Cutting BigLaw Down to Size: New Alternatives for Legal Services Procurement (Part 1)

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A number of unwelcome trends over the past decade have put BigLaw firms on the chopping block. Among these has been the increasing involvement of procurement in managing legal services, along with the emergence of a range of attractive alternatives to traditional full-service firms. While this has been a nightmare for BigLaw firms, it is a shared opportunity for legal services procurement and for emerging alternative legal services providers.

In Part 1 of this two-part series, we focus on BigLaw’s challenges, changing corporate buying behaviors and the rise of procurement in legal services sourcing and spend management. In Parts 2 and 3, we will focus, respectively, on the emergence of non-traditional/alternative legal services providers and on the significant implications for legal services procurement practitioners.

The Beleaguered BigLaw Bust

The term BigLaw refers to the large, traditional, full-service law firms that typically have national or multinational footprints, employ at least a few hundred attorneys and maintain (or try to maintain) traditional organizational structures and client relationship models. While BigLaw firms have long been fixtures and big budget line items at major corporations, over the past 10 years or so they have begun to encounter more than their share of challenges. Furthermore, there does not seem to be an end in sight, as revenue growth stagnates, downward pressure on rates continues, lawyer productivity declines and industry consolidation follows a textbook path.

According to Thomson Reuters “2017 Report on the State of the Legal Market,” BigLaw firms are facing a number of major challenges in their corporate market, where “clients” are becoming “buyers.” These include:

  • A buyer’s market in which clients demand greater value for the dollars they as measured by efficiency, predictability and cost-effectiveness in the delivery of services
  • Corporate client’s tendency to disaggregate work and allocate responsibilities for different aspects of a single matter to different law firms, in-house lawyers and nontraditional vendors
  • The growing segmentation of the market as clients have moved certain work “down market” and have been prepared to reward those firms responding proactively to their demands while punishing those firms that did not

As mentioned above, adding to the difficulties of the already beleaguered BigLaw firms is the increasing involvement of procurement in legal services sourcing and spend management (we all know what that means) and increasing types and numbers of non-traditional alternatives, which do not go unnoticed by the corporate “clients” now becoming “buyers.”

A New Sheriff Comes to Town

The Bloomberg Law/Buying Legal Council “2017 Legal Procurement Survey” report states that “the great financial crisis of 2008 and 2009 was the trigger for legal fee scrutiny and a call to put the brakes on mounting legal expense. Publicity about billing practices, big ticket spending, increased transparency and profit pressure have changed the situation and shifted responsibilities from the legal department to finance and procurement.”

The report also notes that “Legal procurement continues to increase its reach and influence: The majority of legal spend is now under review. A relationship-only business approach to buying (and selling) legal services is now a thin minority among the largest spenders. It is replaced by a professional, business-driven approach to sourcing.”

As corporations reduce the number of law firms they work with and re-look strategic sourcing options, the Bloomberg/Buying Legal Council report states bluntly, “The ‘noose’ is getting tighter; the pressure is on more than ever.” The report also adds that “more work will shift from traditional law firms to new model law firms or alternative service providers, a move that has started over a decade ago,” and which some believe could be disrupters in the legal market.

What Now?

The capture and arrest of BigLaw by increasingly involved and influential legal services procurement organizations is really just a part of the story. With traditional — perhaps somewhat obsolete — BigLaw firms interdicted and crime rates down, what now? How will procurement identify new legal services providers and facilitate the development of new supply channels to meet the contemporary needs of corporations? And what will a new supply base look like and what will it mean for procurement?

Accordingly, in Part 2, we will shift our focus to non-traditional/alternative legal services providers.  And later, in Part 3, we will address some of these questions from the standpoint of procurement practioners. To continue to Part 2, click here.

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