Defining your niche is the key to success for independent firms seeking to remain competitive in a global world. A panel of experts at Legal Week's Global Independent Law Firms Forum debate where independents are falling short.

Markus Hartung, director (picture, bottom left), Bucerius Centre on the Legal Profession: Globalisation – is that a threat or an opportunity? Is it all over now for the independents?

Charles Martin, senior partner (pictured below), Macfarlanes: No it certainly isn't. But it is not a case of steady as she goes; there is an awful lot of adapting that needs to go on, and an awful lot of change that we need to respond to. One of the great challenges of law firms' leadership today is to keep our lawyers enthusiastic about all that change and enthusiastic about the opportunities that it creates, rather than getting too obsessed with the threats. 

Advances in IT mean that clients rarely question our ability as separate independent firms to produce something that is beautifully joined-up.

Well-organised clients are segmenting their work. For example, they give the more commodity-type work to different providers than the high-end work. And they are looking for more for less and our firms generally offer very good value for money through lean staffing and local charge-out rates.

On the other hand, there are some real challenges. A lot of work is becoming commoditised. With commodisation comes advantage in scale, which can favour larger global firms. Some of the changes and cost pressures are also helped by scale, so for example the large firms that are north-shoring some of their work in the UK – that's difficult for smaller firms to justify.

Finally, there are questions surrounding alternative business structures (ABSs): is partnership relevant? Can we really expect the partnership to survive with so much change and so many pressures going on? I think it can, but it needs to adapt – we can't allow it to become fossilised. We need to be responsive, not only to the needs of our clients, but also to the needs of younger generations of partners in our firms.

MH: There seems to be a tension between the managing partner perspective to produce the numbers that you need to run your firm effectively and cost-efficiently, and the time your partners need to talk to their clients, which can't be billed. How do you manage this tension?

Manuel Santos Vitor, managing partner (pictured, bottom right), PLMJ: Our partners have already realised that the way they do business has changed significantly over the last few years. Consultants and lawyers in general say that law firms are working more for less, and that it is much more difficult to get clients and to keep them, and that's true. This inevitably means that partners will have to work more than they used to to get the same results.

MH: We lawyers tend to look at the world through our own eyes. Christopher, from an in-house perspective, looking at the offerings of the Dentons, the Baker & McKenzies and the DLA Pipers, compared to the independent firms, how do you see things?

Christopher Digby-Bell, deputy chairman and general counsel (pictured below), Palmer Capital: If we were looking at the end of term report card for independent global law firms, I think it would say something like 'you are doing ok but you really must try harder'.

We have come out of the financial crisis from a client perspective with a legal services market that is buyer/client led, and, having been in the legal profession for a long time, I don't think that distinction has ever been as stark as it is today. In my sector there is still a significant oversupply of lawyers. Thinking back to before the financial crisis, to get a decent price on a major transaction I would tender a job. I haven't had a tender for eight years and that's because in the real estate sector I know I am going to get a good price without having to tender it because they are pretty keen to have my business.

I am not going to say that's true across the board – there are specialist sectors where clearly there aren't enough good lawyers. But in real estate, corporate and commercial work – general work – the oversupply means that I have the upper hand.
The other problem I have as a buyer of legal services is that I can't tell the difference between you. There is absolutely no differentiation in the market at all – you all look the same. It means that I am thrown back to two fundamental factors: one is the strength of the relationship I have with the law firm – and I am very much driven by what I call 'relationship lawyering'; and price is the other thing you are left with if you all look the same and offer the same thing. I am going to go for the best relationship and the best price.

Another problem is you all claim to know and understand my business and that really bugs me. I hear it in every pitch; every lawyer who is trying to sell himself or his firm is saying 'of course we are different because we know and understand your business'. I don't believe that you understand my business because you don't understand your own. The number of times I've sat in pitches and it becomes obvious that the two guys who have come to pitch have actually just met in the lift coming up to my office and had a quick word with each other about what they are going to say.

