The rise of the accountants in the legal market may have been dominating the headlines in recent years, but it isn't just the big four that are branching out beyond their traditional comfort zones.

Law firms have also started diversifying their product lines, with increasing numbers now offering consulting or other services.

Last month DWF announced the launch of a small client consultancy arm, with the news coming weeks after Addleshaw Goddard set up AG Consulting. Meanwhile, DLA Piper's Noble Street and Dentons' NextLaw Labs were unveiled within two weeks of each other in May.

With these moves all coming after Bird & Bird and RPC set up new businesses in February, the trend for law firms looking beyond legal services as their sole client offering is gathering pace.

It is little wonder then that early-mover Eversheds, which set up Eversheds Consulting in 2010, is capitalising on its existing business, adding a new financial services regulatory arm to its offering.

The trend turns the idea of siloed legal advice on its head – law firms are no longer stopping at the point of delivering their legal opinion on a particular point or deal and are instead getting involved in more commercial aspects of their clients' business.

So why are so many firms choosing to venture into new territories, and what is driving the growth of these businesses? And, more importantly, do they stand a chance of success in a competitive marketplace that is far from short of consultants already?

What's on offer?
Given the concept of moving into non-legal territory is relatively new for law firms, it is perhaps fitting that many of those getting involved are creating businesses built around IT in some capacity.

Bird & Bird, with its strong technology practice leanings, is targeting IT transformation projects with Baseline. The venture involves the firm teaming up with specialist management consultants ASE Consulting to provide wide-ranging advice to help companies with every stage of major IT projects, whether in the UK or international.

Dentons, meanwhile, has set its sights on finding and delivering the future of legal services with the creation of NextLaw Labs, a business that will see the firm developing, deploying and investing in new technologies and processes to transform the practice of law around the world. The firm intends for the solutions to be used by Dentons as well as being sold to other firms and clients.

Others are going in different directions, playing to their legal sector strengths. DLA's Noble Street will provide non-legal financing, corporate and M&A advice to the media, entertainment, technology and sports industries. The business, which is led by Anthony Mosawi, a Hollywood financier, aims to remedy the shortage of capital in these sectors by finding opportunities both for DLA's clients in these industries and their investors.

RPC has also looked to its existing practice strengths for its venture, targeting the insurance sector through RPC Consulting, which has been built around the hire of Towers Watson's former global head of risk consulting and software, Rory O'Brien.

The business will centre around Lloyd's and the London market, UK domestic insurers and those insurers with which the firm has strong existing relationships, and will offer management consultancy services – in addition to its existing legal advice – to these clients. Its range of actuarial, software and consulting offerings are intended to help insurers with issues such as capital management, efficiency, regulatory challenges, outsourcing and strategy.

"For some time we have recognised that there is a significant advantage in having a broader-based foothold within the insurance market," says RPC managing partner Jonathan Watmough. "The development of an actuarial and general consulting practice is seen as a natural progression as we can help insurers address a broader range of issues that they face each day."

Addleshaws and Eversheds, as well as more recently DWF, are taking a more generalist approach, centred around wider legal efficiency issues at their clients' businesses. Though Addleshaws' AG Consulting has only just been launched, the firm was heading in the consultancy direction as early as 2005, when it set up a client development centre. AG Consulting expands this significantly, combining spend and legal process analysis, legal risk management and horizon scanning, knowledge management, legal project management, legal needs analysis and panel management advice alongside a contract lawyer pool. 

Eversheds, meanwhile, has refreshed its five-year old business with a new tool that helps in-housers manage high-volume, low risk work: Eversheds Ignite (see below).

The reasoning
According to legal strategist Richard Susskind (pictured above), these initiatives are only the tip of the iceberg. "I think you are going to see a lot more of this kind of thing," he argues. "In the US there are a few smaller consultancies springing up too; it's the start of a significant trend.

"It's borne of a need for law firms to diversify. The analogy is with the accountancies in the '80s. They had most of their fee income coming from tax and audit so they diversified because that market was limited."

AG Consulting head Greg Bott agrees: "Profits are under pressure. It becomes about what you can do to maintain revenue streams. We have noticed a need for slightly harder-edged, diagnostic analytical areas, for example."

The soft launch of the AG Consulting brand came after Addleshaws' partner conference in December, when the venture was given the go-ahead. Services officially started falling under the AG Consulting banner from 1 June, with the brand sitting with the existing client development centre (CDC) at the firm.

The CDC has gone from one full-time member of staff at its inception to five today, with other fee earners at the firm also involved on an ad-hoc basis. "One of the reasons it's been such a big success is that we have developed the culture and mindset at the firm around the business of law and how we can help our clients in the widest sense," says Bott. "The lawyers are highly supportive, and why wouldn't they be?

"I expect more firms will start to develop a consulting-style offering. But I absolutely believe we have stolen a march on the market."

Winning clients over
But while the wider appeal of lawyers is more recognised now than in the past, it is going to require a big sales push to persuade clients to look beyond their regular commercial advisers to a profession that has notoriously lagged behind others for innovation and is not known for its reasonable value.

"They're happy to pay £100,000 for a lawyer, but that raises eyebrows when it's a consultant," points out Graham Richardson, head of Eversheds Consulting. "We are educating them in the value of spending a bit so you can save a lot."

The use of non-lawyers is, according to those involved, helping firms in this regard. Dentons' new offering, for example, is being led by chief executive Dan Jansen, who has helped to conceive and fund businesses in sectors including social media, financial services and online recruiting. He also has non-legal professional services experience at Boston Consulting Group.

