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Legal Services Market Research Report - Canada & USA

MARKET OVERVIEW

Legal Services is one of the very important and large service-based industries in Canada and the United States. It shares over 50 percent of the market share in the service industry and the highest revenue generation as compared to other services.

The Legal Services industry includes several fields such as taxation, corporate affairs, patents, litigation, political, copyrights, antitrust, arbitration, conflicts, labor, finance, and many more.



Due to globalization and technological advancement, there has been a dynamic change in the Legal Services industry in the past decade. The legal services industry has undergone several changes and new emerging solutions such as Blockchain, and cloud computing services to change the future outlook of the Legal Services market.



OBJECTIVES

The report's objective is to provide a competitive landscape and an in-depth analysis using qualitative and secondary research to forecast market growth and the future outlook of the Legal Services industry.

The report shows a detailed study of the

  • growth rate and size of the industry
  • challenges faced by the industry
  • trends and issues in the industry
  • advertising and marketing expenditure by the industry
  • future outlook of the industry

SCOPE OF THE REPORT

A background analysis of the Legal Services market, including the assessment of the economy and contribution of industry in the economy, market overview, market size estimation for key segments and emerging trends in the market segments, market dynamics and insights, along with key statistics, is covered in the report.



THE GLOBAL LEGAL SERVICES MARKET



The Legal Services industry has experienced a strong growth rate globally in the past decade. The global Legal Services market size generated nearly $766.3 billion in revenue in 2019, with a compound annual growth rate of 5.4% in the last five years. The global market is expected to become a trillion-dollar industry by 2021.



THE UNITED STATES AND CANADA LEGAL SERVICES INDUSTRY GROWTH



The Legal Services market in North America is one of the largest markets in the world, and the United States contributes highly to the growth of the industry in North America. It is the largest distributor in the Legal Services industry. There has been significant growth in the US Legal Services industry and is expected to reach $ 68 billion by 2020.



On the other hand, the Canadian Legal Services industry has also shown strong growth. The net worth of the industry is estimated to be $12.9 billion, and it is expected to grow bigger in the coming years.



The biggest firms in Canada's Legal Services industry are:

  • Gowling WLG Market
  • Norton Rose Fulbright
  • Blake, Cassels & Graydon
  • Borden Ladner Gervais

Major players within the Legal Services industry in the United States :

  • Kirkland & Ellis
  • Latham & Watkins
  • Baker McKenzie
  • Skadden, Arps, Slate, Meagher & Flom




MARKET STRUCTURE

The markets for Legal Services in Canada and the United States are made up of multiple sellers and multiple buyers. The Legal Services market is segmented by type of law firm, size of the firm, end-users, area of practices, and geographical areas.

In both Canada and the United States, the general Legal Services market is oversupplied. The provision of legal services by lawyers in Canada, and the United States is further divided into several market segments:

• Sole practitioners;

• Small and medium-sized firms;

• Large regional or national firms;

• Mega and multi-jurisdictional firms;

• In-house counsel as well as lawyers working in other corporate areas;

• Government and non-profit organizations.

KEY ISSUES AND TRENDS IN THE LEGAL SERVICE INDUSTRY

GENERAL ISSUES AND TRENDS

There are many trends and issues that significantly contribute to the Legal Services industry in Canada, and the United States.

CLIENT EMPOWERMENT

This is a major trend in the marketplace that exists today, and the current recession due to the COVID-19 situation is grabbing all the attention and focus towards it. This trend has shifted the marketplace from suppliers to clients.

With the arrival of new technology solutions and choices, the clients have now started questioning the value proposition of the lawyers and the value of their services.



There has also been a major shift in the client's expectations in the past decade. The client expectation is not limited to the cost of the legal practices, but clients also want more involvement with the Legal Services providers.

REDUCTION IN PRICE

There has been downward pressure on some areas of Legal Services in Canada, and the United States. Due to the economic conditions, there could be downward pressure on the costs of the services from clients, especially in legal areas such as residential real estate, immigration, and administrative law.

MANAGEMENT

The increasing pressure from clients and competitors has shifted the focus of the Legal Services providers to project management and client relationship management in some segments. In the coming years, the pressure may result in new structural arrangements in the market segment.




KEY ECONOMIC ISSUES AND TRENDS

THE LEGAL SERVICES MARKET

The Legal Services market of Canada is very strong and projects a competitive marketplace for multiple sellers and buyers. The regulations that already exist for law practitioners or regulatory authorities on certain services are balanced by growing external oversight mechanisms such as fair registration legislation. However, the cost of the services is considered imperfect. The clients believe that the prices charged by the Legal Services providers are high, and they also complain about the cost transparency. Due to a lack of proper information about the value of the services and their availability, clients are demanding greater involvement in the process, decision making, evaluation, and billing.

