embrace digital more quickly than they’d prefer as courts and government bodies adopt the paperless approach. Electronic conveyancing reform, for example, is one area currently pushing the legal industry towards a more digital future.

Moving into 2018 

As technology evolves and drives change, it’s clear that new business models and ways of delivering services – that better meet market demands – will ensure the best opportunity for future growth. Looking forward, firms that can truly embrace innovation, rather than just throwing the term around, are more likely to rise above the rest.

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