There are plenty of indications to suggest that the disruption of the legal market is already taking effect. Online platforms, apps and in-house legal technologies are proliferating at an astonishing rate and, it seems, their presence is becoming tangible.

Take as an example of this tangibility the latest survey by international banking and financial services holding company Wells Fargo. It reports that larger flagship firms are experiencing stagnation in demand – something that leading analysts and philosophers such as Richard Susskind and Jeremy Waldron have predicted for some time. This is a perspective supported by the most recent Thomson Reuters Peer Monitor survey, which found that the litigation work of 151 large firms fell by 1.1% in the first half of 2016.

It is a worrying indictment of many of these traditional powerhouses that they seem to be able to muster little in the way of response to the shifting landscape other than the odd increase in hourly fees and it is reasonable to ask how they are going to maintain their position at the top of the pile if they lack the imagination to embrace the kinds of innovations and legaltech advances that are already coming to define the legal sector in the second decade of the third millenium.

It is no good for these well-fattened firms to just blithely adjust their napkins while they carry on enjoying the opportunity for yet another extended lunch. The clients are there; it is simply that the most complacent firms don't recognise what their needs are.

If anything, as the world becomes both more global and more complex and consumers more legally savvy, there should be greater opportunities than ever: could it be that some of the more established firms are in denial about their need to evolve and adapt?

The 2015 Altman Weil survey of Chief Legal Officers tallies with the anecdotal evidence of business leaders; corporate clients are spending more than before on legal services, it's just that they're not giving work to traditional law firms, preferring instead to develop in-house legaltech and legal expertise. Why spend more than you need to on lawyers when you can effectively deal with the issues at hand from within your own organisation and with the aid of exciting and efficient new technologies?
The Altman Weil survey supports this position. It found that 68% of managing partners and chairs believe they've lost income as a result of corporations insourcing legal work. In terms of legaltech, Mitratech says that corporate law departments already spend around $1.5bn a year on legal technologies, with that figure expected to more than treble over the coming few years. But it is hardly news; in 2013 the Legal Services Corporation's Report of The Summit on the Use of Technology to Expand Access to Justice, argued that technology had a considerable role to play in improving access to justice.

And, like it or not, lawyers are not always part of this solution. It is probable that Royal Dutch Shell represents only a taste of the future with its decision to redirect much of its legal budget to an offshore legal centre that will rely heavily on legaltech together with a combination of qualified and non-qualified legal practitioners. Clearly, those firms which are hubristic enough to think that increasing their hourly rate is the answer to their troubles are going to be in for a seismic and potentially terminal shock over the next few years.

Hourly retainers will continue to have their place, of course, it is just that they are not the answer to the range of innovations disrupting the marketplace: legal analytics, AI, legal project management, contracts management, compliance software, offshore alternatives and more. For once it is clients who are leading the way and they are making it plain that establishment law firms no longer have the currency they once had: clients may have diversified but many firms continue to operate neatly from within the square sides of the old paradigm.

The largest firms can be reassured that it is still not too late to act, but they should wake up to the fact that they are very much in the eleventh hour. A major firm that has failed to be part of the zeitgeist could still, in theory, just go out and buy the offerings innovated by others. Last year, LexisNexis bought litigation analytics pioneer Lex Machina for a figure many believe was around $30 million. There is nothing to stop the largest firms - the Linklaters and Clifford Chances of this world - from doing the same, if they've not done so already, and importing the advantages of legaltech wholesale, thereby ensuring their continuing relevance in the age of legal innovation and disruption.

But what is clear is that as we reach the end of 2016, time is running out for the major players; they can no longer afford to miss the new opportunities. Diversification is key – it's what consumers demand – and for diversification to happen there needs to be an acceptance of the new reality.


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