Integreon

For decades large law firms in the US, UK, Canada, and Australia followed similar strategies. Will that uniformity change given the recent economic and legal market turmoil?

We have not yet reached a new legal market equilibrium and already see more variation in strategy. The uncertain environment means that firm management must consider more options. Smart firms will, in our view, differentiate and tell the market what they are doing.

In this post, we first review market differentiation, explain why going public makes sense, and illustrate with recent announcements by Integreon clients Osborne Clarke and Simmons & Simmons.

The Legal Market is Differentiating

Once the legal market settles down from the recession, we don’t think it will look the same. We agree with Adam Smith, Esq.’s (aka Bruce MacEwen) premise in Law Firm Business Models: A New Series (30 October 2009) that the market is moving from a “mono-strategy” to a diverse environment. He concludes that, “we may begin to see a wealth of experimentation with different business models.”

For example, consider recent news about change in lawyer pay. Associate career tracks and pay were virtually identical across AmLaw 200 firms in the US for decades. No more. This past week, separate articles reported that Reed Smith and Drinker Biddle abandoned associate lock-step compensation in favor of associate categories and merit-based pay. Howrey, Bingham McCutchen, and Orrick have also made similar moves.

Another example is the rise of smaller firms. The legal press has reported about both BigLaw spin-offs and the relative success of regional firms. Whether these threaten BigLaw is not the point, rather it’s that clients now consider a broader range of legal providers.

Or consider the Legal Week editorial last week. Alex Novarese, in Editor’s Comment: The original LPOs, reminds us that in the 1990s, regional UK firms tried to capture share from higher-end London firms. He argues that the time is ripe to try again but notes that:

“At the top reaches of the global market there is now stratification, not consolidation. That means top firms are refining their practices, a process that increasingly sees them strip down their business rather than expand.”

This further supports the idea that the market has changed, that firms are no longer all playing from the same sheet of music, and that competition and differentiation have increased.

Successful Differentiation Requires Talking About It Publicly

We are surprised to read about some law firm changes as press leaks rather than public announcements. For example, Above the Law recently “broke” news about the The New Biglaw Business Model, According to O’Melveny & Myers, which described the firm’s strategy to become a leader in fixed fee billing.

Firms should, of course, have internal and private client discussions. We think they should also publicly announce new strategies. Clients clearly say they want more value from firms. A public announcement that explains how a firm will deliver more value helps position the firm to retain existing clients and win new business.

Until recently, most firms using legal outsourcing eschewed PR. Today, however, firms recognize that their clients equate outsourcing with better value. Firms that might once have taken steps quietly now announce their moves, recognizing the positive impact on clients…

Two weeks ago Integreon client Simmons & Simmons announced that legal process outsourcing - a team of lawyers in India - was an important part of its new strategy (see The Lawyer article or the Integreon press release).

Last week, Osborne Clarke managing partner Simon Beswick wrote an opinion piece in the The Lawyer, Outsourcing will enhance careers, not hinder them. Readers may recall that OC signed a major Middle Office outsourcing deal with Integreon early in 2009 (see our February press release and October news of two recent prestigious awards). Beswick addresses concerns that outsourcing hurts lawyer careers, making the point that firms need a clear strategy for how they will meet client demands to deliver better value and that outsourcing is one part of the solution.

We think Beswick’s concluding remarks apply well beyond outsourcing to any new law firm strategy:

“The market is demanding that lawyers now embrace change rather than simply adapt to it. Clients are looking to their firms to come up with innovative solutions and law firms that do not move with the times will be left behind by their more willing competitors.”

Firms are clearly making both strategic and tactical moves. We expect that to continue. And we think the ones willing to go public gain an advantage in winning the war both for new talent and new clients.