Going In-house: the Journey Ahead
Based on the article, Going In-house: A Changing Marketplace, first published in Legal Business World - 2020 here. SSQ’s expert APAC Senior Adviser Kenneth Tung explores the dynamic in-house market in the third of a series of articles. First article here and second article here.
Without a doubt, lawyers still command an enviable price for their services, and by no means compare with the price elasticity of fast-moving consumer goods. Witness the limited access of small enterprises and individuals to legal services in most jurisdictions around the world. In contrast with most professions, the median law practice continues to occupy higher ground in associate salaries and profit per partner.
The legal profession, steep in a culture of confidentiality and legal privilege, may present an opaque façade in client value proposition. The democratization of trust between buyers and sellers in more level playing fields illustrated by Uber and AirBnB may not apply in the legal sector. The scaling back of Avvo to be a mere lawyers directory and the limited scope of AdvanceLaw as a membership organization for buying legal services offer scant data points on the status of the trust revolution .
Nevertheless, without a doubt, the flood gate has opened. By bringing in-house the functions diagnosis and quality control, companies reduce the barrier of switching providers and embark on the industrialization of legal services. Indeed, this is not just another buyers’ market, but an unprecedented structural shift.
Traditional legal service providers will see consolidation especially in the top tiers of the industry. While people watch the battle for the largest and most coveted clients, the narrative will start with smaller opportunities, those already served by existing providers as well as new entrants to the sector. Starting at the peripheral is a common pattern of disruptions.
Furthermore, the traditional boundaries between professional services are blurring, and the new landscape will present novel opportunities. Already the e-discovery field employs more non-lawyers than lawyers. Data analytics and technology to mine insights is a reality in so many other industries, and the legal sector is ripe for retiring lawyers to work side by side with entrepreneurs to harness valuable insights for clients.
II. The Law Department as a Strategic Function
The above is just a narrative of the scaling of a profession into an industry and the value shift from sellers to buyers of legal services. A survey of most businesses will show that enterprises still need legal functions that truly address their jobs to be done,  beyond the remedies at the proverbial bottom of a cliff.
Today, everyone in legal services talks about being a partner to the business, being more commercial, engaging people and purpose, having a seat at the table and asks questions like: What is business looking for now from in-house lawyers? How does corporate counsel become trusted advisors in an enterprise?
A core question may be how the in-house legal function can leverage this effort to break out of an opaque past and take the value proposition to the next level. The incumbent or legacy providers of legal services, most still residing in private practice, may appear to be defending their own interests in the status quo and dragging their feet to align with the new client’s perspective. However, the legal service value chain should be viewed as an integrated supply chain, and the current tug of war over pricing between buyers and providers should be just a side show. In fact, simply beating down law firm’s rates will not solve the legal sector’s problems, and mere cost cutting does not pave the way of the legal department transformation into a strategic function.
What this means is in addition to criteria for yesterday’s lawyer and today’s needs of legal departments, lawyers and clients will benefit from keeping an eye on the future. In Kenneth’s next articles, he will highlight points that are being surfaced in the legal community.
1 The Trust Revolution, D. Currell.
2 Know Your Customers’ “Jobs to Be Done,” C. Christensen, T. Hall, K. Dillon & D. Duncan, Harvard Business Review, Sep. 2016.