Cracking open the legal market
What will be the next big disruptor?
The concept of disruption in the legal profession is not a new one. Whether it be technological, economic and/or generational factors, it’s clear to say that the business of law is on the fast track to change.
To get a greater grasp of how this concept is set to continue to impact the profession, we have surveyed you, our audience, to uncover what you believe will be the next big disruptor to hit the legal market.
The Lawyers Weekly Disruption Snap Poll heard from a pool of respondents, who were asked to share their thoughts on what technological disruptors – such as AI and big data – and economic/market disruptors – such as NewLaw firms and flexible working arrangements – would most heavily alter the way legal services are delivered.
A quick breakdown of the results show that the majority of respondents, at 84.68 per cent, are legal professionals, while 15.32 per cent describe themselves as a product and/or service provider to the legal profession.
Those at a partner/principal level accounted for 32.26 per cent of respondents, followed by solicitors at 19.35 per cent, non-lawyers at 16.94 per cent, in-house counsel at 12.90 per cent, senior associates at 9.68 per cent, paralegals and junior lawyers at 3.23 per cent, and legal assistants at 2.42 per cent.
Furthermore, 26.61 per cent of respondents identify that they’re from a boutique firm, while 16.13 per cent state they’re a part of a national or mid-tier; 15.32 per cent say they’re a sole practitioner, 13.71 per cent say they work for a global firm, 9.68 per cent say they work in-house and 2.42 per cent say they operate in a government legal role.
The bulk majority of respondents are based in NSW, followed by Victoria, Queensland, ACT and South Australia.
In terms of age group, majority of respondents cite themselves being aged 26 to 35, followed by 36 to 45, 46 to 55, 56 to 65, 25 or under. The least amount of respondents are aged over 66 years.
As you can see, the above represent the full spectrum of the profession. This tells us that concern about disruption isn’t dependent on different ages, levels of expertise of whether you come from a BigLaw or NewLaw background, but instead is one that has the entire profession on its head.
So, without further ado, here’s what you believe will be the next biggest disruptor to impact the legal profession in the next 12 months…
In the next 12 months, which of the following technological disruptors will have the biggest impact on the legal industry? (You can select more than one)
Intelligent contracts: 37.90%
Social media: 28.23%
E-discovery technology: 25.81%
Big data: 21.77%
Improvements in cloud computing: 21.77%
Chatbot lawyers: 20.97%
New property exchange platforms and technologies: 19.35%
Legal research bots: 18.55%
New utilisation and billing management software: 13.71%
Improved project management and CRM systems: 13.71%
‘Moneyball’ software – algorithms that choose the best legal argument based on previous court decisions: 13.71%
Online client feedback portals: 13.71%
Security technology developments: 10.48%
Optical character recognition (and analysis): 8.87%
Intuitive trial outcome prediction software: 8.87%
Improved dictation software/devices: 8.06%
SEO targeting to attract greater clientele: 4.84%
Technology is undeniably the biggest disruptor to impact not only the business of law, but the world at large.
Never before has it been easier to do everyday life. Whether it’s connecting with your friends on the other side of the world or simply doing the washing – technology has made everything a lot more convenient.
How technology has impacted the business of law is a similar story. Time-consuming but essential work has become autonomous, meaning the client and law firm and/or business alike sees the benefit of “boring” or “laborious” work being completed quicker, for a fraction of the cost.
The results above indicate that intelligent contracts is slated as the biggest disruptor to watch out for over the next 12 months, followed by social media, e-discovery and improvements in cloud computing.
One respondent referenced some of those above as having a “profound effect on interface with clients”. They added that technology like this will significantly impact property transactions, response times and staffing levels.
However, some believe that the convenience technology has created will force some out of the profession, particularly those who operate regionally.
“In rural areas, forced technological changes (e.g. e-conveyancing) will push older solicitors out of the workforce which may exacerbate the current access to justice issues that exist in these areas, resulting from an unwillingness of younger professionals to service remote areas,” one respondent explained.
“E-conveyancing and greater use of social media is creating a bigger gap between the generations,” said another respondent.
“Younger lawyers appear to be quicker to embrace the new technology changes than the older, middle age generation. They take more time. We are losing a lot of experience as older solicitors leave the profession due to the increase in technology and the need to keep up in order to obtain clients and service them fully.”
In the next 12 months, which of the following economic/market disruptors will have the biggest impact on the legal industry? (You can select more than one)
Corporate counsel handling more work in-house: 39.52%
Outsourcing of legal work: 31.45%
Boutique firm specialisation: 30.65%
Graduate oversupply impacting remuneration: 29.84%
Morphing of law firms into more general business advisory firms: 29.03%
Work flexibility (greater options for remote working): 28.23%
NewLaw firms taking larger market share: 25.81%
Change in partnership models: 22.58%
New utilisation and billing structures: 17.74%
Decline of resources economy – move toward renewables and ‘innovation nation’: 16.13%
Open plan offices and hotdesking: 16.13%
Increase in generational divide: 14.52%
Globalisation of firms: 13.71%
Changes to Australian migration polices: 7.26%
New legal funding products: 7.26%
Changes in legal education and university curriculums: 7.26%
Equitable briefing: 4.84%
Rise in international arbitration: 4.03%
US trade agreement adjustment in APAC: 3.23%
Improved staffing/recruitment technologies: 2.42%
Use of external mediators: 1.61%
If the results above are anything to go by, it’s clear that technology is not the only aspect driving change in the legal profession.
