For sixty years before the onset of The Great Recession, law firms experienced a golden age of growth in every area. The law firm of the 21st century has undergone cataclysmic changes. The 21st century law firm is, simply put, operating under a new model. New norms emerged in every area, including the very structure of the law firm, partner compensation, associate compensation, tiered partnership, tiered associate levels, competition for clients, the very nature of the attorney client relationship. Responding to client demands for value billing, a new era of Alternative Fee Arrangements has emerged. Law firms find themselves in direct competition with corporate law departments for legal services, with both operating under severe budgetary constraints. Law firms and corporate law departments are also meeting these challenges by outsourcing, downsourcing and insourcing.

Fifty years of the golden era of law firms’ reliance on compounded annual 5% annual growth, upon which all firms relied in planning for the future gave way to a sudden downward demand for legal services. The legal services bubble has burst. Survival of law firms in the 21st century requires law firms to recognize the legal service balloon bust and that the straight upward arc of demand for legal services has reached its apex and the graph line is moving downward. Recovery by law firms of the legal services balloon bust will be long, arduous and for many painful.