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The end of “Brick-and-Mortar” law firms?

November 01, 2018

Home Blog Research & intelligence The end of “Brick-and-Mortar” law firms?

Virtual law firms: Innovative approach to efficient legal practice.

While traditional “brick-and-mortar” law firms are not going anywhere anytime soon, virtual or cloud-based law firms, such as FisherBroyles, Culhane Meadows, Rimon PC, and Potomac Law Group are mounting a formidable challenge to the old guard, requiring traditional law firms to pay close attention and reconsider how they operate.

Virtual Law Firms: What’s the Appeal?

In reality, many mid-size and large brick-and-mortar law firms operate on a virtual level, to a certain extent, using client portals to interact with their clients or collaborate with colleagues in a private online environment. A virtual space where they can share files, provide updates, plan and manage upcoming tasks. This has enabled firms to offer more flexibility and transparency to their clients by providing them with updates on their work in real-time.

The virtual law firm model provides advantages to both lawyers and clients. With various business models, virtual law firms are different, because they don’t operate from a dedicated office space, but rather through their network of lawyers working at home or remotely. They also have very few associates and staff, which allows them to significantly reduce overhead costs.

From the lawyers’ perspective, the virtual model provides more flexibility when it comes to setting up their preferred working arrangement. Working at a big law firm typically comes with long hours, as there’s a constant pressure to bill a minimum number of hours, which tends to take away a lot of their personal time. Research indicates that the younger generation of lawyers places a lot a value on work/life balance. Lawyers working in the virtual model are still responsible for finding clients, but they tend to operate in an “eat-what-you-kill” kind of arrangement. Through this model they’re provided with greater autonomy not only to set their work schedule, but also to determine the pricing arrangement with their clients.

From the clients’ perspective, it’s the potential for lower legal fees that are the draw. Because virtual law firms have low or no overhead costs, they’re able to channel these savings to offer lower fees. This ties into an ongoing trend where in-house legal departments are trying to contain legal costs and get more value out of their spend on outside legal services.

Why Should Traditional Law Firms Pay Attention?

Some of these virtual law firms are growing fast. According to data collected by Law360, some high-profile virtual law firms “often post headcount growth of between 15% and 30% a year, and revenue growth of up to 50% a year.” For instance, Culhane Meadows counted four lawyers in 2013, it now counts 52, a five-year growth of 1,200%. The largest virtual law firm in the pond, FisherBroyles, is just on the margin of the AmLaw 200, now counts 210 lawyers in its ranks compared to 68 in 2013, a five-year growth of 203%.

The threat facing traditional law firms is two-fold. On the one hand, virtual law firms are poaching partners from their ranks. FisherBroyles, for example, only hires partners, which means they must attract talent from other competing law firms. Rimon PC recently hired a group of eight IP lawyers from Duane Morris’ office in Silicon Valley. On the other hand, these firms also serve big clients – Fortune 100 and Fortune 500 clients, their legal services are not limited to commodity work. For instance, among the reasons shared by the group of IP lawyers that have joined Rimon PC was the fact that they were looking for a platform that was attuned with the Silicon Valley culture.

Virtual law firms, as they continue to emerge and grow, will continue to have a fundamental impact on the legal industry’s established order. This ongoing shift in the industry not only requires traditional brick-and-mortar law firms to pay a close attention to what virtual law firms are up to, but also requires them to adapt – to find innovative ways to meet both employee and client preferences.

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This article was originally published on ShiftCentral, now part of LAC Group.

Kristina Montgomery

Kristina Montgomery

Kristina Montgomery is LAC Group's VP, Client Engagement based in New York working with legal, life sciences, financial and professional services clients.
Kristina Montgomery

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