Corporate counsel handling more work in-house is not much of a shock, with this portion of the market becoming more like “specialists” in their field than taking on the “generalist” position they use to be known for.
Evidence of this occurring more often than not has been explored in the past two previous issues of LW, and is also reinforced in the hiring conditions that businesses set out when taking on their in-house teams. Increasingly, more head honchos are looking for their corporate counsel to act as business advisers, rather than just as the legal sign-off at the end of a deal.
The debatable notion of outsourcing legal work is also not short of coverage. While some outsource all of their front-end processes to organisations separate from their law firm and often outside the country, others, such as HSF, prefer to employ an in-house capability which sees their clients serviced from the firm, by the firm, throughout the entire matter.
The third highest disruptor expected to play out in the next 12 months, boutique firm specialisation, suggests that the smaller end of town is hot on the heels of the heavyweights.
It’s become clear that the notion of a brand is no longer the be-all-to-end-all, with clients going by service proposition rather than reputation when selecting the firm they want to be represented by.
One of the respondents in the LW Snap Poll went as far to say that the proliferation of boutique practices is making competition harder.
However, on the other side of the fence is another respondent who seemingly disagrees with the idea of boutique firm specialisation.
“Too many people have specialised and started boutique firms,” he says.
“They tell clients, ‘Sorry for that advice you need to go see Joe Blog up the street’. A full service firm doesn’t need to do that.”
How is disruption affecting your legal practice?
Disruption, in any form, is impacting the way the profession operates but how is it altering the way lawyers offer their proposition to clients? In no particular order, here are some of the most noteworthy responses we’ve received from the Lawyers Weekly Disruption Snap Poll in regards to this question:
"Legal services will become more competitive on costs and younger generations will have greater access to legal services where previously they may have been hesitant to engage a firm due to perceived costs."
"Predominantly what affects my practice is the growth of in-house teams who are doing more work in-house. Also clients are willing to pay less for the same work."
"With the emergence of millennials who think that articled clerkship is a time when they should be running trials at The Hague International Court of Justice, an abundance of outsourced Indian paralegals, and bots that can predict trial outcomes based on pheromones detected in the courtroom, it seems that the 21st century legal profession is still in its chrysalis. It will be fascinating to see whether what emerges is a beautiful butterfly, or a huge brown mouse-eating moth."
"Law firms are vying to come up with new billing models to compete with NewLaw firms. Ultimately, these new billing models don’t present value to in-house teams in many instances as they are merely a derivative of the usual time-costed models."
"In terms of generational factors, Gen Y bring a different set of work preferences, attitudes and expectations. There appears to be an expectation of flexible working hours around core work hours; more casual work attire; an ‘entitlement’ to ‘use up’ all available sick leave whether sick or not; a sense of entitlement generally. Gen Y are generally tech-savvy and up-to-date with the latest technological ways of undertaking legal research, which is a good thing. Gen Y also seem to like to have regular staff meetings more so than the older generations. I used to think Gen Y were not as loyal and more likely to shop around for jobs, but that seems to be changing."
"My legal practice is evidence itself that the legal profession is changing as a consequence of the technological, economic and generational factors ‘disrupting’ the traditional legal sphere. I have gone from working in a traditional family law firm, seeing clients face to face, to starting my own online firm, with the ability to service family law clients across Australia. Through the use of technology (including the internet, Skype, telephone, email and Dropbox, to name a few), I can connect to individuals in regional areas (who may not have quality and/or specialist family lawyers) and capital cities, and provide quality legal services."
"Disruption is changing the way I work. I work harder and longer because competition and access to legal services is greater, meaning clients are more ruthless and expect high-level work at a fraction of the price in a short time. If there’s no delivery, the work will be easily lost."
"The information age has sped up the flow of information and resulting in expectation of response. No longer is it okay to receive communication, think about it over a day or two, discuss with the client thereafter develop a reply, and then reply a week or later. Responses are being demanded far more quickly from both clients, opponents, and the public at large. This is resulting in an increased pressure on the profession and staff and resulting reduction in quality."
"As an undergraduate law student towards the end of my degree, I am very conscious of the myriad of factors that are likely to disrupt legal practice as I enter the profession. In particular, the graduate oversupply, outsourcing of lower-end legal services, and technological developments in legal software."
"SEO has provided us with leads on a continuing basis. We have a young team who are happy to adapt to changing technologies, for example, creating legal chat bots and develop new ways to service clients through automation. We have over 700 firms that we generate leads for and have helped grow numerous firms from sole practitioner to full-fledged boutique firms focusing on commercial law combined with general business advisory firms."
