Smaller firms lagging behind on technological innovation

The number of larger law firms investing in innovative technology has been steadily growing but, bar a few exceptions, medium-sized and smaller firms are still to take the plunge.

Technologies ranging from document assembly to virtual assistants and artificial intelligence have become regular features of the legal services landscape, including in this journal.

Few will question that these technologies offer ‘exciting possibilities for the way legal processes might evolve or be reinvented for the future’, as a new Law Society report, ‘Capturing Technological Innovation in Legal Services’, has put it.

However, the report goes on, ‘such technologies are still a relatively unknown and unexplored landscape for the majority of the profession’. And in a clear warning, the report’s authors say these new systems are ‘not a fix for struggling business models or outdated processes’.

To date, technological innovation has concentrated on improving processes. Robotic process automation, which is estimated to result in savings of up to 40 percent, has become a high-priority investment for larger law firms, the report says. One consequence is that ‘work once outsourced to humans in India or the Philippines can now be completed inside the firm, using robots’.

Similarly, artificial intelligence and machine learning has only really been deployed in large commercial firms with large enough volumes of data to process to make the technology worthwhile.

But, overall, technology is making inroads. Although the percentages of work replaced by automation technologies have not increased drastically from 2012, there is ‘evidence that larger firms are increasing their uptake of these technologies’.

Twelve per cent of firms have already replaced some work normally done by non-fee earning staff with automated or IT processes, according the Law Society’s 2015 Law Firm Survey, and 3 per cent had automated work previously undertaken by qualified solicitors.

These systems, unsurprisingly, were more likely to have been implemented by large firms, 19 per cent of which had replaced work undertaken in the past by paralegals with automated or IT processes. This compared with 5 per cent of medium-sized and 2 per cent of small firms.

Another area where large firms have taken the lead is in the use of technology in relation to pricing. In the US, 76 per cent of large firms employed somebody with responsibility for pricing. Of those, 38 per cent had staff dedicated to the role.

Meanwhile, back in the UK, Top 200 firms typically had at least one role dedicated to innovation, a job that involved everything from scouting the market for novel ideas and insights, analysing trends, advocating innovation activity, through to facilitating idea generation, directing funding, and taking innovations forward.

By contrast, in smaller firms, innovation usually came from ‘the drive and vision of one particular senior partner’, apart from in smaller so-called New Law firms, where innovation tended to be ‘an ethos that permeated all levels of the firm’.

Budgets were also an area of wide differences. One-quarter of large firms spend more than 75 per cent of their annual IT budgets on existing technology systems. By comparison, one-quarter of small firms spend more than 90 per cent of their IT budget – and 19 per cent spend all of it – on existing systems.

‘New technologies such as machine learning and advanced automation are reshaping the way the legal sector works,’ said the Law Society president, Robert Bourns.

‘Taking full advantage of the opportunities that new technology offers will mean adapting the way we work and embracing change.’ Bourns added. ‘We have a strong tradition of innovating to meet our clients’ needs. Technology offers lots of opportunities to provide services in new ways and to continue to exceed our clients’ expectations.’

Jean-Yves Gilg is editor in chief at Solicitors Journal

jean-yves.gilg@solicitorsjournal.co.uk | @jeanyvesgilg