Report on the Law Firm Management Committee Retreat of the 2019 IBA Annual Conference in Seoul

Gerard Tanja
Venturis Consulting Group, Amsterdam
gerard.tanja@venturisconsulting.com

Robert van Beemen
Venturis Consulting Group, Amsterdam
robert.van.beemen@venturisconsulting.com

 

Saturday 21 September 2019

 

Session Chair

Stephen Revell  Freshfields, Singapore; Secretary-Treasurer, IBA Law Firm Management Committee

 

Speakers

Liz (Kyo-Hwa) Chung  Microsoft Korea, Seoul

David Delman  Samsung Engineering Company, Seoul

Jeff Davis  Ontario Teachers’ Pension Plan Board, Toronto, Ontario

Rajesh Sreenivasan  Rajah & Tann Singapore LLP, Singapore

Steve Seemer  Thomson Reuters, New York

Ian McDougall  LexisNexis, New York

Robert van Beemen  Venturis Consulting Group, Amsterdam

 

Highlights and conclusions

This retreat explored:

• new entrants, such as alternative legal service providers (ALSPs), the Big 4 and Lawyers On Demand (LOD);

• the expansion of international business law firms in new markets;

• the shift from supply to demand-driven service offerings; and

• the growth of in-house departments.

It summarised that the above points would not result in ‘structural changes of the legal market’, but will lead to increased competition and rivalry for ‘normal’, more traditional, national and independent business law firms operating in the mid to upper-mid market segments.

Disruption

The global, investment and technological power of new entrants including international business law firms, the Big 4 and ALSPs will lead to a new and different ‘war on talent’, questioning of associate salaries and pricing pressures. It will also lead to an improved quality of service, higher fees and increased market shares in the respective national jurisdictions for these new entrants. They will encourage traditional law firms to re-evaluate their ‘value proposition’, to re-define their focus point and force firms to ask themselves: Where to play? How to play? Can I win? National firms operating in the typical mid-tier markets and the lower end of such markets will be the most affected.

On the other hand, traditional law firms have many advantages over new entrants. They are confronted with less conflicts, and they have a stronger position in the upper to higher mid-market areas and the higher end of the market which has more strategic legal work. The feeling at the retreat was that ALSPs and the Big 4 will not enter the high end market segment (for the time being at least).

For several law firm representatives the growth of in-house departments was more concerning than new entrants as they take talent, do work in-house that was previously done by law firms and invest a lot in technology. Corporate in-house department representatives noted that most legal issues were dealt with by their own in-house lawyers: ‘We know our legal stuff much better and what works best for our business’.

If and when in-house departments require an external lawyer, the diversity of the legal team has become much more important, as well as how their legal teams work. It was commented that e-mails sent by a legal team in the middle of the night was not a good sign.

The largest aspect of growth of the legal market in the United States and United Kingdom was due to in-house teams, not new entrants like international business law firms, ALSPs and/or the Big 4.

Strategic investments in technology

The retreat asked questions such as:

• Will investing in technology achieve a competitive advantage?

• How will technology change the business model?

• Will technology lead to revenue growth and increased profitability?

It was summarised that technology will impact short-term profitability, but will not be a disruptive force as law firms will be able to incorporate it in their working processes, planning and project management tools. Recruiting lawyers with the right IT-skills may be an issue, as are security-related problems. If properly applied and incorporated in the operational processes of a firm, technology will improve the quality and way in which legal services are delivered by law firms, and may lead to some revenue generation. However, it would be difficult to compete with ALSPs and the Big 4 in this area.

General counsel and clients expect law firms to make better use of IT tools and available software. They require firms to use technology focusing on operational excellence, improved service delivery and the introduction of big data-related software. Depending on the type of work general counsel intend to outsource, they noted that they either go to global elite, international business law or highly specialised boutique law firms. Each of these segments also have different requirements in terms of the use of technology.

The retreat concluded that law firms are still rather ignorant about how technology can and will affect their working processes and they need to invest more in training their partners/lawyers. It was suggested that it should be included in their business planning processes and law firms should decide, given the type of practice and engagements that are core to their positioning and competitiveness, how to optimise and apply technology.

Participants of the retreat saw restricted opportunities to create revenue growth for their firms, although innovation and new service delivery mechanisms using IT platforms were mentioned. The prevalent concern related to the level of investment required. Several participants feared that mid-market, national firms may not have the investment power (or willingness of the partners) to sufficiently invest in technology and if they did, it may have a decisive impact on the future competitive position of their firm.

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