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Six Trends and the Legal Industry

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Introducing Milan

Six trends and the legal industryKeith LipmanCIO DinnerRosie OGradys, NYCFeb. 3, 2015 State of the legal market creates opportunity for change1AgendaIntroduction Fundamental Disruption in the Legal IndustryMoving forwardProsperoware, what we doState of the legal market Client and firm challenges and solutionsTechnology that connects the business and practice of law

WorkSite add-onsSharePointInformation governanceElectronic file (Matter Centricity)Remote access for email and DMSLegal Process Management and PricingAreas of expertise

U.S. CUSTOMERS40% are Prosperoware customers

U.S. CUSTOMERS31% are Prosperoware customers

Total customers 200+Four platforms,four focus areas

Our WorkSite add-ons improve administration and empower users

Enjoy secure email management on your mobile device with the Zone Mail app; Zone Remote Access brings the FileSite experience to your web browserEasily integrate your DMS with your SharePoint intranet and extranetTransform your firm into a client-focused business through Legal Process Management

Six Trends That Are Changing an IndustryHorizontal IssuesVertical specific Client PressureCyber-Security Threat (post Sony-Hack)Drop in demandBalance of powerBig DataWork AnywhereFee pressure

Horizontal IssuesNo longer if you are going to be hacked, but when.Its about risk mitigation, not stopping attacksVendorsFighting nation-states and criminalsTheftEspionageEmbarrassmentCyber Security

Can a law firm survive a Sony-style hack?Mitigating the RiskFaster transition to the closed DMSImpact to workflowReturn of on-site consultingCloser monitoring by clientsWork anywhere

Enable fluid anywhere workingBalance security risk against working anywhereSupport the four-device paradigm:Office computer/laptopPhoneTabletHome computer

Impact for the firmsWhat is it? Ability to leverage advanced mathematics against database, email and documents The ResultBetter decision-makingReduced effortBig Data

Implications to law firmsBusiness of lawBetter staffing decisionsPredictions on revenueUnderstanding profit centersImproving efficiencyPractice of lawReduced eDiscovery costsReduced due diligence costsUnderstanding difference between contractsOur data is homogenousIndustry has very poor metadata around mattersTo improve business of law, good matter metadata is a requirementMatter type, sub-type, area of law, tags, industry, sectorChallenge for the Legal IndustryVertical-Specific IssuesDrop in demandClient PressureFee pressureBalance of power

Why is the legal industry in a state of disruption?

General Counsel

CFOCEOBoard of DirectorsAbilityto withstandmarketswings

How it used to beI dont know, every matter is different.

I have a new matter for you to handle, however, I need to know how much it will cost me?

Demand for legal servicesin 2013 declined slightly across the industry

Growth in Demand for Legal Services

While a clear improvement over the collapse in demand growth in 2009, the current demand growth rate has been essentially flat to somewhat negative for the past three years

According to the National Law Journal, the 350 largest U.S. law firms grew by only 1.1 percent during 2012, compared with 1.7 percent growth in 2011Some 140 firms on the NLJ 350 list (or about 40 percent of the group) actually shrank as compared to the previous year2013 was a record year for law firm mergers and lateral acquisitionsThe Center for the Study of the Legal Profession at the Georgetown University Law Center and Thomson Reuters Peer Monitor

By most indicators, 2013 was another flat year for economic growth in U.S. law firms, with continuing sluggish demand growth, persistent challenges of low productivity, ongoing client pushback on rate increases, and a continuing struggle to maintain discipline on expenses.

During 2013, the number of lawyers in U.S. firms grew by about 1 percent. Productivity total number of billable hours recorded by a firm divided by the total number of lawyers in the firm remained flat.Current levels of productivity are still over 100 billable hours per timekeeper per year lower than in the pre-recessionperiod in 2007.The Center for the Study of the Legal Profession at the Georgetown University Law Center and Thomson Reuters Peer Monitor

22The birth of NewLaw

Percentage Change in Legal Market Revenues vs. Inflation (19992013)

Source: U.S. Census Bureau Service Annual Survey and U.S. Bureau of Labor StatisticsWhat caused the clients to rebel?

