If the practice of law is a sport, which sport is it?
Law firm leaders say that a growing numbers of in-house lawyers are sucking away their traditional work. That highlights three important trends: First, it is basic labor arbitrage, of course. Second, it shows us that firms’ offerings are specialized until the client needs it in such quantities and frequencies that it can blow away the magic dust of “made in a law firm”. (Of course, with that, the 200% mark-up premium dissipates, too.)
And third, it shows that law firms—despite decades of relentless marketing claims and lackluster training—have not yet managed to understand their clients. Clients want their lawyers to understand their business, and really, really understand it. And few lawyers in private practice actually do. In-house lawyers have a much greater chance to master an understanding of their own company’s business, mainly because they are not distracted by the 10 other clients they are serving and the 50 others they are chasing.
But there is more to this excess capacity question than in-house competition—way more! Law firm leaders underestimate the amount of work that is being done by providers other than law firms and legal departments. One prominent example is in the regulatory compliance space where the large accounting firms—under the thinly veiled ruse of offering consulting services—provide nothing short of legal advice. Other examples are e-discovery and contract life-cycle management, which are now being handled by legal managed services (LMS) providers with a far superior mix of people, processes and technology. These are massive projects that were once handled exclusively by lawyers (and still are), but most law firms aren’t even invited to bid for that work because they have no way to staff the work at a reasonable price point.