5 Forces Reshaping the Legal World Gradually, Then Suddenly

To paraphrase Ernest Hemingway in The Sun Also Rises, transformational change happens in two ways: gradually, then suddenly. The first phase is incremental, prolonged, and often induces complacency. The second phase can feel cataclysmic and unexpected to those experiencing it—though, of course, the cracks have been forming for some time. 

One thing Hemingway didn’t spell out, but others have, is that it takes multiple, converging forces for “gradually” to reach an inflection point where “suddenly” arrives. 

The legal world has been experiencing incremental pressure for decades—so long, in fact, that predictions of transformation may sound stale. But the five forces we describe below are converging in ways that make major change inevitable and proximal. 

Understanding those forces can also tell us something about the future after “suddenly.” In this case, they reveal that buyers, not sellers, will gain the upper hand in shaping the legal market to come. This represents a massive power swing away from law firms toward legal departments, giving General Counsels a generational opportunity to create more value for their organizations—if they can learn how to wield that power. 

Force 1: A Thicker Legal Market

The demand for legal services is enormous, growing, and largely unmet. Organizations face unprecedented legal risks and workflow across an ever-expanding range of issues, from compliance and regulatory obligations to deal making, patent protection, contracts, health and safety, data security, and so on.

Smaller businesses must navigate extraordinary complexity without much legal support. But even in-house teams in large organizations are overwhelmed. They reflexively turn to law firms for major risks or specialized expertise, but those risks are more numerous than ever. Meanwhile, they want their in-house lawyers to focus on the day-to-day business and strategy of the organization; yet those lawyers are being pulled away at every turn to deal with the latest crisis or overflow. That feels unsustainable—because it is.

Force 2: Budget-Breaking Costs

Top-end billing rates have reached $3,400 an hour in the US and £2000 in the UK. Given limitless demand, there’s no immediate reason for rates at top law firms to stop climbing; but there is a serious downstream impact on legal ops budgets that affect other workflows. 

Top law firms are exceptionally good at what they do and often have unique experience and expertise that can be invaluable on a particular issue or risk. For the right reasons, clients are more than willing to pay. But even global organizations are trying to assert more control over their total legal spend because budgets are not limitless. When an immoveable object meets an unstoppable force, something has to give. After all, lawyers are only human.

Force 3: The Rise of AI-Enabled Legal Work

Or are they? A year ago, AI was considered an existential threat to the legal profession that could replace attorneys. The truth is, we don’t know where AI is headed. It’s one of the fastest-moving technology waves we’ve ever seen but not many GCs will want to commit to any particular path, solution, or new way of doing business yet. 

AI is already good at doing routine work, however, supercharging support and productivity in some areas. Many GCs rightly want to explore this potential while poised to quickly adapt the right solutions should they emerge. If and when they are ready for an investment, they’ll have a new set of decisions to make: Do I build, buy, or rent the solutions I need? And where do I turn for help?

Force 4: Capital Investment in New Models, New Scale, New Service Lines

Despite the large size of a few national firms, the legal world remains largely a cottage industry compared to consulting or accounting which is dominated by truly global firms. Investors are waking up to a $400 billion American market that is still fragmented with few national brands, limited (but growing) deal activity, and limitless demand.

In the UK, firms have had regulatory clearance to forge Alternative Business Structures since the Legal Services Act of 2007, giving them substantial experience with external investments. Bringing management discipline, capital, scale, and competitive services to firms, regions, and service sectors with high growth potential will create opportunities for providers operating outside of traditional partnerships. 

It’s likely we will see accelerated consolidation, increased scale, and the emergence of true multi-disciplinary practices in the near future with lower administrative costs and more reliance on technology and data. How will that affect the market for legal services?

Force 5: An Expansion of Choice and a Focus on Value

One thing it is doing is giving GCs more choice in where they turn for legal services. In addition to law firms and their own in-house teams, they have a broader array of options today that also include alternative legal service providers (ALSPs), AI-enabled legal solutions, and integrated tech + talent models. 

Which path should they take? On a practical level, it’s “horses for courses,” as we say in England, meaning that different approaches or options are suited to different situations. The right choice depends on the right fit for a particular job or project. In certain areas, “value” will be found in expertise and experience, in others with factors like cost, speed, flexibility, efficiency, and ease of use.

A Sudden Realignment in the Market for Legal Services

The music industry didn't change overnight. Cracks formed when artists chafed at label control, digital technology made copying and distribution effortless, and costs plummeted. Then, suddenly, the economics of value realigned around the listener.

The retail industry didn’t change overnight. Cracks formed as big box stores couldn’t match the convenience, prices, and power of online shopping or the economics of scaled distribution and delivery. Then, suddenly, the economics of value realigned around the shopper. 

The real estate industry. The financial services industry. The hospitality industry. The news media industry. The travel industry. Each faced their own set of converging forces that applied pressure on market demand, consumer dissatisfaction, and operational inefficiency with new technology to reconfigure the economics of value. 

Cracks in the legal industry have been forming for decades. Market demand and dissatisfaction are soaring. Buyers are pushing back on rates and costs. Alternative providers have proven that more can be bought for less. Technology is eroding the expertise that justifies high costs while exposing the inefficiencies of a cottage industry. What does our “then suddenly” look like?

Power is shifting away from traditional sellers to consumers. GCs now operate in a world in which they get to decide what value means to them with more and better options for how they source legal services and expertise. They can make more demands of their service providers—seek lower rates, leverage outcomes-based contracts, require more transparency or speed.

That may not seem monumental this very moment, but we are on the cusp of new consumer behaviors that will lead to more innovation, more choice, new products, new services, and new opportunities. Ask big box retailers, music industry executives, financial advisors, real estate agents, hotel chain CEOs, and others what they think about the two types of change—gradual and then sudden—and how the power they once wielded has shifted to consumers. 

This shift, however, creates questions and challenges for GCs. Given their nascent power to shape the legal services landscape, will they seize this opportunity to improve their position? Ultimately, that comes down to their actual buying decisions. But do they know how to buy? Those that develop a robust strategy for allocating resources and sourcing legal services will have a significant advantage in the legal world to come.