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“Revolutionary changes are afoot” in the market for legal services, according to a new report.

Clients are actively managing their relationships with outside counsel, nonlaw competitors are gaining ground, and law firms are responding to market changes in innovative ways, the report says.

The 2020 Report on the State of the Legal Market was released Monday by Georgetown Law’s Center on Ethics and the Legal Profession and Thomson Reuters Legal Executive Institute. It is available for download here.

Most U.S. law firms saw incremental improvements in financial performance in 2019, the report said. Demand for law firm services, law firm rates and law firm headcount all grew in 2019, although demand grew at a slower pace than in 2018. But if law firms fail to take account of changes in the legal market, their future financial performance will likely be affected, the report said.

The report’s lead author is James Jones, a senior fellow at the Center on Ethics and the Legal Profession at Georgetown Law.

“Clients are rapidly driving all legal service providers, not just law firms, into a new model that is more collaborative and multidisciplinary, built around integrated technology platforms and delivered with value-based pricing,” he said in a press release.

In response to the changes, law firms increasingly rely on nonlegal professionals for expertise on topics such as pricing, project management and technology adoption, the report says. Firms are also turning more often to alternative legal services providers for e-discovery, research, litigation support and document review.

Firms are using technology to improve legal work processes, according to Mike Abbott, vice president of enterprise thought leadership and content strategy at Thomson Reuters.

“We’re seeing a trend towards more law firms launching their own software development businesses, investing in legal tech startups and establishing technology incubators,” Abbott said in the press release. “These firms understand they can not only benefit from, but can help lead, this technology-based disruption of legal services as a means to improve efficiency and expand their business by creating new products and services for clients.”

Bloomberg Law spoke with Jones about the report. He said law firms that are taking a multidisciplinary approach to the delivery of legal services are doing very well. To continue to compete, law firms will have to invest more money in technology, new types of professionals and new business lines, Jones said.

A handful of s arstatee considering changes that would allow outside investments in law firms. If states adopt the changes, it would become easier for law firms to make those investments, he said. “There really is a fundamental shift in the model for legal services that is well underway,” Jones told Bloomberg Law.