Preparing for the future
As much as we can try and predict it, how the next 12 months will play out is really anyone’s guess.
While some envision a massive shift, others foresee not much change at all.
When devising this survey, we received a few personal emails from those wanting to get their view across. All three of these people granted us permission to refer to them by name, confident in that what they’re predicting will happen will eventuate.
One of these is from Rob Knowsley, who is a principal consultant at Knowsley Management Services.
“My view is that not nearly enough has changed during my 45-plus years in the profession on the part of the main participants,” Mr Knowsley said.
“A few key issues to add to the mix, if I may: poor time utilisation continues to be a major issue in the big majority of practices. This and other issues result in very low productivity.
“There’s also much pessimism and too few optimists, and many of them exhibit significant problems despite their optimism.”
Mr Knowsley added that there is “very widespread pricing naivety” plaguing the profession.
“Attitudes to marketing ranging from laziness, through to ignorance, to outright aversions. It’s simply not viewed through the ‘helping clients and others find useful information’ lens,” he added.
“All of these and others lead the majority of practices to poor profitability and impact on enjoyment, stress levels, the ability to properly progress careers, and sensible investment for stronger futures.
“Fortunately all issues are very fixable by those who come to recognise the need, with experienced guidance.”
Massons partner Leisha de Aboitz put pen to paper to describe how specialisation is the “rising giant in Australian law”.
Ms Aboitz said specialisation is becoming increasingly common as clients increasingly appoint firms based on specialist advice and knowledge instead of brand reach and legacy.
“There is an increasing number of breakaway firms who are responding to client demand for specialist knowledge. While this has seen a rise in boutique offerings, it is occurring at all levels in the legal market. For example, there are a number of global and national firms who have either re-structured around core practice areas, or who have entered the Australian market with the express intention to focus on a particular industry or discipline,” she said.
“With large global firms developing core practices and trimming down the non-core practices which have more of a local (and less of a global) focus, the market for boutique specialist firms is growing and the cross-referral network for reputable specialists is growing as a result.
Ms de Aboitz said factors driving specialisation include the rise of artificial intelligence, increased demand from in-house legal teams and clients being more willing to hand pick the right team for the right advice.
“There is greater transparency in specialisation―firms who specialise don’t pretend to do things they are not good at, which means you can attain a higher level of trust by diligently delivering the work that you are good at,” she said.
“For the legal fraternity itself, specialisation is also the best protection against the rise in artificial intelligence (AI), which is an obvious solution to streamlining some tasks. However, it is hard to see where you could replace depth of experience and knowledge when it comes to handling more complex and bespoke transactions, which is why specialisation is so important.”
Specialist advice is rising in importance for in-house legal teams, Ms de Aboitiz added.
“In-house teams are growing and managing increasing workloads internally, and in our experience, they tend to seek out external assistance predominantly where there is overflow, or where they don’t have a particular specialisation in-house because it is considered ‘non-core’,” she said.
“We are also finding that large corporates are cherry picking from different firms for panel selection, specifically targeting teams or firms which are known for a particular area of specialisation.”
Gerard Healy, who is the managing director of Law & Co, offered a different opinion he wanted to put out there, largely related to e-contracts impacting the roles of both lawyers and conveyancers.
“My view is that the conveyancing industry will continue to undergo significant disruption over the next 12 to 24 months. The introduction of PEXA, the recent privatisation of the NSW Land Titles Office and the Victorian government’s digitisation of the state’s Certificates of Title, are all signs that the industry is undergoing significant change,” he said.
“I believe these examples, plus the many more to come, will see the following occur in the immediate future: Those practitioners (both lawyers and licensed conveyancers) will need to ‘adapt or die’ – PEXA and Verification of Identity (VOI) regulation which enables remote VOI is here to stay and those that don’t start adapting will be pushed out of the market.”
Mr Healy noted that traditionally practitioners have operated in a ‘hyper-local’ environment and have sourced their work from their local communities.
“The industry has mostly been a business-to-business one to date. However, PEXA and VOI regulation (as examples) removes the need to physically see your client. Practitioners can now service anyone, from anywhere, at any time,” he said.
“As a result, competition will seriously heat up. In my view, we’ll see more price competition. ‘Brands’ will enter the market, and there will be a consolidation of the 12,000 conveyancing practitioners in the market. This will happen in the following ways: (a) some practitioners will throw in the towel; (b) some will merge; (c) there’ll be a roll-up of conveyancing businesses.
“As all of this takes place, practitioners will need to become more efficient in how they do things. This obviously includes their acceptance and use of modern technologies. Efficiency gains will be critical to enable practitioners to scale their practice and those that aren’t able (or willing) to do this will be pushed out of the market.”
If one thing is for sure, it’s that the legal profession is going to be one that is impacted by disruption in one way or another.
Watch this space to find out when and how.