By Aaron Gott and Jarod Bona, Bona Law PC
It used to be that if your company needed legal services, someone would direct you to the most expensive commercial building in town where you would wait in an impressive mahogany-encased reception area with shiny marble floors before you would meet with expensively dressed attorneys in a conference room with the best view in the city.
No matter what your legal problem, the impressive law firm would handle it for you. The partners had practiced together for years, after growing up as associates together. They all knew each other and you knew them.
The bills were huge, but you didn’t really have a choice. Somebody has to pay for those marble floors and the multi-million-dollar views.
That was before—the market is changing.
Like many industries, the market is cutting the “fat” from the legal industry. The process isn’t complete, but it has started.
The legal industry took the last recession hard. In-house counsel grew impatient with massive bills during a time where there just wasn’t the money to pay them. At the same time—and perhaps reacting in part to these concerns—outside legal providers blossomed by engaging technology and finding new solutions.
If a litigation matter or due diligence for a merger required the review of thousands or hundreds of thousands of documents, you had to go to a big firm because nobody else had that many attorneys. And the big firms loved it because they could charge high rates for their associates to chain themselves to their desk or computer for twelve or more hours a day reviewing these documents, while the billing meter ran and ran and ran. It was the cost of doing business.
But that was before.
Now there is no shortage of companies that offer to outsource functions that were once the monopoly of these large firms. And when many providers offer services that were previously performed in-house (at huge margins), the costs plummet while quality and innovation peak. That’s just how markets work,and the legal industry is no exception.
How does this disruption help companies in need of legal services?
The disruption increases the number of law firms that can handle your legal problem. Law firms no longer need the massive resources that they once did, even to handle large cases or transactions. Firms can easily outsource certain functions to providers that can perform them at least as competently and efficiently, as the outsourcing providers’ business depends upon doing that specialized function well. This is true for every task from printing to attorney work.
Instead of a handful of large law firms that can help you, there are now countless firms—from boutique firms to giant international full service firms—that compete for your business. With more competition come better prices and services.
Not surprisingly, giant law firms that previously depended upon the market power that their economies of scale used to provide can no longer do so. We are in the midst of a restructuring of the legal market. Many top attorneys from large firms are leaving to start boutique firms with the understanding that they can provide the same services to their clients with a better cost structure and thus lower prices.
Of course, with greater competition, the firms that thrive in the future probably won’t be the ones with the expensive marble floors and giant conference rooms, but you were probably getting tired of paying for those anyway.