"The legal profession is undergoing a massive structural shift"

One theme it barely touched is that, like any other technology, legal innovations inevitably get commoditized. Fundamentally, law firms have been unable to properly adjust to this commoditization due to a lack of technology (outsourcing is a short term solution). The only solutions they come up with are to cut overhead costs, which only gets you so far.

The big picture for the legal industry, is that you have extremely bright young people fleeing the industry because this lack of technology forces them to do this mundane commoditized work. And like any commoditized product, the basis for competition ends up on price, which ends up just forcing these people to handle intense amounts of mundane commoditized work. This is obviously not sustainable, if you want to maintain a law firm with the best and brightest legal minds. It's my observation though, that most partners in a position to do anything either do not see this or do not care (because they'll be gone by the time things fall apart anyways).

EDIT: just saw swampthing's comment below, such things exist.

This is actually very relevant to the HN community, because it's all about how to run a business. The problem with legal services begins and ends with poor business practices.

Law firms are addicted to covering their own lack of spending discipline by raising their hourly rates and pushing attorneys to bill clients more for less value. The "solutions" that they're undertaking now (cutting associate salaries, etc.) are equally wrong-headed.

Four years ago, I was making $400K+ at a top law firm. When I became eligible for partnership at my firm, I decided to leave instead. Why? Because I did not want to own a tiny amount of equity in a poorly-run business. Down the hall from me were several men in their mid-eighties who were drawing $1MM+ pensions and turning up for work two days a week. They had teams of secretaries who printed off their email and read them a digest each morning. I watched the firm spend, spend, spend to recruit "the best and the brightest" from Ivy League schools. After those new lawyers were hired, they would be put to work doing tasks that any decent temp worker could do. Young attorneys were being billed out at $500+ per hour and pressured to make their minimum hourly quotas every year. Our offices were expensive. Our parties were expensive. The I.T. support was expensive because it had painted itself into vendor lock-in and a huge (and useless) support staff. I flew first class everywhere. I stayed in the Four Seasons for months on end.

Sounds great, right? Nope – not when you're considering becoming an owner of that company. I saw the writing on the wall. Clients were bailing. They were getting better at doing my job with in house people. They were pressuring firm management to write off big bills and compete in RFPs.

So I got out, and I've never looked back. I did it because I think I can run a business better than they do. I did it because I actually care about whether my clients feel like they've gotten their money's worth. Also, I did it because I wanted to build an IT platform for lawyers that wasn't hampered by incompetent IT staff and poorly-chosen, expensive solutions.

Today, I have many of the same clients that I had back then. My clients are some of the biggest names in their field, and they stuck with me instead of sticking with the big name law firms. When my clients ask me to quote a fixed price for my work on a project, I give them a reasonable fixed price because I can afford to do that. I have low overhead (ridiculously low, actually). I can provide better service than ever before, because I have better tools at my disposal. I don't waste time fighting my way through clumsy solutions like Sharepoint, Deltaview, Worksite, or whatever other POS is in vogue at big law firms today.

I could go on about this forever, but suffice it to say that this article and the phenomenon behind it is extremely interesting to me. I also think it's a great case study for entrepreneurs. Think of it this way: what if your target market was dominated by companies that charge way too much, are extremely inefficient, and are carrying a huge, ever-growing cost basis? Sounds like a good opportunity, right? Well, it is!

There's plenty of lawyers out there - but, like in programming, there are a lot fewer good ones. In general, people are willing to pay $500 / hour because they can't find one of similar quality for a lower price.