July 10, 2018

The legal market landscape: clients want faster, cheaper and more efficient work

Ukraine’s legal market as a whole is rather latent, and Kharkiv is no exception. After all, on the surface, in the public plane, client can only see the top 50 law firms from the annual national rating of the same name. If we take a look at the projects of these companies, they mostly deal with large business, major transactions and disputes. However, it is very difficult to name those who work with the midmarket – rapidly growing medium businesses and startups.

According to the Legal Practice and personal observations, 80% of regional markets is represented by independent lawyers. This is not just regional statistics, it is a global trend. Law firms are reconsidering their traditional model, the so-called BigLaw, and are moving on to NewLaw: remote workplaces and marketplaces – which is essentially outsourcing projects to lawyers.

In regional markets, competition often revolves around the price: who will ask for less (and it’s not just the regional players trying to undercut others, but national ones as well – competing for projects of large regional clients). However, this does not take into account the big picture and such legal business, in my opinion, is not sustainable, since there will always be someone selling services for less than you. The future belongs to another kind of competition: that of recognizable brands (both personal and/or corporate) that are beneficial to the client, and of competitive products. Here, it is not the price that matters, but rather the actual value of the product for the client.

Region-specific trends in legal practice

We know several large national law firms that opened their offices in Kharkiv. They haven’t been particularly successful so far, and regional specifics have nothing to do with it. The problem lies in the business models of top players – clients are unwilling to overpay for legal services (i.e. for double-checking of junior lawyers by senior ones and then partners and for procedural services; they do not wish to pay by the hour, etc.).

The client wants faster, cheaper and more efficient work, so the number of legal startups and freelancers (independent lawyers) will only be increasing. And this does not apply to the regions only.

Over past three years we have seen intensifying bilateral processes, particular in the agrofood, IT and healthcare sectors.

Kharkiv is among top 5 IT cities in Ukraine, so the number of international projects in this sector is increasing: outsourcing companies are expanding their presence in other countries (USA, Europe), developers are bringing their products to international platforms such as AppStore and Steam, and foreign investors are trying to buy Ukrainian companies with narrow specializations, such as medical software.

In addition, international airlines are coming back to Kharkiv, such as LOT, Wizair, Turkish Airlines and others, helping the region get fully integrated into the logistics map of Europe, which also increases the number of international projects.

International organizations (such as EBRD, Konrad Adenauer Foundation and Invest in Ukraine) have opened or are planning to open their offices in Kharkiv this year – they chose this city as a base for their strategic presence in eastern Ukraine. Also, with the support of the German Advisory Group and together with 20 producers and processors, we created the first agrofood cluster in Kharkiv, whose goal is to create and promote brand regional products in international markets. It is a good sign - competitive markets are emerging in Ukraine, which means that the legal market will also be developing, since the requirements of such clients for legal consultants are going to change.