Legal Services
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Industry Overview
The US legal services industry includes about 170,000 law offices with combined annual revenue of more than $180 billion. Large firms include Skadden, Arps, Slate, Meagher & Flom; Latham & Watkins; Jones Day; White & Case; and Sidley Austin. The industry is highly fragmented: the 50 largest firms generate less than 15 percent of revenue.
Competitive Landscape
Demand depends on the volume of commercial and civil legal transactions and court and criminal cases. The profitability of individual firms depends on the partners' reputation and ability, and effective case management. Large firms have advantages in serving corporate customers with a wide range of needs. Small firms can compete successfully providing specialized expertise or superior outcomes and operating in a local market.
Products, Operations & Technology
The industry's major service is the practice of law, which is providing legal services to individuals, businesses, government, and nonprofits. Services to businesses account for almost 50 percent of industry revenue; individuals, including estates, 40 percent; government, 4 percent; and nonprofits, 3 percent. Miscellaneous legal services provide an additional 3 percent.
Law firms operate as partnerships. Operations support the provision of legal advice and other services, such as document preparation and production, legal filings, and litigation. Most work falls under the general categories of transactional or litigation law. Transactional matters occur between at least two parties and usually require contract preparation or filings with government agencies. Litigation includes civil lawsuits and criminal cases. Civil matters include commercial disputes and personal and property damage. Criminal matters are law violations brought to court by government authorities. Document preparation is the major activity for most legal services firms. Many law offices also provide legal opinions and advice and may become involved in business clients' operations and strategy. Metrics include annual caseload and outcomes, such as total dollar amount of settlements favoring clients.
Due to the complexity and number of federal, state, and local laws and regulations, attorneys generally specialize in a particular area of law. Specialization can be in commercial, M&As, antitrust, bankruptcy, intellectual property, international, real estate, labor, securities, estate, tort (related to civil wrongdoing), tax, or criminal matters. Firms may also develop industry-specific expertise, particularly in heavily regulated industries, such as telecommunications, banking, or transportation. Large law firms may have expertise in many areas, while small firms may specialize in one or two. Specialization includes knowledge of relevant laws, the court interpretations of those laws, and the operations of particular law courts.
Most law firms use nonlegal staff to handle administrative functions, client service issues, and related tasks, such as title searches and document preparation. Legal assistants perform multiple administrative functions. Paralegals work for litigation attorneys and typically facilitate depositions and research court records. Office managers handle banking, billing, payables, and day-to-day operations. Some firms, especially those working on contingency, outsource legal assistant and paralegal functions to companies in lower-cost, English-speaking countries like India.
Computer and communication technology are essential for many law firms to handle administrative functions, conduct legal research, and, in some cases, to file documents with courts. Computerized phone systems and software track lawyers' time talking and working on behalf of specific client assignments and send time-accounting data to billing systems. Videoconferencing technology is used for meetings, training sessions, depositions, and settlement conferences. Portable wireless messaging devices are increasingly common for attorney use. Some firms enable clients to access certain systems to exchange email, review and edit documents, and receive copies of filings.
