BigLaw v. NewLaw: Latest Reports From the Battlefield
The legal blogosphere is all atwitter predicting the winners and losers of the mighty battle being waged over who is going to provide 21st Century legal services. At this point in the battle between BigLaw and NewLaw, no one knows who the ultimate victor will be, although many have strong opinions. Conflicting reports are streaming across the newswires from the numerous firefights on the front lines. Below is a brief summary of the various camps and their views:
The “Keep Calm & Carry On” Camp
The safe pick many feel is to bet on the status quo. BigLaw has had quite a run and its demise has been wrongly predicted many times before. The 3 Geeks (Not So Fast…) and The American Lawyer (Will Law Firms Adapt — or Go the Way of the Dodo?) are reporting that the rebels, despite some small successes, are not a real threat to the combined firepower of the BigLaw regime, at least not anytime in the foreseeable future. The latter concludes that BigLaw, as a whole, is safe for one fundamental reason — BigClients need them:
Are law firms, particularly big law firms, the dodos of the professional services sector? The short answer is no. And the reason is pretty simple. Big clients need them. And unless and until a substitute provider of legal services at the high level appears, big law firms will have a future. Here are the caveats: The future of any particular firm is not guaranteed—it never was—nor will this future be free of change.
Under this theory, BigLaw exists to represent and defend “big blocks of power and money.” BigClient is not about to hand over the keys to the new kid on the block when billions are at stake. In fact, this may just be BigLaw’s best defense. No matter how wonderful the NewLaw alternatives, at present, none of them can come close to meeting all of a BigClient’s needs. While BigLaw may not be perfect or efficient, it has one thing NewLaw doesn’t – a proven track record with BigClients.
The Geeks (or at least one geek, Toby Brown) argue that the NewLaw bandwagoners need to rein in their “irrational exuberance” that the Johnny-come-lately rebels are anywhere near to overrunning the well-entrenched BigLaw positions:
Instead watch for steady, incremental changes in the way law firms function and deliver their services. Next generation providers will continue their growth, law firms will merge and things will generally keep changing.
Toby compares the NewLaw Express to the coming of the railroads to 19th Century America. Despite the initial exuberance and wild speculation in the potential of railroads, it took at least 50 years for the “revolution” to become “business-as-usual.” While Toby thinks it won’t take 50 years for the legal industry transformation to play out, he expects change to proceed in a civilized and orderly fashion. Another Geek generally agrees with Toby (in a comment), but also notes that:
Change always takes longer to get here than you expect, but when it happens, it happens faster than you would otherwise believe possible.’
The proverbial $64,000 question then hinges on exactly what stage the current NewLaw invasion is on the change curve? Are we still early in the curve, which leaves BigLaw plenty of time to dawdle, or have we already reached the tipping point?
The “Man the Lifeboats” Camp
Recent posts by Dr George Beaton (The rise and rise of the NewLaw business model & Last days of the BigLaw business model) and myself (What Clients Want and Why BigLaw Can’t Deliver) believe that the BigLaw ship is taking direct hits from the NewLaw gunboats, and is perilously close to sinking. Dr. Beaton bases this conclusion on a variety of factors, including his modeling showing that firms’ high PEPP numbers are likely to fall substantially in the near future, and that at least “two-thirds to three-fourths of the revenue of BigLaw firms . . . is under threat from New Law.” (see his reply to comment #7.) Recent proof of these trends are evidenced by the 30%-and-up growth of Axiom Law, Riverview Law and Novus Law, and the recent reports in Legal Week that Berwin Leighton Paisner’s (BLP) 2012/13 PEPP fell 40%, while their Lawyers on Demand services rose 28%. In other words, the NewLaw business models are “being rewarded by clients.” So much so, that Dr. Beaton predicts Axiom Law could be the largest legal service provider in the world by 2018. Hard for BigLaw to “keep calm” in the face of those numbers.
The “Feast or Famine” Camp
Dr. Beaton’s post has elicited a large number of high quality comments on both sides of the debate that are simply too varied to adequately summarize. While all of the comments are great, one in particular (comment #13) stands out. Jordan Furlong notes that:
Growth is not dead — it’s just changed addresses. Law firms are suffering not from a drop in demand, but from a drop in demand for what they sell, at the price they sell it, in the way that they create and deliver it.
(A similar sentiment was recently posted by Jason Moyse [Growth is Dead? for Who?] on Slaw.)
Further, the larger problem facing BigLaw is not surviving the crisis caused by the Great Recession, but rather surviving the fallout the Great Recession created:
I don’t think it’s necessarily this current downturn that’s the major issue; it’s that this downturn is effecting and ushering in a new set of market conditions that make the environment essentially unsuitable for the traditional law firm business model, and that most firms lack the wherewithal to adjust to the new environment without tearing themselves apart in the process.
In the end, Jordan’s analysis may help us make sense out of the conflicting results being reported. Certain firms may be safe because of the reasons set forth in The American Lawyer – the biggest deals still need high-level lawyering that none of the NewLaw contenders can yet provide. The same can’t be said, however, for for the the majority of firms, i.e., the AmLaw 11-200, who are at serious risk of going the way of the Dodo:
But if I were in a firm from AmLaw 11-200, I would be concerned, and as I go down that list, my concern would edge into panic. These firms are like houses of cards, impressive to look at from the outside but extremely vulnerable and structurally unsound at their core. They may survive the crisis — most are stumbling through alright — but I don’t see them surviving the change process that’s to come.
Even worse, a recent article from the Harvard Business review suggests that even the AmLaw 10 may be at risk of losing business. In Why Law Firm Pedigree May Be a Thing of the Past, the authors discuss a recent survey of 88 GCs of major companies in which 74% responded that they would be willing to move “high stakes” work away from the “most pedigreed law firms” to a good lawyer at a “non-pedigreed” firm, assuming a 30% savings could be delivered (A counter argument was recently posted here). While saying you are going to do something, and actually doing it are two different things, these types of survey results are become increasingly common in the New Normal, and are causing sleepless nights for all but the most myopic of BigLaw partners.
The “If You Can’t Beat ‘Em, Join ‘Em” Camp
While the status quo is usually a pretty stable place to set up camp, in the free-for-all environment that has emerged in the wake of the Great Recession, resting on your laurels is a very dangerous place to be. Unfortunately, as both Jordan Furlong (Law firm innovation: From idea to implementation & Comment #13) and Pam Woldow (Adventures in Magical Thinking, Part I) have shown, bringing about real change in a law partnership is an incredibly difficult proposition given the unique cultural environment of traditional firms. As I discussed in my last post, a couple of traditional firms, Seyfarth Shaw & Akin Gump (Jordan adds Littler Mendelson to the mix), appear to be embracing the new normal, and are either developing their own LPM and LPO programs (Seyfarth Lean), or are joining forces with the rebels (Akin and Novus Law). Ron Friedmann (The Speed of Change) recently summarized Addelshaw’s future vision that the 2020 legal market “will have 25% fewer lawyers and 20% fewer firms, with new business models and disruptive legal technologies sitting at the core of the provision of legal services.” Thus, rather than one or the other model, BigLaw or NewLaw prevailing, the future may be a conglomeration of both.
The BigLaw vs. NewLaw battle continues to rage, and only time will tell who will ultimately prevail, and which of the prognosticators best read their crystal balls. There already is, however, one surefire winner, and that is the client. The seismic changes that the legal industry are undergoing are all providing clients with better value options than they have ever had. The vast majority of 21st legal services, whether delivered by BigLaw, NewLaw, or a combination of the two, will be delivered with a higher predictability of better outcomes at a fairer price than ever before. Win-Win-Win.