The IT white elephant

This year has seen unprecedented change in the legal services sector which has given many firms a very real incentive to consider the ways in which technology can support their ongoing business strategy.

In 2011 we surveyed a small sample of our readers on how they were prioritising IT investment and, in particular, how the advent of alternative business structures (ABS) was influencing their decisions.

On the whole we found that IT was an important consideration in most of the firms that responded to the survey. The majority saw it as an essential part of service delivery and a worthwhile investment. Spending on IT had either stayed the same or been increased and most respondents were satisfied with the IT systems they had in place. A little under a third registered a level of frustration and three per cent said they were deeply frustrated.

Responses to these more general aspects of IT have changed relatively little, it is clear that firms are still investing in IT and in a positive change from last year’s results the level of dissatisfaction with current systems was down. Sixty-three per cent stated that they were either satisfied or very satisfied and only 13 per cent were frustrated.

New priorities

Last year, over half of respondents to the survey felt investment in the run up to ABS day was either “absolutely essential” or “very important”. This year we asked to what extent respondents regarded IT as a tool to remain competitive following the liberalisation of the market. Again, the results indicated that the majority regards it as a business imperative, with 85 per cent stating that IT was either “absolutely essential” or “very important”, but there seems to be a disconnect between that belief and the action taken.

We went on to ask whether firms had gone on to purchase any low-cost solutions for the kinds of volume processes that might be most under threat from the new providers such as conveyancing, redrafting or debt recovery software, and found that, despite indicating that IT was critical in this respect, not one respondent had and only 19 per cent had given it any consideration.

We asked Solicitors Journal’s regular technology columnist Damian Blackburn why this might be. “There’s a slight disconnect between what’s a reasonable investment and what isn’t,” he says. “If a firm’s gone and spent £50,000 on new desktops and a bit of software they think they’ve made an IT investment when actually the real investment is when you spend the next £10,000 showing people how to use it properly.”

But we know from asking firms what they consider most important when choosing a new system that ease of use is top of their priorities, closely followed by after-sales service. This implies that setting up, training users and testing software after purchase are not priorities for most firms. They want quick and easy installation and, according to Blackburn, that’s a common observation. “The vast majority of traditional firms aren’t IT driven,” says Blackburn. “They’re law driven and IT is an add-on. If you treat it as an add-on, there’s a disconnect between the business strategy and the IT strategy.”

Is that really what’s stopped firms investing in software to compete with new entrants to the market? Blackburn believes it is because the cost of the kinds of systems we asked about is not overly high. Where in the past firms would have to purchase and install expensive software, they can now use online systems that charge on a pay per usage basis. In theory, if they aren’t making a return they can just stop using it.

But, as Blackburn points out, the market is changing very quickly. Are firms reticent to invest in ‘essential’ IT solutions now because at this stage they’re still unable to forecast a return? “There’s a lot of truth in that,” says Blackburn. “But part of that is fuelled by the fact that they don’t have a strategy in the first place. If you had a strategy that said ‘we’re going to mop up on writing wills for a certain segment of the market’, you would have a series of actions that allow you to get to that place. If you don’t have that strategy or that running project in place, buying a piece of software isn’t going to make a blind bit of difference to you.”

It was a similar story when we asked about compliance. Over half of the respondents said that they had considered their compliance requirement methodologies but when we drilled down into what they had done and how thoroughly they had tested those systems, we found some worrying statistics (see box). It’s important to point out that these results are taken from a very small sample and, as with previous IT surveys, we do not claim to have been scientific but rather to have taken a quick sample of our readership to gain an impression of how IT strategy is being currently being approached in the legal services.

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• The good news is that 58 per cent of responding firms have looked at methodologies.?

• Pleasing that 60 per cent of that 58 per cent have been realistic and pragmatic enough to acknowledge that changes needed to be made. ?

• Surprising that 23 per cent have not done so.?

• Disturbing that 40 per cent felt that no changes needed to be made. Really? What sort of firms are these? They could be very impressive and have been working hard on compliance. On the other hand, do they have their heads buried in the sand??

• Killer question for the 46 per cent ?of firms who said that their systems ?were adequate or that they hadn’t reviewed the methodologies… ?will your systems stand up to ?scrutiny when the SRA comes ?to call?

• Worrying that nearly 20 per cent of respondents didn’t know. This speaks volumes about the communications structures within their practices and ?the failure to grasp that compliance isn’t just about COLPs and COFAs, it ?involves everyone in the business if ?it is to have a chance of sticking ?and succeeding in the longer ?term. ?

Effective audit trails: it’s instructive that the issues have been more effectively addressed in practice and risk management than in file and client relationship. It seems that those in management roles are grasping the need to demonstrate audit trails rather more effectively than those involved directly in the fee-earning process. This is not surprising, but is disturbing (and a little disappointing) when looking at the future viability of firms.

It is vital that firms actually see the process through and ensure that new habits are swiftly developed on how compliance in the product delivery field is assured. Remember – it is no longer going to be sufficient to state that you will be doing it, you must be able to show that you are actually doing it.

Can you? The final question on testing is a thorny one. If you haven’t tested how can you say you have an effective audit trail? There should be correlation between the answers to this question and question 23. Should not, in a logical world, the numbers correspond with those who stated ‘defined and incorporated’? The fact that they do not may serve more to illustrate where people have got to in bringing in new processes. Alternatively, people may have misinterpreted the question!

Overall the results are an interesting mixed bag that shows there are still an awful lot of firms that need to grapple with the issues of how to incorporate compliance requirements in a practical and intuitive way that takes the line of least resistance to fee earners. The results may also be a reflection on the crucial relationship of software supplier and law firm customer – is it delivering what it should be in a proactive way? We’ve had long enough to prepare.

Matthew Tasker is director at The Compliance People (www.thecompliancepeople.com)