Amidst rapidly changing market conditions, the US Legal Services market shows positive growth. However, the market is facing high competition due to the increase in demand for services, and technological developments. Like the Canadian market, the US legal market will also turn customer-centric. The paralegal jobs and part-timers are expected to grow more. The American government expects higher growth of these two jobs than average job growth in the future.



The global market is also impacting the Canadian and the US markets in a great way. There have been mergers and acquisitions between big firms, and many firms are also putting efforts to develop the new market and cultivate international clients.



MARKET DYNAMICS

SUPPLY AND DEMAND

There has been a compelling trend on the supply side. There has been a rise in the number of new competitors and forms of competition entering the Canadian Legal Services industry. The paralegals and various online services are expected to increase competition in the next couple of years by the "Big Four" (Deloitte, EY, KPMG, and PwC) accounting firms, global legal publishers, and task-specific Legal Processing Outsourcing (LPOs). The new suppliers or entrants are also expected to provide project management and risk management to stand out from traditional services.

In the United States, the supply chain is customer-centric, tech-driven, and automated, with non- traditional sellers entering the legal market. The market, which is lawyer-centric, will shift to customer-centric. Due to digitalization, the supply chain will operate as per client demands and requirements.

Apart from this, there will also be a significant rise in demand for Alternate Legal Service Providers (ALSPs) in the Canadian and the US Legal Services markets. The ALSPs will be dominating both the market in the coming years.

Several other trends that are likely to be seen due to the changes in the supply chain include-

  • disintermediation, where intermediaries are reduced between buyers and sellers, will continue to grow.

  • commoditization, where work is performed in a systematic and standardized way, will become stronger and gain increasingly high demand in the market.

  • unbundling, also known as discrete task representation, will be most preferred by clients.



The increased competition may also lead to the collaboration of independent lawyers and law firms. The lawyers and firms may merge to provide a range of services to a single large client. Also, with the growing technology and AI, more virtual firms and online services will take speedy growth.

On considering the demand side, market power has shifted to the clients. Family law, poverty, and criminal law may be excluded from this market shift. However, in the area of business law, there has been a shift to the client's preferences and expectations.

The clients, as said before, are demanding more involvement and input from the legal service providers. They also indulge in how the providers deliver the services and want more information on the process carried out and about outcomes.

The clients are also expecting higher transparency and information on the actual costs behind the prices charged. This has created a discordance between the clients' expected value and the actual cost of the services. The rise in clients' expectations in this way can create problems for the buyer's side as the cost resistance and unpredictability can drive buyers out of the market, or they may shift to other services and markets.

With upcoming trends of disintermediation and unbundling, the clients also no longer want to hand over the full work to the legal providers, and instead, they want to divide the whole work into discrete tasks, choose and assign as per their preferences and decide how they want to pay for them. And this is most likely to shift the demand to more electronic and online legal services. Tech-inclined consumers are expected to rise in the coming years, which will give a strong boost to the electronic marketplace. However, this will be quite unfavorable to the legal providers who follow traditional ways.



This trend is expected to grow more as more lawyers and non-lawyers are entering the marketplace.



SOCIAL ISSUES AND TRENDS

GENERAL DEMOGRAPHIC TRENDS

Research on demographic trends in the Legal Services industry in Canada shows that

  • The number of practicing lawyers in Canada is growing steadily.

  • Since 2000, the number of practicing lawyers has increased by five times. Currently, there are 130,000 practicing lawyers in Canada

  • About two-thirds of Canadian lawyers are in private practice, around 20 percent of lawyers are working in government organizations, and nearly 10 percent are involved, in-house counsel.

  • According to Catalyst report, there were 43,595 active women lawyers and 53,257 active men lawyers in 2016.



On the other hand, research on demographic trends in the Legal Services industry in the United States shows that

  • The number of practicing lawyers in the United States is growing at a slower rate. According to ABA 2019 report, the number of practicing lawyers only grew by 0.7 percent as compared to last year.

  • The number of active lawyers in the United States has increased by 12.4 percent since 2010.



GENDER

In Canada, the number of women lawyers in the Legal Services industry has been growing since 2000. Females account for 54% of new entrants since 2000. Also, female lawyers with less than 10 years of experience used to be 54.5% in 2010.

