The legal industry is awash in studies and surveys. We’ve been keeping track of a few reports that have recently appeared on the business of law on the radar and poured over the subsequent analysis and commentary. The studies cover: IT security, law firm M&A, economic confidence, attorney lifestyle and eDiscovery.
Summaries to five recent legal industry studies follow below – and way at the bottom of this post are links to eight additional studies that we felt merited a more in-depth review.
1. $7 Million Spend in Law Firm Security
How much are law firms currently spending on IT security every year? According to Bloomberg Big Law Business, AmLaw 200 firms will “spend more than $6.9 million on information security, or 1.92 percent of their gross annual revenues.”
The benchmark metric stems from a recent report, What Price Peace? Key Expense Management Strategies for Law Firm Data Security (free with registration), published by Chase Cost Management, which provides expense management services and programs.
“Participating firms plan to spend nearly $7M in 2015 on their information security and compliance initiatives including $4,709,833 on operating expenses and $2,270,333 on capital investments,” according to the report.
Bloomberg reporter Joyce Cutler wrote, “The average amount spent is $8,440 per full-time equivalent employee, the survey report said.”
IPWatchdog noted, “none of the survey’s respondents felt as though they had too much budget while half of the respondents felt as though their information security budget was too small.”
The report says “the typical respondent profile is a person in the role of Chief Information Officer (CIO) or Information Technology Director with an AMLAW 200” and “uses the collective wisdom embedded in the ISO 27001-02:2013 security standards to guide” information security spending.
“The American Bar Association estimates that 80 percent of the 100 largest firms in the U.S. have been breached, while a survey of members of the International Legal Technology Association released last week showed that for the first time ever, security management is viewed as the biggest challenge facing legal IT departments,” according to The American Lawyer.
2. A “Record Pace” for Law Firm Mergers
“In the third quarter of 2015 alone, 20 law firm mergers were announced,” wrote The American Lawyer based on research from Altman Weil. The increased merger activity “is a reflection of overall optimism about the economy and financial stability within many firms,” according to the article which cites Eric Seeger, a principal with the firm:
“He added that some firms are finding that lateral hiring is too slow and expensive as a growth strategy, while tacking on a boutique can be a quick way to grow a particular practice area or establish a foothold in a new city.”
Chad Halcom of Crain’s Detroit Business, reported “more than 70 M&A transactions nationwide affecting more than 5,000 lawyers this year, compared with 63 deals involving fewer than 2,000 lawyers the first three quarters of 2014 (a January merger of Dentons in New York and Dacheng Law Offices in China is 10 times larger than any other U.S. deal, skewing the 2015 head count).”
“Large and mid-sized law firms continue to cherry-pick desirable small firms based on practice specialty or geography,” Mr. Seeger said in an announcement. “We’re also seeing same-city or same-state tie-ups between smaller firms that are joining forces in an attempt to strengthen their relative market positions.”
Altman Weil has a tally of law firm mergers are freely available online, including law firm mergers for the first, second and third quarter of this year. Keep an eye out for the firm’s updates at the year winds to an end.
Also see these related posts:
The Cliff Notes to 7 Current Legal Industry Studies
A Cheat Sheet for 5 Recent Legal Industry Studies
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3. Law Firm Confidence Net Positive but Declining
Sentiment among law firm leaders is a mixed bag according to the latest, “Law Watch Managing Partner Confidence Survey and Index” by the Citi Private Bank Law Firm Group. In a statement emailed to the Business of Law Blog, the group summarized its latest quarterly survey:
“Managing partner confidence overall, and particularly in the outlook for the economy and the legal industry, remained above neutral in 3Q’15, but declined for the third consecutive quarter. Confidence in demand growth moderated materially and, while still positive, is well off the peak seen at 1Q’15. However, managing partners are more optimistic about the pace of revenue and profit growth at their own firms. For the third quarter in a row, they predicted some relief in the pace of increasing discounting pressure. Expense growth is expected to slow, yet managing partners continue to project headcount growth. The pace of associate hiring is projected to increase, with moderation expected for equity partners and other lawyers.”
The American Lawyer covered the survey and reported, “38 percent of those surveyed said they expected their profits to grow at rates between 5 percent and 10 percent, while 4 percent expected growth rates exceeding 10 percent. The report also said that 46 percent of managing partners expected revenue growths of greater than 5 percent.”
