A recent American Lawyer article by Roy Strom extolls the growth of ‘alternative providers.’ It focuses on The Corporate Legal Operations Consortium (CLOC), an oft-cited industry bellwether. Strom references a recent CLOC survey that reveals the growing use of ‘alternative providers’ (read: non-law firms) by corporate consumers, especially among the Fortune 500. Connie Brenton, CLOC’s Chairman and chief of staff and director of legal operations at NetApp noted, “When a Fortune 500 GC sees that 46 percent of their peers have leveraged [a legal service outsource firm], it is not risky any longer.”
Ms. Brenton’s comment casts a bright light on the shifting legal services buy/sell dynamic. The CLOC survey confirms that: (1) it is changing; (2) legal buyers—especially the largest ones—are signaling that ‘it’s safe to use service providers, even for more complex work’; (3) that means that a tipping point has been reached where sourcing to ‘alternative providers’ becomes the norm—not an ‘alternative’ (necessitating new nomenclature for service providers); and (4) traditional law firm market share, already showing signs of softening, is projected to erode further. The big winners will be companies like Elevate and Axiom, the leading provider sources in the CLOC survey. Thomson Reuters and Adam Smith, Esq. project legal provider revenue will mushroom from $2B in 2015 to $55B by 2025. Law firm revenue is targeted to decline while in-house share will increase during this same timeframe. It’s a changing marketplace indeed.
This begs the larger question: why is this market shift occurring and what is it about the new provider sources that consumers find attractive?
Market Change is About Elevated Consumer Expectations and Providers That Satisfy Them
Legal consumers—like buyers in other industries—have elevated provider expectations in the post-global financial crisis era. Providers of goods and services are expected to deliver on a ‘faster, better, cheaper’ basis. Consumers expect easier access to providers, more transparency and choice, faster delivery, lower cost, and instant, ongoing connectivity with providers. Corporate legal buying is no longer the exclusive province of in-house lawyers; procurement and the C-Suite—especially CFO’s—now routinely participate in legal buying decisions. Legal ‘services’ are not presumptively bespoke. In fact, the pendulum is shifting in the other direction. That means fewer ‘relationships’ and more metrics. Law has always been about admissible evidence and burden of proof except in the sale and purchase of its services-- until now. With procurement and the C-Suite in the purchase mix, the burden shifts to lawyers to show cause why sources other than law firms are required to handle non-differentiated work.
View source to continue reading https://www.forbes.com/sites/markcohen1/2017/11/20/whats-a-law-company-and-why-are-legal-consumers-embracing-it/#2ef45d60155c
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