24On budgetMetric-drivenSpend to budgetStaff workloadSpend by matter type and business unitOutside counsel evaluationsOutside and inside spending as a percentage of company revenueProcess-focused

How is general counsel performance measured?Invoice savingsTrack timekeeper rate increasesLitigation exposureInternal training vs. Ethics complaintsLessons learned by matter

According to a study by AdvanceLaw:What firms GCs will use shiftedAMLAW 200 Law Firms

The New York elite

74%13%In a recent survey conducted by AdvanceLaw, 20 general counsel at 88 major companies were asked about their willingness to move high stakes work away from "pedigreed firms" (essentially defined as AmLaw 20 or Magic Circle firms) to non-pedigreed firms, assuming a 30 percent difference in overall cost.Of the respondents, 74 percent indicated they would be inclined to use the less pedigreed firm, with only 13 percent saying they would not.

According to the Altman Weil CLO survey, 40.5 percent of respondents indicated that they had shifted work to lower-priced outside law firms in the preceding 12 months.

26Which matters have pricing pressure?

Company size mattersor

The amount of fee pressure is tied to the risk:Clients are willing to pay more for bet the business representationBet the CompanyMid-level RiskNuisance29

Lesson from Apple

From Bespoke to Commoditized

Source: Richard SusskindBespokeStandardizedSystemizedPackagedCommoditizedAs clients become more aware of the cost of services, bargaining power increasesFree flow of pricing informationTymetrix Legal AnalyticsInternal matter managementNumber of times doing same type of matter

Pricing equilibriumHow are clients applying pressure?What does the pressure look like?Alternative fee arrangementsFixed FeeEfficiency & resultsHold Back / Success FeeResults first, efficiency secondPortfolioLong term success and cost managementBlended RatePushing work down (Efficiency?)Fee CapsHitting the caps first, concern about efficiency after thatTime and MaterialResults FocusedDiscountsNo incentiveCollarsEfficiency, but minimum reward33RFPsProcurementeBilling / Matter ManagementData AnalyticsOGCsRise of Law Department Operations ManagersOther client trends34Now that you got rid of the secretaries,there is a new question:How efficient are you with the technology of law?Welcome to the test.A new twist on client pressure

D. Casey Flaherty, corporate counsel for Kia Motors America, says legal services performance should be measured using analytics. Competency tests in technology that firms use: Word, Excel and Adobe AcrobatHe envisions tests for e-discovery and review competency by procurement officers and others specializing in managing retained counsel.*Flaherty suggests a write-down of bills based on a firms tech competency. The lower the score, the higher the write-down.

*Law Technology News, Oct. 21, 2014

35To save money is No.1 goalOther concernsQuick resolutionSpecific outcomeCash flow managementPredictabilityCertaintyPrecedentEfficiency What do clients really want?

36Insidethe law firms

Partners must shift how they workFrom perfect service

Price irrelevant

to client focus

Price is key

38

Move to a pool model with minimum staffMove support services to low-cost regionsOutsource secretarial staffCheaper real estate in citiesCutting costs to the boneSheppard Mullin cut admin staff / Snell & Wilmer cut 40 admin staff / Nixon Peabody cut 38

Legal secretaries and other administrative support staff cutsSheppard Mullin cut secretaries and admin staff in July 2014Snell & Wilmer cut 40 admin staff in May 2014Nixon Peabody had similar cuts in March 2014

Employment of paralegals and legal assistants is projected to grow 17 percent from 2012 to 2022, faster than the average for all occupations, according to the US Bureau of Labor Statistics

Legal secretaries and other administrative support staff cutsSheppard Mullin cut secretaries and admin staff in July 2014Snell & Wilmer cut 40 admin staff in May 2014Nixon Peabody had similar cuts in March 2014

Employment of paralegals and legal assistants is projected to grow 17 percent from 2012 to 2022, faster than the average for all occupations, according to the US Bureau of Labor Statistics

39

From:Any hour is a good hourTo:A profitable hour is a good hourFrom:Partner comp from origination and billed hoursTo:SalesManage your mattersQuality of workShifts in measurement40The LPM Maturity ModelFive steps to transform your firm into a client-focused business

Thinking With A System Lens.Pricing workflow and modelingPitching and proposal generationMonitoring and altering of budget vs. actualPricing database good metadata

Task/project management for lawyersExperience and availability managementBusiness intelligence and predictionMerging the business and practice of law

Umbria

Pricing workflow and modelingTask/project management for lawyersPitching and proposal generationExperience and availability managementMonitoring and altering of budget vs. actualBusiness intelligence and predictionPricing database good metadataMerging the business and practice of lawThank you

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