ALM’s The American Lawyer reported in November that five years after the official end of the Great Recession, the appearance of a recovery for the Am Law 200 top-grossing firms in the nation is actually nonexistent when adjusted for inflation.
However, profits per partner are up and, at the same time, four fundamental changes are roiling the legal marketplace, according to a report published in the November issue and online at www.americanlawyer.com.
The trends — which if they continue, will constitute secular changes in the market — are:
1. Legal spending by corporate America dropped sharply during the Great Recession and has been slow to return. Firms continue to charge higher hourly rates, and clients are willing to absorb a portion of those increases but are buying fewer hours.
2. Even in the downturn, The Am Law 200 increased their share of the money American business spends on law firms. But the firms seem to have hit a plateau and, after being stalled for three years, may have reached their natural upper limit in the biggest legal market in the world.
3. The big-firm market has segmented. A handful of firms—the top 10 percent—have capitalized on the other trends by claiming an outsized share of the remaining premium-priced work. As a result, their partners have reaped benefits. The other 90 percent are divided into those who are mere winners and those falling behind.
4. The nature of big-firm partnership has changed. Fewer partners have equity status and a greater percentage of the firms’ lawyers aren’t sharing in the profits.
“One of the take-aways for firms is that they need to know where they stand in the marketplace with respect to their competitors,” said Editor-in-Chief Kim Kleman. “And they need to know really, truly and honestly what their clients think of their work—and commit to doing even better.”
The American Lawyer also released its annual technology survey which found that worries about data security have reached new heights among technology directors, with 55 percent citing security as their biggest challenge. Overall, 74 percent of the CIOs surveyed said they are more concerned about security now than they were two years ago, with the issue becoming more time and budget consuming. Mobile devices also continue to gain traction with 85 percent of respondents identifying data security as their chief concern about letting lawyers use their own devices for work.
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