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Talking Legal Industry Trends with Professional Firms Expert, Laurent Marlière
Dec. 7, 2018

The legal industry globally is undergoing a profound transformation as it adjusts to a changing socio-economic and competitive landscape. This change, in turn is demanding an adjustment on the part of law firms in how they react to and manage competition from new entrants, innovation, market consolidation and more.

We discussed some of these trends with Laurent Marlière, a global expert on professional firms; and Harry Pfeffer, International Sales Manager at LexisNexis Enterprise Solutions. It made for some insightful and thought-provoking tête-à-tête:

The Big Four are back on the legal pitch – and audit and accountancy firms are acquiring law firms to build capacity and expertise. With independent law firms impacted by this new wave of acquisitions, how can they protect their business?

Laurent Marlière: Sarbanes Oxley led to a radical separation of the accounting and legal market, but in the last 10 years or so, the Big Four accountancy firms have strengthened their position in the legal market. With their financial muscle and already extensive presence in the broader industry, they are challenging the one-stop shop, multidisciplinary, legal practice model.

Traditionally, law firms have always remained external consultants, but to compete with the accountancy firms who are fast sweeping up business; legal services providers, need to become part of their clients’ inner circle. The major strength of the Big Four is that they can use their core professional activity, which is audit, and explore clients’ insights to understand and anticipate their needs. Law firms need to be more proactive and less reactive to clients’ needs. They need to emphasise on their role of trusted advisors. One way of doing this is to leverage technologies like CRM to strengthen their international strategy and build strong relationships.

Harry Pfeffer: I agree. Accountancy firms have a large network of business consultants who have an in-depth knowledge of clients’ business. This model doesn’t exist in the legal sector, but do law firms need business consultants so that they can assure clients that they understand their business?

From an international strategy standpoint, clients now know that they have a choice of legal services providers – the local law firm isn’t the only option as accountancy firms and indeed other law firms with a global presence could potentially deliver the same service. However, the local law firms in Europe have a natural advantage in the jurisdiction they cover due to a huge network of local contacts across business functions. They need to exploit this advantage so that they are on a level playing field with accountancy firms who typically are much bigger in size but are unlikely to have the depth of relationships in associated areas of business. As Laurent says, leveraging CRM to achieve this a good way to make strides in this space for independent firms.

It would be fascinating to know how senior partners view competition with the Big Four. What does it mean to them to know that the likes of KPMG and EY are competing for their slice of the pie? Do partners have any inside knowledge that they use to compete with them?

There’s also another type of market concentration that is growing. Firms like DLA Piper and Norton Rose have adopted a similar global strategy to the Big Four. How can independent law firms then compete against these huge international conglomerates?

Laurent Marlière: This is an interesting trend. Previously, the market for the large accounting firms was less concentrated and the Big Eight shrunk to the Big Four. With firms like DLA Piper harbouring a vision to become global organisations, the question it puts forward is that can firms remain independent or do they have to merge into bigger practices to survive and thrive? Similarly, will there be a process of concentration among global law firms? Will these larger law firms also consider buying up smaller accounting firms in the same way as the Big Four are buying legal firms?

Harry Pfeffer: Almost all independent law firms are part of friendly referral networks and regularly refer business back and forth. Lex Mundi is a good example of one such successful network. The Big Four too have such a capability, but it is mainly internally as they share opportunities within their global organisation rather than relying on a network. However, for clients it’s about local knowledge. They might employ a big global firm, but if they have an issue, in a particular jurisdiction, say the Middle East, they still prefer to go to a local firm with strong contacts within that region. It’s true that big firms also employ local lawyers in the various regions they operate in, but culturally they are still part of an international organisation. The lawyers in the Middle East may be locals, but their colleagues across the organisation will to a large extent be from other regions.

Again, independent firms must exploit their ‘local’ advantage to the full as the value they can provide is truly tangible and exceptional. CRM is proven to help firms optimise their local and referral network relationships. By devising a CRM-supported business strategy, they can successfully remain independent.

Innovation in law firms is a big topic today, but who’s in charge of handling the disruption it might cause? Is it the senior partners? Is it the marketing team? Is there a need for cooperation across the business functions to achieve innovation?

Laurent Marlière: We are now seeing the fourth industrial revolution – i.e. digitalisation of the industry. So, lawyers should not look at themselves as merely supplier of legal services, but also consider newer technologies such as Blockchain, smart contracts, and others to create an environment of innovation in their organisations. Maybe mentorship is needed internally to help the various teams come together to fuel innovation in the business. External advice too may be required to help the law firm navigate the disruption that often innovation brings with it.

Harry Pfeffer: Most will say that the CIO should take charge of innovation, and to an extent it may be true. But there’s a bigger question – how do firms embrace technology that empowers those that use it? Technology-led innovation is only viable if people in the firm are willing to embrace it. Firm can’t innovate, if employees don’t embrace the idea and adopt the tools that can help them be innovative. The responsibility for innovation can’t rest with an individual or a business function. By way of example, we find that CRM is genuinely a success in only those firms where everyone in the organisation uses the tool.

The Big Four are seen to be innovative, but their business structure is very different to that of law firms. They are run as corporates, the CEO dictates policy and it’s often mandatory for employees – top to bottom – to follow processes and adopt the tools that are provided by the organisation. In law firms typically, these things are never enforced as this kind of culture doesn’t exist. No law firm is ever going to insist to a partner that they ‘have to’ use the technologies available in the business. So, while law firms might have a strategy for innovation, if they can apply the ‘discipline’ to the ‘embracing’, how can they be effective?

Harry Pfeffer

Harry manages the sale of CRM solutions for LexisNexis across EMEA and South America and has over 30 years of experience providing software solutions to the legal sector. Harry is well familiar with both the needs and the challenges of international law firms and has developed a vast array of experience and expertise that he shares with his clients.

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