Data from the industry’s most comprehensive legal spend database reveals palpable shakeup in last year’s outside legal services market.
Last year produced the biggest shakeup in the outside legal services market since the Great Recession as 90 percent of corporate legal departments (CLDs) reduced their active provider relationships, and 16 percent of attorney-client relationships that existed in 2019 were paused in 2020. That’s according to Wolters Kluwer's ELM Solutions, which today published its LegalVIEW® Insights report – the first of four quarterly reports in 2021 – analyzing emerging legal industry issues using data from its LegalVIEW Data warehouse.
The inaugural report, compiled by Nathan Cemenska, Director of Legal Operations and Industry Insights for Wolters Kluwer's ELM Solutions, focuses on corporate legal department law firm vendor usage. Due in part to the 2020 COVID-19 pandemic and its effect on the economy, every law firm segment was impacted. From the largest, most prestigious firms to solo practitioners, every group saw a significant number of attorney-client relationships put on hiatus. The mean number of outside providers actively serving the typical corporate law department declined by 12 percent year over year, and the median number of providers dropped by 16 percent, compared with 2019.
“Last year, a significant number of relationships between law firms and their clients went dark—not a single legal invoice was sent in these cases. With the economy coming back, those gaps are going to be filled, but it won’t always be by the firms that lost the business,” said Cemenska. “Alternative legal service providers, the Big Four, and competing law firms are hungry for that business, as are in-house legal teams, which continue to get better at doing the work themselves.”
Additional highlights from the inaugural LegalVIEW Insights report include:
- Am Law 150-200 firms were those most likely to have clients go on hiatus, followed by firms outside the top 200.
- In the last six years, approximately 32 percent of CLDs sent half or more of their work, in dollar volume, to the top 100 global law firms. Some CLDs consistently send 75 percent of their work to those top firms.
- The extent to which CLDs send work to those 100 largest firms did not change much year over year. Forty-six percent of CLDs show less than 15 percent variance in their utilization of those firms over the last six years.
- Most CLDs consolidated 80 percent of their work into 20 percent or fewer of their vendors – a recognized best practice that reduces administrative overhead and creates opportunities for volume discounts. In 2020, larger law firms tended to experience market share growth, while smaller firms lost market share. Conversely, unranked law firms saw their market share decrease by more than two percentage points year over year, and they have lost four percentage points overall since 2016.
In conjunction with the LegalVIEW Insights reports, Wolters Kluwer's ELM Solutions will produce an ongoing series of LegalVIEW Insights blogs, webinars, and other content discussing the emerging trends from the LegalVIEW Data Warehouse – the most comprehensive legal spend database in the world, with more than $140 billion in invoices. On Thursday, April 15, for example, Cemenska and legal technology strategist Brad Blickstein, Principal, Blickstein Group, will host a webinar offering a deeper look at data and potential long-term trends from the inaugural report.
ELM Solutions, part of Wolters Kluwer’s Governance, Risk & Compliance division, is the market-leading global provider of enterprise legal spend and matter management, contract lifecycle management, and legal analytics solutions. The company provides a comprehensive suite of tools that address the growing needs of corporate legal operations departments to increase operational efficiency and reduce costs. Corporate legal and insurance claims departments trust its innovative technology and end-to-end customer experience to drive world-class business outcomes.
Wolters Kluwer's ELM Solutions was named a leader in both the IDC MarketScape: Worldwide Enterprise Legal Spend Management 2020 Vendor Assessment and IDC MarketScape: Worldwide Enterprise Matter Management 2020 Vendor Assessment. The company’s award-winning products include Passport®, the highest rated ELM solution in the latest Hyperion MarketView™ Legal Market Intelligence Report and TyMetrix® 360°, the industry’s leading SaaS-based e-billing and matter management solution. CLM Matrix, meanwhile, was named a “strong performer” in The Forrester Wave™: Contract Lifecycle Management For All Contracts, Q1 2021 report. ELM Solutions’ LegalVIEW portfolio of legal analytics solutions is based upon the industry’s largest and most comprehensive legal spend database, with more than $140 billion in invoices.
About Wolters Kluwer Governance, Risk & Compliance
Governance, Risk & Compliance is a division of Wolters Kluwer, which provides legal and banking professionals with solutions to help ensure compliance with ever-changing regulatory and legal obligations, manage risk, increase efficiency, and produce better business outcomes. GRC offers a portfolio of technology-enabled expert services and solutions focused on legal entity compliance, legal operations management, banking product compliance, and banking regulatory compliance.
Wolters Kluwer (AEX: WKL) is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer reported 2020 annual revenues of €4.6 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries, and employs 19,000 people worldwide.