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Law Firms Facing Disruptive Changes Impacting E-Discovery and Other Legal Services

Created on September 24, 2014

Disruptive ChangesA new report issued by Georgetown Law and Peer Monitor contends that disruptive forces have forced law firms to re-examine their traditional business models and embrace change in how legal services are delivered. According to the "2014 Report on the State of the Legal Market," the law firm market has become much more competitive over the past five years as the supply of legal services has greatly exceeded demand. Moreover, the market for legal services has shifted from a sellers' market to a buyers' market with fundamental decisions about how legal services are delivered increasingly being made by clients, not law firms.

One of the reports lead author is James W. Jones, senior fellow at the Georgetown Law Center for the Study of the Legal Profession. Jones will discuss the report and some of its key recommendations on Exterro's upcoming webcast, “Disruptive Change Confronts Law Firm Industry." The webcast, which airs on September 25, will also explore how a changing market has impacted the delivery of e-discovery services, an area in which many law firms are begin forced to adapt to new client expectations and demands. You can learn more about the webcast and register here.

We asked two prominent attorneys involved in their respective firms' e-discovery practices to share their reaction to the report's conclusion that law firms must re-examine their traditional business model and embrace change to remain competitive. Please note that the views expressed below are those of the individuals and do not necessarily reflect the views of their law firms. Don't hesitate to share your reaction as well in our comments section.

David R. Cohen, Partner, Reed Smith

David CohenI cannot speak about all law firms, but I think that statement is largely true with regard to large law firms that serve large corporations and institutional clients, and certainly when it comes to e-discovery. We have seen, in the corporate legal services market, an increasing focus on value and efficiency when selecting what law firms clients want to use or continue using. There are enough options out there that it is a “buyer's market" for most legal services, even when seeking top tier legal service providers. Those lawyers and law firms that figure out how to continue to deliver the highest quality work, while reducing and then meeting budgets, and otherwise being responsive to client needs, will be the winners in the marketplace for legal services, including but not limited to e-discovery.

Some ways that law firms can succeed in this environment include: (1) using legal process mapping to help identify where and how work can be done more efficiently; (2) optimizing value to clients by assigning work to the best, lowest cost legal talent (particularly more commoditized work, including some e-discovery and due-diligence tasks); (3) making better use of technology to accomplish more work and/or better work in less time; (4) making better use of metrics and project management to drive efficiency, improve budgeting accuracy and offer lower cost alternative fee arrangements; and (5) critically examining which ancillary services law firms can best and most cost-effectively perform for their clients versus which services are best left to vendors, consultants, or other solution providers.

Most clients understand that top quality and reasonable pricing need not be mutually exclusive and they ultimately want to hire lawyers and other providers whom they can trust to look out for all of their interests, including bottom-line costs.

Gareth Evans, Partner, Gibson Dunn

Gareth EvansThe fundamental premise of the Georgetown report is that clients are increasingly focused on enhancing the value of the legal services they purchase, with “value" referring to greater efficiency, predictability, and cost effectiveness (quality being assumed). The report states that this focus on value has accelerated significantly since the onset of the recession in 2008. Instead of growth for growth's sake (“build a bigger boat"), the report encourages law firms to pursue a strategy of being more responsive to the needs of clients and to deliver services in a more efficient and predictable manner (“build a better boat").

I agree that law firms that can do so will gain a competitive advantage over those that do not. The appropriate use of new technologies in the delivery of legal services, such as analytics and predictive coding, in my view, can go a long way towards delivering high quality results in an efficient, cost-effective and predictable manner for clients in the right litigation and government investigation matters. According to a 2012 RAND report (“Where the Money Goes"), approximately 50% of litigation costs are spent on discovery and 70% of that on document collection, review and production. It therefore makes sense that clients would be interested in retaining counsel with expertise in the use of technologies that help provide efficiency, cost-effectiveness and predictability in an aspect of litigation and investigations that can account for the majority of the clients' expenditures.

William "Bill" Hamilton, Partner, Quarles & Brady

Bill HamiltonThe legal services market is divided into various sub-markets and categories. Very broadly put, the market can be divided into (i) firms servicing top tier fortune 500 business clients (major market) and (ii) the remaining providers that service highly price conscious small businesses and individual consumers. I'll call small business and individual consumers the "consumer market." Increasingly the consumer legal services will see erosion of demand from efforts by self-help organizations that provide forms, apps, and the like. Downward pressure will cause providers serving the consumer market to also develop and use apps and other "near" self-help technologies.

On the major market side, firms will find that litigation revenues will continue to decline as more and more e-discovery moves in-house and as predictive technologies become increasingly routine. Except for "death of the company, " and extreme product liability cases, and class action cases, clients will demand near-immediate (compared to traditional times frames) resolution of disputes based on data analytics. This will cause a reduction of high revenue generation review projects as well as downstream costly litigation activity such as depositions and trials. Trials disappeared some time ago. Depositions are next. The increasing explosion of data will be met by increasing proportionality restrictions (now contemplated by the new 2015 rule changes) and rapidly advancing technologies. Firms will need to adjust the litigation billing model to move to [significant] flat fees based on the provision of advanced highly skilled litigation service teams composed of e-discovery professionals that quickly resolve disputes within weeks if not months -- or at least can tell the client the basics of the litigation story and provide an analysis of risk. Litigation departments will also begin to provide services analyzing potential liabilities and claims based on data analysis rather than simply reacting to suits and claims.

Upcoming Webcast

Learn more about Georgetown Law and Peer Monitor's new report, "2014 Report on the State of the Legal Market," be registering for Exterro's upcoming webcast, "Disruptive Change Confronts Law Firm Industry" (airing Thursday, September 25). The webcast will feature the report's lead author, James W. Jones, senior fellow at the Georgetown Law Center for the Study of the Legal Profession. The webcast will address some of the report's key recommendations as well as how e-discovery services stand to be impacted by a changing legal services landscape. Learn and more and register for the webcast here.