Law firms should consider increasing investment in technology as a matter of urgency if they are to remain sustainable and stay ahead in an increasingly competitive environment, according to Patrick Hurley, Vice President of Global Expansion at leading international business intelligence firm Thomson Reuters Elite.
Mr Hurley was a speaker at the Africa Janders Dean Legal Knowledge & Innovation Conference held in Johannesburg on Friday (March 15, 2013), where he delivered a paper titled “Legal Technology Trends: The Impact on Law Firm Profitability”. His comments come at a time when the legal industry is undergoing deep structural changes and is facing serious challenges, including declining profitability as it struggles to recover from the recent global recession and to cope with the disruptive technological changes underway.
He notes that whereas before the global financial crisis in 2008 there was more demand for legal services and firms were in a position to hike their rates to maintain high levels of profitability, over the past five years however there has been an oversupply of lawyers and falling client demand. In addition, clients are now demanding more value for less and new competitors have added to competitive pressure.
He argues that technology is an important solution to these challenges as it can help firms remain profitable, if approached wisely and strategically. He says legal firms have lagged most industries in adapting to changing technologies, and warns that firms that do not move swiftly now could fall by the way side. He points out that it is not so much that technology has imposed itself on law firms, as changes in the demands of law practices have required new solutions.
“There is mounting evidence suggesting that the legal industry is undergoing a massive structural shift; one that will leave it dramatically transformed in the coming years. I believe that technology is a key solution to the challenges that the industry is facing. Firms must understand that they must be prepared to invest strategically in technology because they will be left behind if they do not change.”
He says the increasing use of technology is one of the key trends that are shaping the legal industry, adding that it is important for law firms and corporate legal departments to leverage technology to improve services and streamline workflow. A number of global firms are already embracing technology, he says, as seen in the increases in technology spend.
“The industry, which until recently had witnessed a golden age of prosperity almost unmatched by any other industry, is at the cusp of technological change, which presents vast opportunities as well as challenges in the way the industry works.
He says it is those companies that use technology wisely that will be sustainable in the long-term, arguing that technology has the ability to significantly lower costs and legal fees for firms. He notes that in the case of Gable Gotwals, “the introduction of 3E mobile provided the firm with ease of functionality around mobile time entry, thus the company increased the number of attorney’s who were able to keep their time current”.
“The structural change in the industry reflects an urgent need for better and cheaper legal services that can keep pace with the demands of a rapidly globalizing world. It cannot be business as usual for them, especially at a time when there is now more supply of legal services than there is demand for them. Although firms have historically regarded technology as an unnecessary cost, there is no doubt that it has now become a key point of competitive advantage.”
“The management of law firms and the way in which they operate is becoming increasingly complex and competitive, and as such solutions that improve efficiency and lower costs for clients are critical. For a firm with aggressive business goals, such as Hesketh Henry, the introduction of technology meant that operating with the most advanced financial and practice management systems allowed the firm to achieve aggressive business goals and achieve a stronger competitive position” explains Hurley.
Technology is becoming a key client differentiator in terms of commodity. In the future, the most successful firms will be those that can identify relevant technologies the earliest, implement them quickly and profit from the gain in efficiency to better serve their clients.”
He notes that data management software can help firms create leaner and more smoothly run offices that, in turn, offer more convenience for the client. Nabarro, a major UK commercial firm, recognized the economy was on a downward trend and recognised, according to Hurley, that a competitive advantage could be gained by investing in technology to better leverage how the firm interrelates with clients and prospects – a critical differentiator in such a tight economic environment.
Also the evolving online marketplace and social media are creating new and more efficient ways to market legal services and attract prospective clients. “The value of technology lies largely in its ability to create process efficiencies and to control any inherent risks,” he says.
Mr Hurley concludes that although the advances in technology have created several important challenges which are yet to be fully understood, there is no doubt that technology will continue to offer more operational capabilities to the legal industry. To succeed, firms will have to deal with technology that swallows billable work, in addition to a world market that takes the competition global, and a more sophisticated client with vast knowledge instantly available. He says survival will depend upon law firms’ ability to harness technology to deliver greater value to clients at a cost that declines over time.