The proportion of women lawyers in the industry is likely to grow more in coming years and also women lawyers are expected to reach the top management positions in future

However, in the United States, the number of women lawyers in the Legal Services industry is decreasing. Considering the last three years, the percentage of women lawyers in the industry is still the same i.e., 36 percent. Female lawyers account for 36 percent, while men lawyers account for 64 percent in the US Legal Services industry. The percentage of women lawyers was 31 percent in 2009, and there has been no significant growth in the number of women lawyers in the United States.




KEY TECHNOLOGICAL ISSUES AND TRENDS

GROWTH OF TECHNOLOGICAL INTEGRATION / ARTIFICIAL INTELLIGENCE (AI)

The Legal Services industry is no longer left behind in the race of technology-based solutions. Like every other industry, AI and algorithm-based technologies have become very common in the Legal Services industry, and are used in every aspect of the legal industry, such as in research, trial preparation, evaluation, management, and billing.

According to a recent survey by the RELX, it is found out that 91% of law firms believe emerging technologies are having a positive impact on the Legal Services industry, and 60% report they are expanding business areas touched by AI.

AI and algorithm technologies have disrupted the industry, which has directly affected the old traditional methods, especially the networking between clients and firms.



CLOUD COMPUTING

Cloud computing service has become very common for law firms because of their cost-effective nature and greater efficiency. According to the American Bar Association - 2019 Legal Technology Survey, 58 percent of lawyers are using cloud computing services for their work, and 61 percent use the software as a service. The small firms and solo practices are major users of these services at around 60 percent. The cloud usage had grown from 55 percent in 2018 to 58 percent in 2019.

While cloud services like Google Cloud, iCloud, and Evernote are very popular among the law professionals and are offered at a higher price than other dedicated legal cloud services, Clio and NetDocuments ranked as the top-rated legal cloud services and leading legal software solutions.

CYBERSECURITY AND BLOCKCHAIN

Cybersecurity and data protection are considered major trends in the Legal Services industry. The Annual Law Firms Survey 2018 - conducted by PWC UK - revealed that cybersecurity is a concern for 82% of the top 100 firms. The report also revealed that 60% of the firms reported having suffered a security incident in 2018, making cybersecurity a major concern for many law firms.

With the use of cybersecurity, Blockchain technology is becoming more prominent in the legal field. Blockchain and cybersecurity laws are being increasingly adopted across countries, acknowledging Blockchain’s ability to trace data and protect data from manipulation. The information on the Blockchain is completely traceable and impossible to hack, and this helps the firms keep the data safe and secure.

VIRTUAL LAW FIRMS

Virtual law firms may be new trends in the marketplace, but they will soon redefine the law practices operations and Legal Services. Virtual law firms are replacing the traditional business model, and many firms have been adopting virtual law firms since 2017. Moreover, social distancing and the ongoing COVID-19 crisis will result in a great shift in the market towards virtual law firms.


CUSTOMER/CLIENT RELATIONSHIP MANAGEMENT

Many law firms have embraced digital transformation to manage their work more effectively and efficiently. They are using customer relationship management or CRM software to manage marketing and customer service efforts.

Although CRM solutions are not so popular in the legal field yet, there has been a steady growth in the number of lawyers and law firms using new digital solutions for their work.

ADVERTISING AND MARKETING BY LEGAL SERVICES INDUSTRY

Like many other industries, the Legal Services industry also spends a lot of money on print, television, and digital media. It is estimated that around $226 million were spent on nearly three million ads for legal services or soliciting legal claims across the United States in the third quarter of 2018 only.

On average, law firms invest between 2 – 10% of their revenue into legal marketing and advertising. The spending by the law firms depends on various factors such as

  • Areas of Practice
  • Size of the Law Firm
  • Firm’s Desire & Aggression in Client Acquisition
  • Cost per Client Acquisition
  • Effectiveness of Marketing Channels
  • Types of Marketing Activities & Overall Strategy
  • Time Investment into Marketing

According to a study conducted by Martindale-Nolo, it is also found that law firms spend a considerable amount of their budget on digital marketing and online advertising. Around 65 percent of the law firms spend a significant amount on digital platforms. Among them, 25 percent of the firms spend between 50-75 percent of their budget online, while 40 percent of them spend around 76-100 percent of the budget on internet marketing.













Source: www.zahavianlegalmarketing.com... of the firms find digital marketing strategies and opportunities very essential for their business development and find it more impactful than other traditional mediums. The CMO Survey conducted by Deloitte, Duke University, and the American Marketing Association of B2B services companies indicated that CMOs of B2B services companies allocate close to 80 percent of their marketing budget to digital marketing initiatives, such as social media and digital marketing analytics.

