By Hrishikesh Potey, David van der Does, Sierk Wiegers and Alexis Spyrou

While law firms have always been part of a dynamic and volatile business environment, they are now navigating a landscape that is changing more rapidly than ever before. Though expertise, quality, trust, and personal relationships remain foundational, new forces are reshaping how law firms deliver value.

This article, the first in a series on legal services, looks at the dynamics law firms face and how those dynamics impact their business model. Stay tuned for future dives into topics such as cost management, adoption of technology and AI adoption, and boosting business growth.

Technology is rewriting the business model – faster than firms can adapt

The pace of technological change in legal services has accelerated dramatically in recent years. GenAI is now a tool in core legal workflows, reshaping how research, drafting and document review are delivered. Clients, too, are adopting AI tools themselves, raising expectations around transparency, speed and cost-effectiveness.

But technology spend is rising far faster than revenue – with digital and AI costs per legal professional increasing two to three times faster than compensation and three to four times faster than topline growth. This widening gap is reshaping traditional law firm economics and forcing leadership to rethink pricing, efficiency, and the role of technology in delivering value.

Scale, stability and strategic flexibility: why consolidation is rising

With rising cost pressure, talent shortage, and competition from alternative legal services providers, many firms are seeking scale as a strategic advantage. The legal sector is seeing a renewed wave of mergers and acquisitions , with deal activity projected to surpass earlier record levels.

Major combinations reflect a broader trend: firms are pursuing larger platforms, deeper expertise, and greater investment capacity to meet technological demands and client expectations. For many, consolidation is becoming a strategic pathway to long-term resilience, expanded reach, and a more competitive service offering.

As cost pressures, talent shortages, and rising client expectations converge, law firms are responding by embracing alternative model - from ALSPs focused on high-volume work to AI platforms and flexible talent networks – are expanding rapidly and reshaping what clients expect, even in complex matters. Leadership is responding with clear strategic agendas: sharpening sector focus, strengthening pricing discipline (including how tech/AI costs are passed through), accelerating digitalization, and aligning operating and talent models to the realities of an AI‑enabled market.

To explore how these trends will influence the legal services industry in the years ahead – and to understand the strategic areas firms must prioritize – download our full report.