Game changer: How technology will transform law firms

Technology is a high management priority and will change the way that law firms operate in future, Managing Partner’s
legal technology survey has found.

Almost all respondents (97 per cent) said they expect technology to have an impact on how law firms operate in the next three to five years. Opinion was split over how strong a changing force technology would be, however, with 48 per cent expecting it to have a high impact and the same amount saying it would have a moderate impact.

Regardless, 95 per cent said they plan to invest in technology in the coming year. A total of 82 per cent said they plan to either increase (46 per cent) or spend the same amount (36 per cent) on technology compared to last year.

More than half (54 per cent) of respondents said their firms spend between two and four per cent of total firm revenues on technology. A further fifth (21 per cent) invest between five and six per cent of firm revenues on technology; seven per cent said they currently spent more than 10 per cent of revenues on it.

Investment priorities

The top areas for investment in software/systems are practice management (46 per cent), followed by case/matter management (43 per cent). Intranets and project management tools came in joint third at 39 per cent.

Also ranking highly in this category were email management, client relationship management and social media platforms, with 36 per cent of respondents indicating that they intend to invest in these areas.

Interestingly, risk management systems ranked lowest, with just four per cent of respondents indicating that they intend to invest in ethical screens and enterprise risk management.

Mobile working is however a priority among law firms, with smartphones (60 per cent) getting the biggest investment in the coming year. Other items on the shopping list for about half of respondents are tablets (52 per cent) and laptops (48 per cent).

Social communication tools also ranked highly, with around a third planning to invest in videoconferencing (32 per cent) and instant messaging (28 per cent).

Staffing resources have been recognised as a priority to support technology deployment and usage. However, a higher proportion of firms are investing in outsourcing tech support (58 per cent) than in growing in-house technology support teams (53 per cent).

“Our new head of IT is assessing whether we outsource some aspects,” commented the Australia-based Maryjane Crabtree, executive partner of practice at Allens Linklaters, an integrated global alliance between Allens (formerly Allens Arthur Robinson)
and Linklaters.

Among the respondents who said they do not plan to invest in technology in the coming year, the top three reasons given were evenly split between budget cuts, all systems being currently up to date and heavy investment in technology in the previous year.

 

Supplier criteria

With a growing amount of technology suppliers in the legal marketplace, firms are increasingly faced with the challenge of making a meaningful choice between suppliers and products.

In more than half (53 per cent) of respondents’ firms, the head of IT is primarily responsible for selecting technology investments. This decision is devolved to the management board in a quarter of firms. Just over a tenth (11 per cent) said the managing partner and partnership choose the firm’s technology.

Other respondents variously noted that the enterprise architecture team makes technology spend decisions; that decisions are made jointly between the head of KM and head of IT (and, depending on the level of investment, the COO); and that the COO and head of IT make technology recommendations to the management committee.

When asked to select their top three criteria when choosing a supplier, the biggest consideration for respondents was cost (75 per cent). Experience in the legal sector also ranked highly (57 per cent), as did responsiveness (54 per cent) and reputation (50 per cent).

The least important criteria were financial stability (four per cent), followed by availability, frequency of updates and personality (seven per cent).

Nearly half (45 per cent) of respondents said they are thinking about changing suppliers in the coming year, while a further quarter (24 per cent) said they are planning to do so.

Kevin Goosman, head of IT at regional UK law firm Brethertons, noted that he would be “looking for best of breed and competitive pricing” as part of that process.

Technology trends

The bring-your-own-device (BYOD) revolution has brought many challenges for law firms’ IT teams, such as providing support across multiple platforms and securing firm data in case of device loss or a lawyer’s departure to a competing firm. This continues to be an issue, with two fifths (59 per cent) of respondents saying they expect BYOD to have the biggest impact on their firms in the coming year. Indeed, mobile working (39 per cent) and BYOD (36 per cent) were highlighted by respondents as key challenges facing their IT departments in the coming year.

A related trend is cloud computing, which enables lawyers to use their mobile devices to access and share firm data on the go. It ranks second (45 per cent) among the technology trends affecting law firms.

Client collaboration is on the rise, with IT teams increasingly required to facilitate and enable closer working with clients. Two fifths (41 per cent) of respondents rated it as a top trend for their firms in the coming year, making it third on the overall list. A further 36 per cent noted that they expect responding to client demands to create challenges for their IT departments in the
coming year.

A rising trend is data security in light of the Snowden leaks, with almost a third noting that it is on their radar. It is expected to be the biggest challenge for respondents’ IT departments in the coming year, with nearly half (46 per cent) expressing concern about it.

Interestingly, big data – which can enable client collaboration and ties into data security issues – ranked lowest (17 per cent) on the list of upcoming trends for respondents.

Other challenges facing nearly a third (29 per cent) are email management, disaster recovery and business continuity, and supporting firm growth. Insufficient resources were highlighted by a quarter of respondents as a key challenge.

Crabtree of Allens Linklaters also noted that “inspiring senior partners to embrace available technology” would also be a key challenge in the coming year.

 

Future of law firms

Almost all respondents (97 per cent) said they expect technology to change the way that law firms operate in the next three to five years. Opinion was evenly split, however, over whether technology would have a moderate or high impact on law firms.

“Everything a law firm does in delivering its services and how it does this is underpinned by technology,” commented Gerard Neiditsch, CIO at Allens Linklaters in Australia. “Some aspects of IT will become commodities, others enablers of a competitive advantage (when combined with significant work practice changes).”

Crabtree of Allens Linklaters also noted that “increasing demand from sophisticated clients for value and certainty in pricing and efficient delivery of service will require increasing support from a stable and intuitive IT system, and full engagement in its use by the workforce. Firms will succeed or fail on this factor more than
any other.”

She continued: “Using technology to support an increasingly mobile and flexible workforce will also be a key marker of firms
that succeed.”

Goosman of Brethertons also noted the need for improved processes and efficiency gains, in addition to continued mobility and remote working.

A key part of this process may involve less face-to-face contact and higher use of internet and app technology, according to one respondent at a local UK law firm.

Improved collaboration – internal and external – was also highlighted as key by the head of IT at an international law firm, along with enabling multi-disciplinary teams.

Automation of generic tasks was highlighted by several respondents as a game changer in the next three to five years. Jordan Meagher, IT manager at Australian national law firm
Hicksons said he expects that automation will become “more commonplace”.

“If firms don’t buy into using technology better, they will be doing too much work manually and won’t be competitive with firms that have embraced technology,” he said.

One respondent said that investment is already being made in automation at his national Canadian law firm. “We are going to automate more systems and get involved in more document automation,” he said.

“Our financial reporting will become available on demand through user dashboards. We will have better matter budgeting and management tools,” he added.

The key in determining how fast law firms can scale up their technology will be their fee income. “Currently our fixed fees make up 20 per cent of our revenues,” said Sebastian Carey, CEO at regional Chilean law firm Tecnolex. “It will depend on how fast that number grows as it would unleash major changes in our priorities.”

Managing Partner’s legal technology survey was conducted between 21 January and 4 February 2014 and received
42 responses.

Manju Manglani is editor of Managing Partner
(www.managingpartner.com)