competitors

Survey clearly shows law firms who their biggest competitor really is – their client!

I have long held (see this post from September 2017 [‘Do you know who your competitors are?‘] and this post from July 2014 [‘5 steps to take when you client becomes your biggest competitor‘]) that in a hyper competitive legal market, your client – and not any of your more traditional law firm competitors in private practice – is actually the biggest competitor you face when trying to win new work.

Given this, it should come as no surprise that I found the graph below in the recent (September 2020) Gartner publication ‘2021 Legal Planning & Budgeting – Preview: State of the Legal Function‘ of interesting:

Take note all you private practice lawyers, in a three year period between 2018 and 2020, ‘The ratio of legal spend in-house vs outside‘ moved from 50.2% / 49.8% in 2018 to 57% / 43% in 2020.

That equates to a 13% swing of legal spend in-house over this timespan.

In a period when legal spend on outside lawyers actually grew! (Probably providing a false sense of security!).

And, these numbers pre-date COVID. So it is highly likely this movement of work in-house has, and will continue to, grown.

So, next time your firm is doing a SWAT and/or Competitor Analysis, make sure to keep some room for the biggest competitor out there – your client!

rws_01

Which kinds of businesses are most threatening to your firm’s future?

The December/January edition of Briefing magazine includes a supplementary report looking at the Legal IT Landscapes 2019. It’s a very enjoyable read, and includes the following graphic (answering the question from which the title of this blog is taken):

image 201901

What this indicates is that despite my having blogged about this issue as far back as September 2017 (‘Do you know who your competitors are?‘) senior managers of law firms still hold that other law firms like theirs are the greatest threat to their ongoing commercial success (at 26%).

As I wrote back then,

With the level of work that clients are now taking back in-house, or not bothering to do at all, they are without doubt the “overwhelming competitive threat” to the current law firm business model. And, this is not cyclical but structural.

Crucially, understanding this is of paramount importance if firms wish to survive the next 5, 10, 15 years. Because it reshapes everything we do. How we try and win work. The type of work we are trying to win. And even the nature of the relationship we have with our client.

In the long term it will determine the way we measure and reward. It will dictate how we charge, and it will determine whether we succeed or fail.

and I still hold now, this view is misplaced at best, and out and out wrong at worst.

As the following quote taken directly from the National Profile of Solicitors 2016 report (most recent I could find) published by the Law Society of New South Wales, in Australia the seriousness of the threat that in-house legal teams have on  the viability of your firm’s future success should not be underestimated:

Legal employment sectors are shifting. The great majority of Australian solicitors continue to work in private practice, with 69% employed in a law firm. However, the proportion of solicitors working in private practice has dropped from 75% to 69% over the last five years. This is due to a significant growth in the number of solicitors working in the corporate sector and government.

Between 2011 and 2016, there was a 59% increase in the number of solicitors working in the corporate sector, compared to a 17% increase working in the private sector.

Let that sink in for a second: a 59% increase in the number of solicitors working in the corporate sector [in Australia] over a 5 year period post the GFC.

Even coming from a relatively low baseline, that’s a staggering shift (indeed, some may even argue seismic)!

But ask senior management of law firms and only 10% will tell you that “in-house/client” is a business that is most threatening to their firm’s business.

Misguided pershaps?

As always, would be interested in your thoughts, views, feedback.

rws_01