Interesting post on the Legal Blog Watch blog by Carolyn Elefant…
Who references a recent article by Paul Lippe the main man at Legal On Ramp.
They both make the point that when this recession recedes, and it is worth noting that they don’t things will return to "normality" until 201, that law firms will have to conduct business in a new way, especially with regard to fee earners and the sacrosant billable hour.
Elefant writes:
Is 2011 the End of Law Firm Leverage?
Over at The Am Law Daily, Paul Lippe of Legal OnRamp shares some interesting observations on the future of law practice, circa 2011. Although most experts predict that the recession will end by 2011, Lippe doesn’t believe that law firms can viably return to the days of business as usual, where firms profited from billable hours generated by armies of associates. Though clients will continue to pay the same amount of money for partner work, Lippe believes that associate revenue will decline by half:
A typical law firm bill in January 2011 will generate the same dollars for partner work as it does today, but it will generate half the revenue for associate work. Consider a bill in July 2008 for $1,000,000, representing $450,000 of partner contribution, $500,000 of associate contribution, and $50,000 of ‘other’; in January, 2011, the bill for an essentially identical project will be $800,000, reflecting $450,000 of partner contribution, $250,000 of associate contribution, and $100,000 of ‘other.’
To make up for shortfall in labor, firms will likely outsource work, rely on contract lawyers and replace some associate time with technology. But Lippe is confident that clients will no longer pay inflated rates for associates. As a result, smaller firms that can offer flat fees and leverage technology will generally beat out larger firms, even for high-end work.
http://legalblogwatch.typepad.com/legal_blog_watch/2009/02/is-2011-the-end-of-leverage.html
By a hop and a skip these insights also beg the question of what will happen to the huge set of industries that over the past few years have made a mint out of firms scrambling to modernize.
- Legal Publishing / Databases
- Legal IT
- Consultancy For Law Firms
- Legal Conference Providers
- Legal Recruiters
- Legal Business Development
and so on.
Natural attrition over the next 18 months will weed out many and thin down even more. Those that survive may well have to develop a whole new set of criteria, skills and technology in order to generate income from a leaner and smarter legal industry.
