Legal innovators: Technology trends for law firms in 2015

The most successful law firms of the future will have lawyers who embrace new technologies, Managing Partner's comprehensive market research has found.

Almost all respondents agreed that technology will change how law firms operate in the next three to five years.

The key to success will be "how lawyers engage with the effective application of technology," as the head of IT at an international law firm noted.

Added the managing partner of a mid-sized Italian law firm: "Technology will definitively change the way to operate a legal firm. This will have a big impact on internal processes, creating efficiencies
and decreasing costs, and on inventing
new tools to collaborate more efficiently with clients."

Managing Partner's second annual legal technology survey was conducted in December 2014 and received 144 responses. Respondents were almost evenly split between local, regional, national and international firms and two thirds were based in the UK.

More than half (56 per cent) of respondents said that technology will have a high impact on law firms in the coming three to five years, while a further 41 per cent said it will likely have a moderate impact.

Technology will have the highest impact in firms that are "alive to the need to invest in and adopt technology," remarked the managing partner of a regional UK law firm.

In the coming year, technology is expected to be a key driver of law firms' growth. However, concerns were raised
as to whether partners are fully prepared
to embrace its potential.

"I still think there is a lot of doubt
among the investing partners that technology is a major player in contemporary and future service provision. The 'owners as employees' model of the traditional partnership is a significant handicap to significant investment," commented the
head of KM at a regional UK law firm.

"Technology is going to impact on legal services like never before, and failure to at least keep pace with the average investment is going to be more costly than any savings from cautious or limited investment."

The COO of a US law firm suggested that technology will "turn compensation upside down" in future.

Buying in efficiency

A striking finding of the survey is that many law firms are struggling to get lawyers to use their new systems.

Respondents said the biggest challenge facing IT departments in 2015 is persuading lawyers and others to use the new systems acquired (39 per cent). Close behind is the challenge of training users on how to use the new systems (37 per cent).

Lawyers' attitudes towards evolutions in technology can make all the difference to the effectiveness of new systems. Gaining partner buy-in for new technological systems is critical to getting the most value of out their investments.

Another challenge facing law firms is
the drive towards greater efficiency in
the delivery of legal services. This trend
is expected to have the greatest impact
on law firms' IT teams in the coming year.

Legal process improvement was voted as the most influential technology trend (47 per cent), followed by legal process automation (42 per cent).

"We are focusing on using technology to improve the efficiency of our lawyers in providing client services," commented a strategy partner at a mid-sized US law firm.

Automating legal processes was also highlighted as a big challenge for IT teams in the coming year, with improving legal processes close behind.

However, concerns were raised over
the impact of the commoditisation of legal work on the quality of client care provided.

"I think we are very much in danger of losing the personal touch, that interest in our clients which was unique to the legal practice," commented the managing
partner of a local UK law firm.

"People are becoming more like numbers every day."

Investing in growth

In recognition of the importance of technology in driving legal services,
law firms are investing heavily in new software and systems.

Eighty-eight per cent of respondents said their firm plans to invest in technology in the coming year.

A third of respondents said technology will be getting a higher share of firm revenues, while 34 per cent said its share will remain the same.

The net result is that 37 per cent will have higher technology budgets in the coming year than in 2014. A further 42 per cent of respondents will spend an equal amount as last year amount on technology.

"Historic underinvestment has proved
a false economy," remarked a respondent
at an international law firm.

The majority (44 per cent) of firms currently spend between two and four per cent of their total revenues on technology.
A further 22 per cent spend 5 to 6 per cent, while 8 per cent said they spend 7 to 10 per cent of firm revenues on technology
and 5 per cent said they spend more than 10 per cent.

Respondents variously said their firms are "committed to massive investment" and have "large software projects underway". These include new practice management systems, document management systems and a migration from Novell to Microsoft.

In total, 56 per cent of respondents said they plan to invest in practice management systems. Other big areas for software/systems investment are: legal process improvement (45 per cent); financial management (40 per cent); case/matter management (38 per cent); firm websites (38 per cent); and process automation
(37 per cent).

The gradual move by law firms
towards greater flexible working to improve
client services and talent retention is
being reflected in their investments in supporting technologies, including remote
access, cloud computing and project management systems.

The top three products which firms plan to invest in to support mobile working in 2015 are smartphones (56 per cent), laptops (49 per cent) and tablets (43 per cent). Other areas for investment are videoconferencing (36 per cent), digital dictation (22 per cent) and instant messaging (13 per cent).

Business process management and client relationship management systems also ranked as investment targets for a third of respondents, followed closely by document management systems and intranets. Other upcoming areas for investment are centralised client management and business intelligence systems, along with performance dashboards (29 per cent).

In addition, a quarter of respondents' firms plan to invest in technology that supports fee management, e-billing and/or client extranets to improve client services.

In last year's survey, data security was ranked as the biggest challenge facing law firms. This year, respondents voted it as the fourth-biggest challenge. A third said they would invest in data security in 2014; this dropped to a fifth in 2015.

A third of respondents highlighted insufficient resources as an issue, ranking
it the third-biggest challenge for IT teams.

Among the firms with the budget to increase tech support, the majority (61 per cent) said they will be outsourcing it in the coming year, while 53 per cent said they
will be increasing the size of their in-house tech support teams.

Purchasing decisions

Screening for new technology systems
is predominantly the domain of the head
of IT and management board at respondents' firms.

At two fifths, the head of IT is primarily responsible for selecting technology investments, while the management board carries that responsibility at a quarter of firms. The managing partner and partnership have equal responsibility
(17 per cent) for selecting new technologies for their firm.

However, more than two thirds
(68 per cent) of respondents also noted
that the managing partner/CEO is the biggest influencer on technology procurement decisions within their firms, followed by the head of IT (63 per cent).

Interestingly, the firm's partners
(29 per cent) have greater influence than the IT team (25 per cent). In addition, the head of finance (21 per cent) has more of
a say on new technology investments than the COO or head of KM (17 per cent).

"Even as head of KM, I have had to date very little influence on the choice of systems, and that continues to be a problem for me. I don't profess to know best, but to have no input at all is less than ideal," commented a respondent at a mid-sized UK law firm.

Some respondents noted that their management board or department head lead the decision-making on technology, while others noted that the key influencers vary on a project-by-project basis.

Choosing suppliers

When asked to consider their top three criteria in choosing a technology supplier, cost overwhelmingly came out on top
(70 per cent), followed by responsiveness (56 per cent) and experience in the legal sector (50 per cent).

Interestingly, a vendor's reputation
(43 per cent) was considered almost
twice as important as a recommendation (23 per cent).

Also considered key criteria in
selecting a vendor is its availability and financial stability.

"Continuity is important - low staff turnover, coupled with high skills and business understanding," commented the head of IT at a large Swedish law firm.

Technical competence, including the ability to provide the right solution, was also highlighted as vital by several respondents.

The least important criteria in choosing a supplier, according to respondents, are multiple platform support, personality and frequency of updates.

More than half of respondents said they are investigating changing technology suppliers in 2015. Two fifths said they are thinking about it and 14 per cent said they will change suppliers.

"We keep all suppliers under review," noted the managing partner of a regional UK law firm.

Added the operations manager at a mid-sized UK law firm: "All contracts are reviewed annually to ensure that solutions/suppliers remain fit for purpose and relevant for our needs".

A further 45 per cent of respondents said they do not plan to change suppliers.

Manju Manglani is editor of Managing Partner (www.managingpartner.com). Follow her on Twitter @ManjuManglani