My last point is you have got to be more business savvy. When you say you know and understand my business, what I want to hear is not only do you understand it but you have real experience in it. If you are buying legal services the last thing you want is a lawyer who actually doesn't know very much more about what you are asking them to do than you do. I want to buy experience, I want to buy confidence, and you are not very good at promoting that.

MH: So if you have an international piece of work, say a cross-border real estate transaction, to what extent does it matter to you whether it's Charles' firm, Kathleen's firm or whether it's these large firms?

CDB: You don't want to have to pay for the wheel being invented so, on a major piece of work, I want to know that you have done this before. I don't mind paying high fees if I am buying seriously good in-depth experience. If you have acted for my competitors I really like that because you will have confronted and had to deal with the same sorts of issues.

Kathleen Garrett, partner (pictured below), Arthur Cox: It's really important that lawyers are thoughtful about the trends they are seeing in deals they are working on. I think that's very useful, particularly for the younger lawyers, because it starts to teach them about the business underpinning the transactions or matters they are advising on. An ability to see the whole picture is vital.

MSV: For many years we operated as a Portuguese firm and at a given point we were competing against firms that were several times larger than us. We decided that since we were sizable in Portugal we wanted to go international; we believed then and we believe today that for an independent firm to thrive it needs to have an international presence. Once you decide to go international then you know you are going to be coming up against those very large global firms – you will be competing with the sense of safety they give to clients.

Global firms are also global brands. In principle they will be the same wherever they are. We differentiate ourselves by offering local advice, through local firms, with a local approach and a deeper knowledge of the market. We can offer the same level of service as global firms and we can probably offer it on more beneficial economic conditions for the client. Often this enables us to provide far more for less to clients and it means we get the mandates. You need to be flexible, you need to provide quality and you need to offer a guarantee of reliability. Levels of service and reliability are critical to us being the preferred choice of clients.

MH: Let's talk about technology, because these big firms have deep pockets and they are very good with technology.

CM: To date I think independent firms have coped with advances in technology reasonably well. We can all access databases; we are much better connected than we used to be. However, we are about to move into an era where things are very different. A lot of work that we do today is going to be done much more cheaply. I am not talking about north-shoring and what is being done 20% or 30% cheaper. A lot of work will be done at a fraction of the cost by computers. It's too early to tell to what extent independent firms will be able to buy this technology, access it and offer it to clients off-the-shelf at an acceptable cost, or whether the large firms will gain a major competitive advantage.

MH: The issue with law firms, be they independent or not, is that they are all very poor; at the end of the year all the money is divided and distributed to the partners – there is no money left for investments. 

KG: I think it's to do with having a strong management team and thought-through processes in terms of where resources need to be allocated by reference to internal objectives, as well as the broader business environment in which you are operating. 

CM: I agree, we can and do invest, although you have to justify it carefully. One of the advantages that many independent and generally smaller firms have is a strong culture. Whether it's about the way people behave, engendering an interest in a particular way of working, really listening to clients or having a tradition of mentoring. These things help to create a culture where partners also understand that the firm does not exist to distribute every penny. They understand that we need to invest appropriately for the future and we have a culture that sees the business as a continuum, and they want to leave it in a better shape for future generations. There may be a debate but the important stuff gets done.

MH: Do you look at alternative providers before going to a law firm or do you say to a firm 'why don't you look at an alternative provider to make your services more cost-efficient?' 

CDB: I don't care how you run your IT systems. I equally don't care if you are an ABS and you choose to share your profits in a different way to the traditional law firm model, and I don't really care about your culture – I care about getting the best-quality advice at the best price. I want to have a good relationship with you because I want to enjoy going into the office everyday. Am I in favour of IT influencing the delivery of legal services by commodisation? Yes, if you can use your IT system to produce what I need on a transaction quicker, better and cheaper, I am absolutely in favour of it.

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