Reporter Scott Flaherty attributed Gretta Rusanow who leads advisory services for the group, as having said:
“While they feel less confidence about the industry as a whole, their confidence in the pace of revenue and profit growth for their own firms has picked up. We take from this that while managing partners see the challenges in the market, many feel they have built a brand and a business model that can grow regardless.”
In reaction, Bill Henderson, a professor of law at Indiana University and contributing editor to The Legal Whiteboard, offered commentary to Casey Sullivan of Bloomberg Big Law Business about the shifts in market dynamics. These include constrained opportunities in law firms complicated by the high cost of legal work and the corporate legal trend to shop for better values:
“Henderson said that to adapt, law firms need to ‘take measured risks’ in investing in new technologies and business models, as well as adopting alternative fee structures, to provide new service offerings to clients. But even then, Henderson said that even the ones that do run the risk of not being noticed by the client: ‘The client has to be educated to take advantage of that… and a lot of clients don’t want to ascend that learning curve.’”
4. Lifestyle: Hard Legal Work and Exhaustion
“Lawyers pretty much run the country. Maybe the reason they run the place so badly is that they’re always exhausted,” according to Stephen L. Carter, a professor of law at Yale University, in a Bloomberg View column.
Lawyers, especially those in “large corporate firms” are well compensated, according to Mr Carter:
“Yet as the law professor Benjamin H. Barton points out in the new book I discussed recently, ‘Only 44 percent of Big Law lawyers report satisfaction with their career, while 68 percent of public sector lawyers do.’”
“The reason for all that unhappiness, Carter concludes is exhaustion. Forty-one percent of lawyers in large firms work 60 hours or more each week, compared to 50 hours for the median lawyer,” according to Debra Cassens Weiss reporting for the ABA Journal.
“He points out that the ethic to work hard is something ingrained in the lawyers at Big Law – part of the culture of what they do and who they are. Also part of being in the elite club whose membership they pursued,” wrote the editors at LawFuel. “Pity it just comes at the cost of happiness.”
5. eDiscovery Adoption Lags in Mid-Market
It’s expensive to have an attorneys sift through electronically stored information (ESI) to find and evaluate digital content for relevancy to a matter or case. The key to keeping cost down is narrowing large volumes of information down to just the data that matters.
This gets to the essence of the purpose and value of the eDiscovery process, which a recent survey by BDO Consulting says mid-market companies have been slow to adopt:
“More than a third of all organizations (38 percent) report that they have not employed any recent e-discovery technological advances. This percentage rises to half (50 percent) when looking at middle market organizations.”
“Corporate counsel at middle-market companies pointed to challenges associated with data management, cost control and regulations to explain their hesitation in implementing e-discovery technology, according to the survey,” wrote Law360 in an article: Midmarket GCs Lag The Most On E-Discovery Tech.
Reporter Aebra Coe cited BDO principal Douglas Herman:
“While some larger organizations have started to adopt technology, the middle market is late to the game. Not only do such tools reduce e-discovery costs, they can result in better case outcomes. It is critical for organizations of all sizes to evaluate and implement these technology advances as they become increasingly mainstream.”
The survey of 140 in-house counsel was conducted by ALM and the full report – The State of E-Discovery Accounting to Corporate Counsel – is freely available online.
8 Additional Legal Industry Studies
We’ve recently combed through several studies that have been included as standalone blog posts or as additional roundups that may be of interest:
- Inside Counsel Salaries Brighten as Skillsets Widen (Robert Half Legal)
- Trends in Legal Spend from a Law Department Survey (HBR Consulting)
- Law Firm Competition: Buyers Becomes a New Entrant (Altman Weil)
- Infographic: Law Firm Panels and Legal Industry Scorecard (CounselLink ELM)
- 3 Studies Suggest Law Firm BD Heating Up With Competition (Legal Marketing)
- Litigation Costs Study: How P&C Shops are Keeping a Lid (Insurance Survey)
- Legal Market Review: Small Firms Struggle in the South (PerformLaw Surveys)
- Audit of 50 Law Firms Finds New CRM Best Practices (InterAction Data)
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Have a strong view on one of these topics? Please sound off in the comments. Have a study you’d like to see included? Tweet us a link @business_of_law.
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Photo credit: Flickr, Janet Lindenmuth, Law library books (CC BY 2.0)