Legal sector at tipping point as technology concerns take hold
The global legal industry is at a tipping point as firms struggle to keep up with advancements in technology that continue to disrupt the market, according to a new report published today by accountancy and business advisory firm BDO LLP.
According to the Law Firm Leaders Survey, which polled the managing partners and senior partners of 50 national and international law firms, 98% of leaders said the pace of change in the legal industry, driven mostly by the impact of technology, is a real cause for concern.
The report says a new period of disruptive market challenges will dominate the sector during the next 5 years.
The findings of BDO’s Law Firm Leaders survey shows that technology is expected to have the greatest impact on law firms in the short term, with four out of five law firm leaders seeing it as a major factor to their firm’s success over the next five years. Unsurprisingly, technology is considered a strategic priority for 94% of law firm leaders surveyed.
One managing partner of a global law firm said: “Technology has been changing the world for a long time. Why should law be any different?”
After technology, national and global firm leaders said changing client demands, generational change and competition are the biggest threats.
UK firms considered US law firms, new market entrants and the Big Four accounting firms as significant competitors to watch.
Meanwhile, they expect businesses to take more work in–house, where automation is likely to reduce the need for external lawyers in routine and high volume areas.
Almost half (44%) of law firm leaders said cultural change will be a big challenge in keeping up with new technology. Of those, the majority (59%) said it was a firm-wide issue, while 41% said partnership resistance could be the biggest problem.
When asked about their Brexit concerns, 32% of global firms and 24% of UK firms said an exit from the EU would have the greatest impact on the legal industry over the next five years. While some believe lawyers will benefit from a temporary uptick in regulatory work as regimes and rules change, more are pessimistic about potential long-term impacts on workflows.
Matthew White, International Practice Leader, Professional Services Group at BDO, commented:
“In this new world where technology and changing client demands are causing firms to reconsider how legal services are delivered, is it feasible that law firms can continue to provide legal services in the same way they have done for decades?
“Law firm leaders must accept that if they want to maintain competitive advantage they will need to be much bolder in their approach to overcome with these disruptive market changes.”