Legal Business Blogs

Comment: Why one-stop shopping isn’t doing what it was supposed to

Sometimes in business what you correctly forecast can prove as problematic as what you get wrong. Because even when you manage the considerable feat of identifying what will happen in the world you are left with problems of unintended consequences.

Take the one-stop shop, a dominating idea during the legal industry’s defining 1990s-era globalisation as firms fought to become larger players that could serve clients across borders and product lines. The idea was that plc clients would narrow their adviser lists to smaller numbers of larger law firms. And this has largely come to pass – the trend of smaller panels has been well documented for years and the shift shows no sign of changing. There is also ample evidence that being a one-stop shop for high-end work across borders is highly profitable for law firms.

But glancing at this month’s report on the progress that some US law firms are making in mainstream M&A, you can’t help wondering if the one-stop concept has worked out quite according to plan for City law firms.

For one the model is increasingly associated with business-as-usual work, delivering high volumes, certainly, but not high margins.

One response of City firms has been nearshoring, which obviously deals with some of the cost issues, but that comes with consequences, including pushing City firms further into managing mountains of documents and potentially positioning them further down the value chain.

A particular problem in this regard is the expansion of in-house legal teams, which are increasingly striving to justify expanding empires by either taking on work themselves or, more threateningly, breaking it up and parcelling between different kinds of providers. This is an ominous development for City firms, as are signs that a select band of US firms have been able to credibly handle substantial amounts of high-end deal work in the City while handing out large quantities of support work to mid-tier UK firms. There are many forces driving the renaissance of the City’s better mid-tier players but it is becoming increasingly apparent that robust levels of referrals from the growing mass of US practices in London is one of them.

In this context, the one-stop shop is becoming dominant while co-existing with its thriving polar opposite, the narrow high-end firm targeting strategic advisory work. It is market segmentation but one that raises worrying questions about the business, economics and positioning of some London-bred law firms.

The one-stop shop was supposed to be the ticket to the boardroom and in some contexts it still is. Yet for increasing amounts of legal work the approach looks more like a fast-track to the basement, providing little discernible competitive advantage, definite profit dilution (and probable brand dilution) and a heap of organisational complexity.

In the far more consolidated banking and accountancy industries, the one-stop shop delivered clear benefits but in high-end law the dividend is getting harder to see by the day. Something to chew on in what will be a tough year’s trading.