Posted by: johnocunningham | May 26, 2018

The State of the Legal Services Market and the Future Outlook

Hildebrandt Consulting and Citi Private Bank released a 2018 “Client Advisory” report earlier this year for law firms and legal service providers, and the report offered up some interesting insights that law firms should consider.

Some of the many insights provided by the report include the following:

  • Revenue growth and profit-per-partner growth are stalled in the 4 to 7 percent per year range, and likely will remain that way given the competitive landscape
  • Law firm demand growth has sputtered ever since the last recession
  • U.S. brand firms have recently started cutting into European market share as firms look to new markets for opportunity
  • Alternative legal service providers and in-house corporate staffs continue to supply a growing share of legal and quasi-legal services that law firms used to provide exclusively
  • Firms are bracing for the artificial intelligence revolution, and developing strategies to invest in or deal with e-discovery predictive coding, mass document review, large scale due diligence for M&A or other purposes, massive contract review and updating projects, and predictive analytics with regard to case outcomes, liability predictions and damages
  • Law firms are dealing with increasing levels of cyber-attack by criminals, developing more sophisticated cyber-defense strategies and buying cyber-insurance
  • Firms are currently looking at certain practice areas for the most growth opportunity, including white collar and regulatory investigations, tax advisory, project finance,and cybersecurity-related work
  • The technology, private equity, health care and life science industries are being eyed most closely for new client development
  • The numbers of professional and administrative staff supporting each lawyer continues to shrink over time as technology increases productivity and client demands drive competitive cost controls
  • The numbers of outsourced staff continues to grow slowly in response to the need for nimble adaptation to constantly volatile client demands
  • Nearly a third of equity partners are 55 or older now, which will necessitate greater succession planning

The report’s authors conclude that law firms can indeed adapt to the rapidly shifting market environment, stating that “We believe that law firms have historically been resilient in the face of changing market conditions and while change has come slowly, the law firm of 20 years ago bears little resemblance to the law firm of today.” If you have not checked it out already, it is worth a read.

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