Page 220 - Leaders in Legal Business - PDF - Final 2018
P. 220
The Rise of Legal Managed Services
Axiom is based in the U.K. and works closely for clients in commercial transactions,
M&A, litigation, and other areas. Axiom’s lawyers are highly trained and carry top credentials.
But Axiom is not a law firm. It is a corporation that places its attorneys through insourced and
outsourced solutions. Like many good companies, Axiom prides itself on operational efficiencies
that are rarely found in the traditional law firm structure, like low-cost overhead, a culture of
agility and flexibility, and a centralized command structure. And perhaps the great distinction is
that Axiom can — and does — receive outside investment, operating formally in a way that blurs
the line between business and law.
As mentioned earlier, Legal Business magazine proudly proclaimed that Axiom had
breached the top 10 “legal services providers” in the U.K. Outside of Axiom, the Legal Business
list of prestigious “firms” included all the usual suspects (Allen & Overy, Clifford Chance,
Freshfields, Linklaters, Slaughter and May, and DLA Piper). This was the first time a non-law
firm has appeared in these ranks, but it will not be the last. Legal Business noted that this breach
of the coveted top 10 was “significant” and “demonstrate[ed] how non-law firm providers are
winning over some bluechip clients.”6 In our view, this breach demonstrated something else:
alternative legal services providers are not just “winning” the business of “bluechip” clients but
are gaining their respect and trust. Axiom has won that ephemeral prize every attorney desires:
prestige.
For those that have been following the alternative legal space, Axiom is just one of many
recently birthed companies fueling this transformation. Like Axiom, many of them find their
heritage in entrepreneurship and investment. While Biglaw firms rely heavily on their storied
history and prestige, many of the new heavy hitters were birthed after 2000. Companies like
Axiom, Pangea3, Quislex, and UnitedLex are relatively new players, but are steadily increasing
their headcount, revenues, and market share.
The increase in the legal market share for LMS businesses explains unusual trends in the
overall legal services marketplace. The New York Times reported on detailed research into the
legal market HBR Consulting, a leading provider of legal metrics. This research found that
companies worldwide increased their total legal spending by 2 percent in 2014. Yet, during that
period spending on outside law firms fell 2 percent.7 Surely some of this is attributed to
corporate counsel insourcing functions that were previously given to Biglaw firms. But we
believe much of the work is being sent to LMS providers, which have become part of the
corporate legal departments’ growing arsenal for improving efficiency. At Pangea3, we have
seen a double-digit spike in demand over this time period, and we hear that our competitors have
too. The legal services pie is getting bigger, but law firms’ share is decreasing.
Still not convinced? Read this year’s report published by Georgetown Law Center for the
Study of the Legal Profession and Thomson Reuters Peer Monitor on the state of the legal
market. That report squarely addressed how “the market for legal services has changed in
fundamental — probably irreversible — ways.”8 The report then defines “the dominant trends
impacting the legal market in 2014 and key issues likely to influence it in 2015 and beyond.”9
6 Sarah Downey, The Clients’ Verdict: Linklaters Wins Best Firm in Show from Annual In-House Survey, LEGAL BUSINESS (Oct. 7, 2014,
2:00 PM), http://www.legalbusiness.co.uk/index.php/lb-blog-view/3053-linklaters-wins-best-firm-in-show-from-annual-in-house-survey.
7 Elizabeth Olson, Corporations Drive Drop in Law Firms’ Use of Starting Lawyers, Study Finds, THE N. Y. TIMES (Oct. 10, 2014,
12:25 PM), http://dealbook.nytimes.com/2014/10/10/corporations-drive-drop-in-law-firms-use-of-starting-lawyers-study-finds/?_r=0.
8 Georgetown Law Center for the Study of the Legal Profession & Thomson Reuters Peer Monitor, 2015 Report on the State of the Legal Market
(2015), http://www.law.georgetown.edu/academics/centers-institutes/legal-profession/upload/FINAL-Report-1-7-15.pdf.