In digital marketing, email marketing is found to be the most popular and used strategy by law firms, which is followed by client alerts and content marketing.



Source: LMA & GOOD2BSOCIAL

Now coming to social media platforms, the survey also reveals that around 75 percent of the firms believe LinkedIn as the most valuable platform followed by Facebook. The 2018 Social Law Firm Index confirms this data.

Source: LMA & GOOD2BSOCIAL

Law firms also use pay-per-click methods such as Google Ads and paid social media for marketing and advertising. They use search engines optimization (SEO) strategies for their firm's website.



ANALYSIS



The Legal Services industry is in transition, and it is expected that the legal market in the future would be much different from the one today. In the next five years, the Legal Services markets in Canada, and the United States are likely to witness-

  • A shift in the providers of legal services: there will be a shift in how customers access legal services. The trend of larger firms merging with small firms for personalized, expert legal advice will grow more in the coming years.

  • The Legal Services industry is highly fragmented. From the $849 billion of global spend in 2017, no single firm has more than 1 percent share. In 2017, The small to mid-sized law firms generated the largest portion of legal revenues, ~40 to 50%, within North America. The Alternate Legal Services market was ~ $10.7 billion in 2017, making it 1% of the legal market. This market is expected to grow to $55 billion by 2025.




However, apart from this, there are going to be some significant changes in the Legal Services industry. When the novel Coronavirus has affected the entire system in unprecedented ways, it is expected to have a broad spectrum of changes across legal sectors and practice areas.

Due to the global economic crisis, the global Legal Services market is expected to decline from $734.1 billion in 2019 to $728.5 billion in 2020 at a compound annual growth rate (CAGR) of -0.8%. The market is expected to recover and grow at a CAGR of 5% from 2021 and reach $845.7 billion in 2023.

The litigation and restructuring practice areas are expected to be steady, while other transactional practices are likely to absorb a negative impact. Although the Legal Services industry is in transition and early stage of digital transformation, the impact of COVID-19 will bring many changes to the legal business.

Here is a brief outline of how things are likely to be after the pandemic:

  • Technology would potentially remain a trend in the legal marketplace. Technological trends such as AI, cloud computing, and virtual assistants will rule the marketplace.

  • The Legal Services industry would probably switch to a remote workforce.

  • Departments would potentially be transformed with new business operating models adopted for the delivery of legal services.

  • Going digital will be the new way of working. We might see digital courts in the future.




CONCLUSION

The Legal Services industry is changing and evolving globally; and, so are Legal Services in Canada, and the United States. These markets project strong growth in the long term, and their economic conditions show positive revenues and profits. The industry will witness new operating business models and solutions in the future.

The law firms in the future will not just be limited to lawyers. There will be legal engineers, legal technologists, legal project managers, business professionals, and legal marketers who work together to fulfill the client's demands. There will be significant growth in Alternate Legal Services Providers (ALSPs) and technology, which will increase demand for unbundling legal services. The traditional services will face scrutiny and will be replaced by technology-driven solutions, which in turn would expedite the commoditization of legal services.

The Legal Services market which used to be lawyer-centric traditionally - would shift to being client-centric, data-driven, and automated, which will bring a wide range of non-legal skills into the industry. With digitalization, the industry will gradually transform into a multi-disciplinary, platform-driven, problem solving, data-based and client-centric marketplace.

However, even if things are looking up for both markets, both markets will be facing a compelling set of challenges in the coming years as they seek to remain viable and competitive in the marketplace. Also, at a time like this, when the COVID-19 outbreak has severely affected every system, both markets need to prepare themselves for embracing the imminent and unavoidable changes the crisis would usher in. Both the Canadian and the US Legal Services markets need to be more nimble to overcome the global crisis and stay competitive in the shifting market.





REFERENCES:



Industry market research, reports, and statistics. (n.d.). IBISWorld - Industry Market Research, Reports, & Statistics.

https://www.ibisworld.com/canada/market-research-reports/law-firms-industry/#:~:text=The%20Law%20Firms%20industry%20in,and%20other%20capital%20market%20activity

  • Global legal services market analysis & forecast, 2015-2019 & 2023F - Top opportunities will arise in the B2B legal services segment, which will gain $117.2 billion of global annual sales by 2023 - ResearchAndMarkets.com. (2019, November 19).

https://www.businesswire.com/news/home/20191119005973/en/Global-Legal-Services-Market-Analysis-Forecast-2015-2019activity