Over the past several years there has been an unprecedented level of change in the Australian legal market. We’ve seen this change at a number of levels at a number of levels, both in terms of the structure of the industry itself and also changing within law firms and the way they compete.
Changes in the Legal Service Market in Australia
There have been a lot of changes in the market for legal service in Australia that are in turn driving change in the way the industry is structured. The two that have had the most impact are the entry of foreign firms, either directly or in alliances with Australian firms and the entry alternative service providers. As a consequence, the number of firms competing on the Australian market has increased significantly over the past several years. If you couple this with the fact that overall demand on the market has decreased, the result is more firms chasing less work.
The other thing that has occurred is during that time is that clients have been under the same or similar pressures. Globalization, the credit crunch and all of the other economic factors that clients have had to deal with have led them to cut costs and focus on getting more for less. As a consequence of this, law firms have had to figure out how to deliver more for less and how to create greater value for clients by changing how they deliver legal services.
Furthermore, firms are now giving a lot more consideration to developing their own legal departments. Thus, as these in-house legal teams get larger, the demand for legal services further decreases.
Changes Within Law Firms In Australia
In terms of the changes within law firms, we are seeing changes on a range of levels, but primarily in the following areas:
- The way services are provided
One of the primary areas of change is around the need to provide more for less as mentioned above. There is no doubt that since the global credit crunch and the pressure that it put on the market, clients having been pressing legal service providers to do more for less. As a consequence, law firms are innovating in a range of areas. Law firms are now looking at alternative resourcing models, as well as, the application of legal project management techniques and legal process engineering. However, it’s fair to say that the industry is in the early stages of these processes.
Another area of change within law firms that is under way, but where more change is truly needed, is in the area of greater diversity and participation by women in the workforce. It is fair to say that the incredible efforts that law firms have made in this area over last 5-10 years have not yet born fruit. But, there has been progress made in terms of identifying which strategies work and which do not. Thus, we can expect to see a lot of improvement in this area over the next few years.
The final area, where we are seeing some quite dramatic changes within law firms is in relation to pricing. While it will be a long time before anyone can declare the billable hour dead, it’s fair to say that we are seeing a very significant movement towards the use of alternative fee structures, as well as, the tailoring prices to particular circumstance to ensure that clients get value for their money.
We’ve seen an incredible internationalization of the Australian legal services market with the entry of foreign competitors and alternative fee providers. We’ve also seen demand for legal services decrease due in large part to global market pressures. So, what we are seeing overall is a shrinking market with more competitors, along with a change in the way clients buy services. Together they are driving profound changes in the Australian legal Industry and are very likely to proceed for years to come.