Edge International


Big Firms in Small Cities: Go Virtual!

Big Firms in Small Cities: Go Virtual!

Eversheds Sutherland! Norton Rose/Chadbourne Parke! Arnold & Porter/Kaye Scholer! If it’s such a bad idea to get bigger to create scale and capability, why are so many smart leaders at so many leading firms doing it? As a regional or mid-market full-service firm, it’s easy these days to feel pretty un-validated by all of this activity. To be sure, it makes objective sense for these firms to expand their footprints and their capabilities through these combinations. There is real opportunity for firms in establishing recognized best-of-breed cross-border transactional and regulatory expertise, as cross-border expertise often represents the highest rate/highest margin work. In short, the “footprint arms race” is real and makes sense for many of these firms. However, as is the case with most forms of dislocation and change, vacuums are created and opportunities are presented that other firms should think about exploiting.

Per Malcolm Gladwell in David and Goliath, those that have “overwhelming force” in the market just by being bigger often drag along liabilities that can impair their ability to compete on other fronts in the market – think IBM vs. Microsoft; think Microsoft vs. Apple; etc. What vulnerabilities has global BigLaw created for itself by establishing a physical footprint everywhere? How do these vulnerabilities relate to real changes in the way Global 1000 companies are trying to experience, consume, and procure commercial legal services? The answer here lies in advances taking place in two areas: procurement and technology.

It’s not news that procurement departments have been asking corporate law departments to experiment with new law firms that, on paper, seem to offer differentiated value. It’s also not news that procurement departments are asking outside law firms to innovate with legal project management methods and shared risk billing practices. What is news is that next-generation procurement department / law department collaborations are focusing on true labor arbitrage. Procurement is asking, “Is there any reason we can’t do better than pay a local BigLaw firm $700-$1,000 per hour for certain complex work that is delivered at the highest level by tier I law firms headquartered in tier III cities with tier IV cost structures . . . ?” Sophisticated law departments are taking the time to learn about the best law firms and practices located in cities like Birmingham, St. Louis, Pittsburgh, Cincinnati, Chattanooga, Little Rock, or Tampa. These efforts are gaining momentum in part because of the evolution of LegalTech in breaking down the distance between client and law firm; technology is doing its part here through collaboration platforms and dashboards that provide clients with a virtual proximity to their law firms and their matters. Even very remote clients have never had better visibility into the legal work as it is being produced. As a result, companies are particularly open to using “extra-geographic” law firms in transactional practices like M&A and lending, as well as in many IP litigation practices (via pro hac vice).

As the delivery of legal work becomes increasingly virtualized, full service law firms in tier III (in terms of population and size, but not in terms of overall quality!) and perhaps even in some tier II cities should capitalize on this procurement trend. In helping firms put together a plan to source work and clients outside of their region, I encourage my clients to think about the following:

Tier I full-service law firms based in tier III cities: Your time is now! Take the time to understand why the law departments at the heart of high margin opportunities would appreciate what you have to offer, and then deliver a high quality, virtual experience!

Mike White

was a practicing attorney for seven years prior to founding and operating two enterprise software companies — Sirius Systems (sold 1997) and MarketingCentral (sold 2007). He owned and managed ClientQuest Consulting, LLC for 10 years serving law firms. He holds an AB in History from Duke University and a JD from Emory University School of Law.