9 Id. at 1.
206
Axiom is based in the U.K. and works closely for clients in commercial transactions,
M&A, litigation, and other areas. Axiom’s lawyers are highly trained and carry top credentials.
But Axiom is not a law firm. It is a corporation that places its attorneys through insourced and
outsourced solutions. Like many good companies, Axiom prides itself on operational efficiencies
that are rarely found in the traditional law firm structure, like low-cost overhead, a culture of
agility and flexibility, and a centralized command structure. And perhaps the great distinction is
that Axiom can — and does — receive outside investment, operating formally in a way that blurs
the line between business and law.
As mentioned earlier, Legal Business magazine proudly proclaimed that Axiom had
breached the top 10 “legal services providers” in the U.K. Outside of Axiom, the Legal Business
list of prestigious “firms” included all the usual suspects (Allen & Overy, Clifford Chance,
Freshfields, Linklaters, Slaughter and May, and DLA Piper). This was the first time a non-law
firm has appeared in these ranks, but it will not be the last. Legal Business noted that this breach
of the coveted top 10 was “significant” and “demonstrate[ed] how non-law firm providers are
winning over some bluechip clients.”6 In our view, this breach demonstrated something else:
alternative legal services providers are not just “winning” the business of “bluechip” clients but
are gaining their respect and trust. Axiom has won that ephemeral prize every attorney desires:
prestige.
For those that have been following the alternative legal space, Axiom is just one of many
recently birthed companies fueling this transformation. Like Axiom, many of them find their
heritage in entrepreneurship and investment. While Biglaw firms rely heavily on their storied
history and prestige, many of the new heavy hitters were birthed after 2000. Companies like
Axiom, Pangea3, Quislex, and UnitedLex are relatively new players, but are steadily increasing
their headcount, revenues, and market share.
The increase in the legal market share for LMS businesses explains unusual trends in the
overall legal services marketplace. The New York Times reported on detailed research into the
legal market HBR Consulting, a leading provider of legal metrics. This research found that
companies worldwide increased their total legal spending by 2 percent in 2014. Yet, during that
period spending on outside law firms fell 2 percent.7 Surely some of this is attributed to
corporate counsel insourcing functions that were previously given to Biglaw firms. But we
believe much of the work is being sent to LMS providers, which have become part of the
corporate legal departments’ growing arsenal for improving efficiency. At Pangea3, we have
seen a double-digit spike in demand over this time period, and we hear that our competitors have
too. The legal services pie is getting bigger, but law firms’ share is decreasing.
Still not convinced? Read this year’s report published by Georgetown Law Center for the
Study of the Legal Profession and Thomson Reuters Peer Monitor on the state of the legal
market. That report squarely addressed how “the market for legal services has changed in
fundamental — probably irreversible — ways.”8 The report then defines “the dominant trends
impacting the legal market in 2014 and key issues likely to influence it in 2015 and beyond.”9
6 Sarah Downey, The Clients’ Verdict: Linklaters Wins Best Firm in Show from Annual In-House Survey, LEGAL BUSINESS (Oct. 7, 2014,
2:00 PM), http://www.legalbusiness.co.uk/index.php/lb-blog-view/3053-linklaters-wins-best-firm-in-show-from-annual-in-house-survey.
7 Elizabeth Olson, Corporations Drive Drop in Law Firms’ Use of Starting Lawyers, Study Finds, THE N. Y. TIMES (Oct. 10, 2014,
12:25 PM), http://dealbook.nytimes.com/2014/10/10/corporations-drive-drop-in-law-firms-use-of-starting-lawyers-study-finds/?_r=0.
8 Georgetown Law Center for the Study of the Legal Profession & Thomson Reuters Peer Monitor, 2015 Report on the State of the Legal Market
(2015), http://www.law.georgetown.edu/academics/centers-institutes/legal-profession/upload/FINAL-Report-1-7-15.pdf.
9 Id. at 1.
206
