A View From London – Viva la revolution in legal services

The stakeholders in the legal market have finally become aligned – clients are now
at the centre of the legal services solar system with premium law firms relegated to
an orbiting position, says Bryan Hughes, Chief Executive of Eversheds

There is no question that the worst
recession for 80 years has had a major
impact on the legal sector. General
Counsel are under pressure to deliver
more for less. In turn, they are
demanding reduced costs and greater
value from their legal advisers. Quite
rightly they want accountability when it
comes to how their budgets are being
spent and more imagination when it
comes to fee structures.

For law firms this has meant facing
up to challenge and change. Whilst
some are holding fast, hoping that the
boom times will return soon, the
smarter ones are adapting for the longer
term.

Eversheds latest Law Firm of the 21st
Century Report shows that the legal
landscape has changed permanently and
more quickly than anyone could have
imagined when we produced our
original Report in 2008. Even before the
credit crunch, it was clear that clients
were disillusioned with ever-increasing
fees, wasteful practices and an
unwillingness to change. Harsh
economic times have polarised these
issues.

When the severity of the recession
became apparent at the end of 2008,
opinion was divided as to what this
meant for the legal market. Would it
bring about a new world order, or
would the market revert to its prerecession
shape as soon as the cycle
swung up again?

For our 2010 update, 130 General
Counsel and 80 law firm partners were
asked whether they thought the
recession would have a lasting impact
on the profession. A resounding
majority (78%) answered 'Yes'.

However, the recession in itself was
not thought to be the key driver of
change. What it has done is accelerate
other significant, long-term drivers.
Some believe that this change has been
accelerated by as much as ten years.

The research identified four major
factors which are driving change. The
confluence of these, stimulated by the
recession, has created a perfect storm in
the legal market. In order of importance,
they are:

• globalisation – the move to the
East

• increasing professionalism and
status of the General Counsel

• technology

• the Legal Services Act in the UK.

Shifts in the business world are
undoubtedly affecting the way lawyers
interact with their clients.

General Counsel have increased in
importance in their companies, private
practice has been put in its supplier
place and the billable hour has been
relegated to an internal facing tool in a
varied fee toolbox. Value and efficiency
have finally become common in a sector
that has stubbornly refused to follow
business rules that say the client is
always king.

The recession may have caused law
firm redundancies, and those more
exposed to financial services and real
estate will have felt the pain more than
others.

But overall, lawyers will actually be
more significant business players in the
new world.

The increasing role of regulation,
ethics and the re-examination of risk are
core areas for the lawyer, ensuring that
even as the transaction 'go-go' days
wane, they still have an important role to
play. What they might not see any more
are super-high fees and, at the premium
end of the profession, headcount may
shrink for the next generation.

For Western law firms, the shift to the
East is well underway both as a move to
follow a global economic trend but also
as the drive to efficiency dictates that
low-cost jurisdictions are a key
component of cost base reductions.

Few law firm leaders now believe that
old models will survive. Some may
occupy the role of trusted adviser, but
even this has been assumed by General
Counsel who, whilst wanting
collaboration, will put value for money
first. And with the power resting with
General Counsel for some time to come,
what they want (and need) will dictate
how the market develops.

Whilst little good has come out of this
recession, the much needed reality check
for lawyers is, perhaps, one positive byproduct.
Is the time ripe for a revolution
in the delivery of legal services? Our
Report suggests that it has already
arrived.