Page 237 - 2019 - Leaders in Legal Business (n)
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McKenzie, DLA Piper, and Jones Day) has been slower11 than for the global elite, and the PEP
gap between the highest- and lowest-performing global law factories has remained stable, the
number of partners has changed significantly. Some global law factory firms have significantly
reduced the number of partners, making them more akin to the Magic Circle group, while others
have continued to grow, resulting in a staggering difference of more than 500 partners between the
biggest and smallest global law factories.
The overall result is that the global elite (plus a few challengers) are pulling away from the
pack, while the global law factories (less a member or two) continue to expand. Left in the middle
is a mixture of lower-performing challengers and middle-field firms. Only the Magic Circle can
continue to be distinguished as a separate group of firms in this segment of the market. While these
findings may help John Doe understand the changing global legal market, one crucial part of the
strategic jigsaw is missing.
Reliance on the usual market data (law firm rankings such as AmLaw 100 and the U.K.
Top 50) ignores an interesting movement in the legal market. A new group of players, “alternative
legal service providers,” has squeezed into the picture, but who are they? As they are not brick-
and-mortar “law firms,” they don’t appear in the law firm rankings and little information about
them is available. A recent study12 on the market for alternative legal service providers estimates
the size of the new market segment to be $8.4 billion annually. Although not quite matching the
value of the U.S. legal market at $275 billion, it is not an insubstantial figure for an emerging
market. These players are made up of a diverse group of providers, from outsourced legal work
(such as document review) to insourced legal work (for example, temporary lawyers) or entire
managed legal services (traditional in-house legal functions). Outsourced legal work by the likes
of QuisLex, Consilio, and Thomson Reuters accounts for some 70 percent of this emerging market.
This is a group of players that John Doe needs to know more about. Especially as, according the
study, the use of these alternative legal service providers by corporations and law firms is strong
— and is expected to grow.
The “middle of the road” firms have come under extreme pressure, and the jury is out on
their future. Will they eventually cease to play a role? This depends on a number of factors. John
Doe has to make a decision because there will no longer be an international “middle of the road”
law firm segment. Remember the words of political activist Jim Hightower that ring true today
and apply to John’s situation: “There’s nothing in the middle of the road but yellow stripes and
dead armadillos.” The middle is clearly a dangerous place to be.
So, what are John’s strategic options? Move toward the global elite? Tricky — the sterling
brand and sparkling client book of the Wachtells of the legal world cannot be achieved overnight.
Merger? According to our crystal ball (this time in the form of The Lawyer Global 200),
international expansion is not a watertight growth strategy. In fact, revenue increases in the Global
200 were mostly enjoyed by the richer firms, while merging firms tended to record drops in
revenue. Furthermore, the John Does of this world are often already too large to be an attractive
merger partner. Finally, maybe he should look at law firm networks: groups of firms who are
balancing their independence with the ability to expand their referral network, and are able to
quickly scale up in cases where size matters.
Having said that, to avoid being “stuck in the middle,” John Doe could dig up some
classical strategy and follow Porter’s advice of pursuing either a cost leadership strategy or a
11 Average PEP rose only 14% to $1.2m with average partner numbers dropping. Id.
12 Georgetown Law & Thomson Reuters, Alternative Legal Service Providers: Understanding the Growth and Benefits of these New Legal
Providers (2017).
222
gap between the highest- and lowest-performing global law factories has remained stable, the
number of partners has changed significantly. Some global law factory firms have significantly
reduced the number of partners, making them more akin to the Magic Circle group, while others
have continued to grow, resulting in a staggering difference of more than 500 partners between the
biggest and smallest global law factories.
The overall result is that the global elite (plus a few challengers) are pulling away from the
pack, while the global law factories (less a member or two) continue to expand. Left in the middle
is a mixture of lower-performing challengers and middle-field firms. Only the Magic Circle can
continue to be distinguished as a separate group of firms in this segment of the market. While these
findings may help John Doe understand the changing global legal market, one crucial part of the
strategic jigsaw is missing.
Reliance on the usual market data (law firm rankings such as AmLaw 100 and the U.K.
Top 50) ignores an interesting movement in the legal market. A new group of players, “alternative
legal service providers,” has squeezed into the picture, but who are they? As they are not brick-
and-mortar “law firms,” they don’t appear in the law firm rankings and little information about
them is available. A recent study12 on the market for alternative legal service providers estimates
the size of the new market segment to be $8.4 billion annually. Although not quite matching the
value of the U.S. legal market at $275 billion, it is not an insubstantial figure for an emerging
market. These players are made up of a diverse group of providers, from outsourced legal work
(such as document review) to insourced legal work (for example, temporary lawyers) or entire
managed legal services (traditional in-house legal functions). Outsourced legal work by the likes
of QuisLex, Consilio, and Thomson Reuters accounts for some 70 percent of this emerging market.
This is a group of players that John Doe needs to know more about. Especially as, according the
study, the use of these alternative legal service providers by corporations and law firms is strong
— and is expected to grow.
The “middle of the road” firms have come under extreme pressure, and the jury is out on
their future. Will they eventually cease to play a role? This depends on a number of factors. John
Doe has to make a decision because there will no longer be an international “middle of the road”
law firm segment. Remember the words of political activist Jim Hightower that ring true today
and apply to John’s situation: “There’s nothing in the middle of the road but yellow stripes and
dead armadillos.” The middle is clearly a dangerous place to be.
So, what are John’s strategic options? Move toward the global elite? Tricky — the sterling
brand and sparkling client book of the Wachtells of the legal world cannot be achieved overnight.
Merger? According to our crystal ball (this time in the form of The Lawyer Global 200),
international expansion is not a watertight growth strategy. In fact, revenue increases in the Global
200 were mostly enjoyed by the richer firms, while merging firms tended to record drops in
revenue. Furthermore, the John Does of this world are often already too large to be an attractive
merger partner. Finally, maybe he should look at law firm networks: groups of firms who are
balancing their independence with the ability to expand their referral network, and are able to
quickly scale up in cases where size matters.
Having said that, to avoid being “stuck in the middle,” John Doe could dig up some
classical strategy and follow Porter’s advice of pursuing either a cost leadership strategy or a
11 Average PEP rose only 14% to $1.2m with average partner numbers dropping. Id.
12 Georgetown Law & Thomson Reuters, Alternative Legal Service Providers: Understanding the Growth and Benefits of these New Legal
Providers (2017).
222
