In my last Article we started to explore how the Internet could change the way legal
services are delivered over the next 10 years. We discussed how the Internet is largely an
information medium, and that as such it would have a direct impact on the legal profession,
which is essentially in the business of providing information.
We also looked at how the Internet could make serious inroads into our market share in
commodity or process driven services such as conveyancing, leasing and debt collection.
Finally we looked at the work of UK lawyer and author Richard Susskind, who states that the
delivery approach of lawyers will need to change as follows:
| Old
Paradigm |
New Paradigm |
| Advisory Service |
Information Service |
| One to One |
One to Many |
| Print based |
IT based |
| Time based billing |
Commodity Pricing |
| Restrictive/Defensive |
Empowering |
| Legal Focus |
Business Focus |
(The Future of Law:
1996)
All of this sounds pretty threatening, however there are also opportunities to be exploited
in this new business environment.
In order to develop strategies for law firms that enable them to adapt and thrive in this
‘new economy’, it is necessary to first understand the nature of the legal profession in
Australia and how it is characterised.
The last ABS survey on the legal profession was conducted in 1995/6 and did not include data
on Internet usage (this shows you how new this medium is). It did, however, provide the
following insights:
-
95% of legal practices were small (employing less than 20 people) and they accounted
for 46% of the total income derived from the provision of legal services for Australia
-
only .65% of practices were large (employing more than 100 people) but they derived
30% of total income
-
Commercial work generated the most income (31.9% of total legal service income) with
conveyancing second at 12.3%· Small practices generated 24% of their income from conveyancing, while large firms
only generated 4.4% from this source.
-
Large firms derived 49.8% of their income from commercial work compared to small
firms who generated under 20% of their income from this source.
-
Overall, large firms made higher operating profit margins (29%) than small firms
(21.5%).
The findings of of my recent survey of Brisbane law firms, also revealed the following
characteristics from the sample law firms:
-
60% of small firms (1-2 partners) described themselves as general practices, while
no large firms described themselves in this way. Interestingly, 66.7% of medium size sample
firms fell into the general practice category.
-
The larger the firm, the greater was the percentage of commercial /business work
conducted. Large firms almost exclusively conducted this type of work (93%) while medium
firms stated that commercial and business work comprised 60% of their overall service.
Small firms averaged 41%.
-
All large law firms were associated with national and international law networks.
None of the small or medium firms in the sample had national or international affiliations,
apart from one medium sized firm, who was part of a national law
group*.
* For the purpose of
the survey, firm's were categorised as small, medium or
large based on the following criteria:
- Small 1 or 2 partners
- Medium 3 - 9 partners
inclusive
- Large 10 or more
partners
Taking other data provided by the Queensland Law Society and the Small Business Index (May,
1999) we can start to paint a picture of the typical law firm in each size category.
Obviously not all firms conform to these stereotypes, however it is helpful to cluster
characteristics that are common to many firms in each size category.
| Small
Firm |
Medium
Firm |
Large
Firm |
| General Practice |
General Practice
with commercial work |
Commercial Practice |
| Equal Partner to
Solicitor ratio (:1.1.1) |
Less Partners than
Solicitors (1:1.3) |
Far More Solicitors than
Partners (1:2.15) |
| No
Outside Affiliations |
Possibly
a national affiliation, but not international |
National
and International affiliations |
| Local
Client base only |
Most
clients local some interstate |
Clients
primarily in QLD but also interstate and o/s |
| Moderate
income, Low IT expenditure |
Moderate
income Moderate IT expend |
High
income
High IT expenditure |
| Less
likely to be Internet connected |
More
likely to be Internet connected |
Has
Internet connection |
| Less
likely to have a Web Page |
More
likely to have a Web Page |
Has
a Web Page |
| Connected
firms are regularly using email and research online |
Regularly
using email and research services online |
Regularly
using email and research services online |
| Generally
averse to e-commerce |
Generally
averse to e-commerce |
Starting
to explore e-commerce |
FIGURE 1: Common characteristics of Small and Large Law firms and their tendency to effect
Internet adoption and usage rates
The above diagram helps us to understand how each type of law firm is positioned within its
business environment and gives us an idea of each firm's strengths and weaknesses.
This forms a foundation from which to analyse the particular threats which the Internet may
pose to each firm type, as well as e-strategies to succeed in the new cyber environment.
In the next and final Article, we will discuss the likely threats that each type of firm
faces as well as the unique opportunities that are available.
Ann Janssen
BA.LLB (Hons)
Solicitor & Consultant
ann.janssen@legalmart.com.au
Copyright. July 2000. All rights reserved
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