But that's not to say lawyers shouldn't play an active role in these ventures. "Lawyers are very bright with strong analytical skills and are good at expressing themselves," notes Susskind, adding that firms should involve their fee earners in more commercial initiatives. "They're also very sensitive to risk, which is such a big issue now."

On the flipside, however, lawyers and consultants often come at things from different – and occasionally competing – angles, Susskind admits. "Lawyers tend to operate at quite a deep level of specificity. A lot of consulting work is more generic, it's not looking at the specifics but at an entire market or industry. Lawyers can find it hard when it's vague and general. It needs a new mindset, skills and techniques."

Dominic Cook, chief executive of Bird & Bird's Baseline, agrees: "I am not one of those lawyers who thinks that because I have a legal qualification I am capable of doing everyone else's job.

"I doubt law firms will ever compete effectively with traditional consultants because we have different skills. What Baseline is doing is not competing with consultants – we are teaming up with them to offer an end-to-end solution to the problems clients are facing."

Cook adds that Bird & Bird partners formally voted to support the venture and the vast majority have contributed capital to back it, showing their willingness to be involved. "Other fee earners and business services teams have been excited by the broadening of our services that Baseline represents, and by the great reaction we have had from the market in the first few months," he says.

Making it work
Law firms dipping their toes into consultancy and other commercial initiatives marks a step into the unknown. It also comes with the risk that a poorly performing offshoot could damage a strong legal brand.

Paul Heugh, chief executive of legal consultants Skarbek Associates, sums up the problem: "Any law firm that's going into this needs to give careful consideration to their brand. Is the consulting area consistent with the expertise in the organisation? Is the brand actually adding to what they're delivering?

"I think some clients might be puzzled. The worst possible situation is that the client asks 'why are you doing that?'"

However, potential brand benefits are part of the reason RPC has dropped plans to spin off its consulting business, instead choosing to keep it within the firm. "We have decided, based on several factors, that creating RPC Consulting is the most appropriate way to build on the strong RPC brand," Watmough explains. "At the same time the separate entity structure will help recognise the differences that exist in the operating model, revenue and cost profile and incentivise the partners and staff to deliver the objectives."

So far, it looks like some clients are being won over by the offerings, however they are structured. At Addleshaws, for instance, 95% of the work the CDC has done has been for the firm's existing clients, but it has also been able to go out, pitch for and win some work off its own back. Bott says several clients have also testified to the CDC's importance in securing Addleshaws spots on their legal panels.

Given the small scale of the businesses at this stage there is still much to prove. "It's in the early stages but clients are very receptive," says Susskind. "It's up to the consulting businesses to deliver real value."

The only venture mentioned in this article willing to discuss its revenue figures with Legal Week was Eversheds, which has a target of £11.5m this calendar year for consulting, and the firm says it is likely to exceed it.

Future of the market
Given the limited scale of the industry at this point, Heugh says he is reluctant to describe it as a trend just yet, instead describing it as "more like rational experimentation" on the part of law firms. "It's natural given that firms are seeing the big four accountants coming into the legal sector," he comments. "That might encourage them to think that they have an offering they can build on and extend their brand."

And if they choose to do so such ventures create opportunities both to win new clients and strengthen relationships with senior figures at existing ones.

"We don't see our competitors as just law firms," Dentons chairman Joe Andrew (pictured above) says of NextLaw. "They could be technology companies, accountants or other providers. Firms need to be business solutions providers, not just legal services providers. We don't want to lose any of the pieces of disaggregated services."

According to Heugh: "The market is ripe for bolder moves and more experimentation. But you have to put enough investment behind it that you are not pre-determining its failure through lack of commitment."

What is clear is that for the next few years the impact is likely to be limited despite the potential such businesses offer, with investment in new technologies and teams taking time to bed in.

As Susskind concludes: "Do I think it's a flash in the pan? No. But is it going to change the marketplace overnight? Absolutely not."

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Case study: Eversheds Consulting
Launched in September 2010, Eversheds Consulting was set up as a new business strand for the firm, offering advice to in-house legal teams on how best to manage their legal services.

It was designed for procurement, compliance processes and record management matters, and was launched by a nine-person team including two partners: then legal systems partner Graham Richardson (pictured right) and litigation partner Paul Smith.

Smith was given the task of generating new business while the firm looked to hire more management consultants.

Eversheds Consulting's headcount has now reached 40, including three partners. The business has moved from running just one business strand, legal consulting, to include another four: a financial services regulatory compliance service, its bespoke Ignite tool, a contract lawyer service, Agile, and a separate flexi-lawyer offering for financial services regulatory compliance clients.

"Companies want their legal guys engaging with high-level strategy and risk, not dealing with a lot of crap contracts where they don't add value," explains Richardson. "We are still a law firm, but we think we know about managed legal services because of that."

Since setting up its financial services regulatory compliance arm in February, it has worked on a broad range of governance, risk and compliance mandates for banks and has already hired one more staff member to add to its original team.

Revenue has climbed from £2.8m in 2011-12 to £5.6m one year later, to £11.5m this year – exceeding the original 2015 target of £10m.

Richardson cautions against setting the bar too high for the legal consulting market, however. "Not everyone will jump on the legal consulting bandwagon because it's a small market when you act for the biggest players. Once you've fixed a bank's in-house team, for example, you might not be able to do it again. Not every firm has room for a consultancy, but many will look to hire people who are not lawyers and who have other skills."