Legisway legal industry transformation
LegalApril 13, 2020

COVID-19: Accelerating legal industry changes that were going to happen anyway

COVID-19 has left many communities scrambling to cope. While the negative impact on those who get the disease – or know someone who does – is undeniable, a lot of the impact on the legal industry may be to accelerate positive changes, or at least inevitable ones. There will also be a number of consequences that are less positive. Here are some of the existing trends the virus adds fuel to.

  • Bowling alone. A number of articles have already been published about how COVID-19 strengthens video conferencing, work from home, etc. However, those articles didn’t frame the change as part of a larger movement that was already happening, which it is. Harvard sociologist Robert Putnam pointed out as early as 1995 that in-person activity—and particularly participation in larger organizations like churches, fraternal organizations, and even bowling leagues—was in steep decline. He blamed television, but as we now know, the internet and cell phones would go on to cause even greater social atomization. In the legal industry, this change was already well underway as both firms and clients became larger, more global, and more anonymous. With social distancing, expect the relationships between law firms and large business clients to feel even more institutional, defined by policy and procedure, rather than individual personalities.
  • Millennialization of law firm culture. I’ve written before about how millennials are taking over legal culture and how that is a big deal, considering that most of them think the current way of doing business is “fundamentally broken.” Millennials already had an interest in working from home because they perceive it to provide a better work/life balance. They are also quicker to adopt technology and do not necessarily appreciate the old way of doing things, like physically printing out documents and marking them up with a red pen (which lots of senior attorneys still actually do). COVID-19 is now providing the ammunition for millennials (and those who think like them) to advocate for change at the very time that they are coming into their own politically at firms.
  • The (probably temporary) tabling of “re-regulation." Prior to COVID-19 hijacking the legal industry dialogue, there was a high level of interest in examining ways to allow folks without a law license to do some types of work that traditionally only lawyers could do. This excited a lot of observers because lawyers are too expensive for ordinary consumers, and these new workers might be able to provide services more affordably. Utah and Arizona created experimental programs to learn about the issue, and California and the ABA looked like they might follow suit, although they backed off. There are enough influential people behind these efforts to keep them going in some form, but on a national level, they will take a backseat to more pressing issues, like how to keep the world from flying to pieces.
  • Impact on the legal tech bubble? Just a few months ago, a number of legal industry journalists started asking the question of whether the legal tech bubble was about to crash (see here, here and here). COVID-19 probably crashed it, even if things turn around sooner rather than later. We are probably in a recession, and during a recession, sources of startup funding typically become less available, and acquisition size and volume tends to go down, making it more difficult for startups to keep the lights on. Startups that don’t have sufficient cash to weather a prolonged storm could be in big trouble. Contract lifecycle management and related spaces in particular, which are populated with literally dozens of competitors, look like they are in for a true battle for survival. Some will emerge victorious and stronger than ever, but many will be consumed or simply disappear.

Where does this leave us?

When all this is resolved, how will the legal industry look different? For starters, coming into the office may permanently decline. When people get used to working from home, they become more accepting of it and figure out ways to stay efficient even when not in the office. Lease expenses represent the second-largest cost driver in law firms, behind salaries, and many law firms may decide to reduce that expense by switching to smaller offices.

Second, there may very well be a delayed handoff in legal culture, as attorneys who thought they were approaching retirement decide to hang on for a few more years until their portfolio recovers. That may feel stifling to millennial junior partners and associates who believed they were on the verge of making partner and were eager to try new ideas and technology. If they do not feel like they have a voice in their existing organizations, some of them will leave for organizations where they think they will feel that way. This goes for attorneys working in corporate law departments as well—younger-minded workers, if they don’t feel like they have a vote, will vote with their feet.

Third, the CLM market will consolidate into 5-10 key players, and the rest will fall by the wayside or go after niche markets where the others can’t compete. The survivors will probably include existing industry leaders but also a few newer companies that were better than average at attracting capital.

Nathan Cemenska
Director of Legal Operations and Industry Insights

Nathan Cemenska, JD/MBA, is the Director of Legal Operations and Industry Insights at Wolters Kluwer's ELM Solutions.

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