Legal
Overview
One Minute Read
Ever growing regulation and digitisation are challenging the Legal Services industry, increasing competitive pressure and raising client expectations. COVID-19 and now declining economic and geopolitical conditions only make things harder. In response, the industry is transforming towards to the law firm of the future driven, driven by five challenges and the widespread adoption of digital technology.
Industry Description
The legal services industry provides services, including advocacy and advice on a range of topics, such as commercial, property, private, criminal and family law. The range of roles includes solicitors, barristers, legal executives and licensed conveyancers.
There are three types of legal services business and the implications will depend on the business structure: Lockstep Partnership, Limited Liability Partnership (LLP) and Alternative Business Structure (ABS).
The global legal services market was valued at about $680 billion in 2021, growing at 2.3%.
Customer expectations and regulation designed to open up the legal services market (such as the UK Legal Services Act 2007 which allowed firms managed, owned or controlled by a mix of lawyers and non-lawyers to offer legal services) is creating new competitive opportunities and squeezing margins. Competition is coming from players such as US law firms, the Big4 accountants, ASB legal businesses and LawTechs.
Simultaneously law firms are being squeezed by the growing volume of regulation and information in their client’s world and increasing digitisation.
Drivers
Shaped by the global megatrends and now the pandemic, the industry is being shaped by five major drivers:
Credibility – Law firms have always needed to demonstrate their expertise, experience and credibility to customers, but this is becoming more challenging as industries become more complex and regulation continues to grow. They also need to demonstrate their corporate social responsibility.
Security – Legal services is an attractive target as they hold sensitive client information, handle significant client funds and are a key enabler in commercial and business transactions.
Talent – The competition for talent is increasing both inside the legal industry and as potential recruits are tempted by more “trendy” industries. The traditional workstyle of the industry has not been seen as attractive or flexible.
Innovation – Clients are looking to law firms to demonstrate innovation in how they do business. The court system is migrating to operating digitally.
Competitiveness – Clients are expecting more transparent value for money with a trend towards fixed price services.
Transformation
The traditional legal ways of working – with a large dependency on office work, paper documents, manual processes, and local desktop computing and storage – has to change. The Law Firm of the Future is multi-channel, hybrid working, uses intelligent processes & AI, and does business digitally.
Transformation will require a shift to:
Multi-channel Engagement
Hybrid Working
Intelligent Operations
and ultimately shifting business models to participate in a digital Legal Ecosystem.
The COVID-19 pandemic has forced a shift to digital interactions and remote working that is unlikely to change in the new normal (some firms expect up to 80% of staff to permanently operate in an agile way).
Digital Technology
Digital transformation will drive needs for Business Applications to help automate key processes and manage information. Data Management will be required to deal with a deluge of information caused by the growth of regulation and information, and Artificial Intelligence will help complement the lawyer and drive efficiency.
Cloud computing is required to support innovation, flexibility and customer experience, a Digital Workplace to enable a remotely located workforce, whether on-site, at home or in satellite offices and Networking & Communications to deliver a consistent and reliable experience.
Security, Compliance & Data Privacy is also critical as customers will expect a legal services firm to operate at a very high level of security and privacy to protect customer confidential information, funds and IPR. Remote working and cloud open up new attack surfaces and potential for security breaches.
Finally, IT Governance & Management will be essential to manage the change and ensure value for money.