The business ecosystem of law — more on the law-department cottage industry

While law firms drink by far the largest draught of law department spending, many other vendors draw from the same well (See my post of April 18, 2005 on the cottage industry and April 2, 2005 on unbundling.). What is the legal ecosystem’s revenue?

If US law departments pay vendors on the order of $100 billion a year, approximately 10 percent of that covers law firm disbursements and the costs of non-law firm vendors. Very loosely, that amounts to $10 billion a year. Most of that expense, we all recognize, is travel and lodging. Perhaps 10 percent would be other vendors who provide products and services to law firms.

Another tier consists of vendors who sell not through law firms but directly to law departments. Examples include stationers, CLE providers, expert witnesses, software companies, publishers, consultants, and many others who operate symbiotically with law departments.

More accurately, we should consider the law department cottage industry as those vendors who focus on the legal market as a recognizable segment. For that reason, I would not include coffee makers, airlines, hotels, taxis, or bottled water dispensers. The largest cottages, in terms of dollars spent by law departments, are inhabited by litigation support services, expert witnesses, and software providers. Legal research commands a chunk of spending as do CLE providers.

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