What next for law firms

Three years ago I began speaking about the tough times that lay ahead for the South African legal profession.  “Alarmist!  We’re doing just fine,” was the feedback I got to my talks.  But some firms listened, and they are now doing well.  Most simply carried on as usual.  And now here we are three years later, and guess what?

For those who missed my talks back then, there are a number of reasons why law firms are going through a tough time right now.  Firstly, clients can’t afford their services any longer.  Secondly, clients won’t accept an “open chequebook” bill anymore – they want a firm quote.  Thirdly, the Internet has made legal services available at a much lower cost – and clients can now find basic templates cheaply, or even for free on the Internet. Of course, there are many other reasons why life has become a challenge for the legal profession in South Africa, but I won’t go into those here – except to say that the recession in South Africa makes this situation a double whammy.

So now what?  What can law firms do to survive?  It’s not easy.  And for many firms it is too late.  (Oh, by the way, this isn’t simply affecting small firms, it is affecting firms of every size.)

Three years ago I said there were only two viable options for success. Firstly, find some niche legal work. And some firms did that very well.  But as we all know finding niche work is not easy.  And it takes time.  Three years ago, firms still had time.  Unfortunately, time is running out for those who didn’t hear me back then.  Secondly, I said “embrace technology”.  Some firms did, and they are have managed to increase efficiency and keep their costs down.  But most had no idea what “embrace technology” meant.

Today, three years later, the only viable option left for law firms in South Africa is to become more efficient1 and more effective2. (1Doing things right, and 2doing the right things…)  If clients are insisting on a fixed fee, firms have no choice but to become more efficient to make a profit.  That is simply common sense, right?

But how do firms embrace technology? 

Probably the biggest gain for the least cost is to train your staff members how to use the firm’s existing software products better.  Microsoft Office training – Word, Excel, Outlook.  Accounting system training.  And case management training, for example your conveyancing software. Firms need to get more out of their existing people. “More, with less.

Another aspect that international firms cottoned onto a while back is to host their software remotely.  So they don’t need server hardware and they don’t have to pay IT support consultants to manage their servers.  They don’t have to worry about hardware failure, backups, virus updates, ransomware attacks, and software updates.  Today, hosted servers are secure, with huge names behind them – like Microsoft and Amazon.  So it is no longer a case of whether you should host remotely.  It’s when. And the sooner you do it, the more money you will save. Put simply, for 95% of law firms, a hosted provider will do a much better job of managing the server than the law firm’s IT consultants will.  And that’s a fact.

Having a hosted server also provides peace of mind.  Servers can’t be stolen.  And if something happens to the office, a hosted server provides instant disaster recovery.  And all you will need from a user’s perspective is a basic computer with a browser.  No more re-loading of software, or upgrading workstations.

Another useful piece of technology is process management software. Computers manage the workflow, allowing staff members to manage many more matters than they could manually – thereby reducing staff costs.  Such systems also ensure that nothing slips through the cracks, and they organise case data.  Think conveyancing software.  Or litigation or debt collections software.  All of those are great examples of process management.

Next up, accounting software.  Today, most legal accounting and practice management systems in South Africa help firms to bill for all work done on a matter, and they help with reducing discounting, collecting money, and organising clients’ information.  Yet many firms still believe that only the bookkeeping department needs access to accounting.  Firms need to get full value from their people – since people are the largest expense for any firm. 

Another way that legal accounting software can save firms money is to prevent fraud through requisitions management, integrated banking, and bank account verification.  And yet many firms are still finding themselves affected by fraud.

Last but not least there is document automation (templates) software.  Re-use of information is essential if firms want to remain viable into the future.  And document re-use is probably the best example of this.  In its simplest form, calling up an existing document and cutting and pasting information into it is already an example of re-use of information.  Of course, cut and paste introduces a number of problems such as outdated documents, old letterheads, or not all variable information in the document being updated, etc.  

Without a doubt, the biggest problem with the adoption of document automation is that firms don’t have anyone in-house to build templates.  And hiring an expert to build templates is simply not affordable for most smaller firms.  But document automation is that important that firms ignore it at their peril. Don’t believe me?  Give it 3 years and we’ll see! And the reason I can say that with confidence is that if we look at the first world, fixed-fee billing has forced firms to find ways of becoming more efficient. And we’re three years behind the first world…

So there you have it.  A simple recipe for success.  Find niche work and embrace technology

Chris Pearson is a director of AJS Legal Software (www.ajs.co.za) with over 40 years of experience in legal software technology. 

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