The world is still very much struggling to cope with the human tragedy of the COVID-19 pandemic and the resulting deep economic damage, but we all recognise that even when we emerge out the other side, we will be in a transformed business environment. Companies will have suffered serious financial damage, as well as operational problems that will take time to fix, and many will even have to rethink their business models completely.
Law firms too will have to rethink their business proposition to adapt to an environment in which their clients will focus even more closely on value for money. As incoming managing partner of Dentons’ Amsterdam office, I am struck by the findings of the GCN’s General Counsel NL Benchmark Survey 2020, which shows that 40% of general counsel expect that their total legal costs will increase in the next two years. And yet, 36% of GCs already believe that they do not have sufficient financial leeway to enable their department to function in the desired manner and 58% say their supervisor does not support a bigger legal budget.
The GCN survey found that 37% of GCs expect their external legal costs to increase in the next two years, but the financial plight of many companies will put huge pressure on law firms to demonstrate that they are controlling these costs and at the same time adding value. There may be more work for law firms – not least because of the impact of COVID-19 on businesses – but there will also be more competition for that work. Already 43% of GCs regard good value for money as a key factor in choosing external law firms, a consideration that is only likely to become more important.
One way to potentially control costs is to embrace alternative fee arrangements, something 52% of GCs would like to see, according to the report. These can force both sides to pay more attention to the scope of the legal work that is required and the most efficient way of providing it, while giving the company a better viewpoint on the breakdown and likely size of the eventual bill. They can also provide options for customisation, offering companies the possibility of a more bespoke service.
Moreover, law firms will also need to show that they are adding value. This goes beyond legal expertise to include other factors such as geographic coverage (which can also cut costs), a real understanding of the client’s business, and a genuine commitment to diversity and inclusion, which can nurture legal talent and give a broader viewpoint.
Companies are also looking for value-added services, such as Dentons’ Nextlaw In-House Solutions, a global consultancy that advises them on resourcing, process management, and technologically innovative legal solutions based on artificial intelligence.
Such solutions are part of an ongoing legal tech revolution that offers a real chance to cut costs and improve efficiency. But companies are often too overstretched to take advantage of this. According to the GCN survey, 61% of GCs expect new technological solutions to be deployed in the next two years, but only 43% are quite or very actively engaged in this.
Legal firms can assist here by innovating themselves, testing legal technology and introducing the best- in-class products to their clients. Dentons’ Nextlaw Labs, which we launched in 2015, was the industry’s first legal technology and innovative initiative. It is designed to find and develop legal innovation projects for Dentons and its clients, using early-stage legal tech companies to solve their legal business problems. Through projects like this, law firms can keep costs down and create value, and play our part in preparing for the post-COVID world.
