The sudden dearth for liquidity has frozen many transactions, which has resulted in lesser work for lawyers. There is also an added push for cutting costs from corporations, who would like to move away from the billable model, so as to be able to manage their budgets more efficiently.

The corporate law firms are owned by partners, who have a group of associates working under them. The ratio of partners to associates is referred as leverage. With no big deals coming their way, partners are finding it difficult to justify the very high leverages they are working with. Most have resorted to associate retrenchment, delaying start date of incoming associates and salary freeze or salary cut to better manage their profitability.

Companies like Cisco and Ace insurance group are investing in developing their own legal departments to contain costs.

At the same time the legal market in Europe and India is changing. In India, laws have been passed for foreign law firms to open offices in India, while in Europe, the market has been liberalized with non lawyer ownership and alternative business structures, pursuant to the Britain’s Legal Services Act of 2007. In future law firms will be able to tap the primary market and the private equity funds in Europe, while US law firms will still need to finance all their expansion through bank debts.

The billable and the partner model will continue to stay in US, but firms who innovate the most within this framework will prosper in future.

Source:

http://www.wharton.universia.net/index.cfm?fa=viewfeature&id=1707&language=english