legal_accountingCompetition among legal accounting and practice management vendors has never been as strong, despite the slump in the economy. While most of the vendors have been around for many years, new entrants such as Korbitec’s GhostPractice and AdvanceSoft’s LMS are causing existing vendors to re-assess their strategy.

A recent study “National Survey of the Attorneys’ Profession” conducted by Research Focus (Pty) Ltd, and commissioned by the Law Society of South Africa lists eight legal accounting suppliers, although our count shows eleven vendors. The number of clients reflected in the report also varies from the number of clients claimed by the vendors. This discrepancy could be due to the response rate of only 11.6% attained in the LSSA report, as well as the possibility of slightly optimistic estimates provided by the vendors themselves.

It could also be that not all vendors are clear about how many clients they have, since some clients may have fallen through the cracks over the years. This is because in the early days, record keeping was not all that important, since law firms usually bought the software outright. So there was no reason to keep track of a client once they had purchased the software. In many of these cases law firms merged or closed, also making it more difficult to keep an accurate count. Some firms also changed software along the way, but since there was no real reason to tell the previous vendor about that, records of clients became patchy.

For the Tech4Law survey, nearly all of the vendors were prepared to divulge the size of their client bases. We received this response from Paul Macaulay, General Manager for GhostPractice: “Korbitec spent three years developing GhostPractice, a bespoke practice management solution, tailored to the unique requirements of the South African legal fraternity. The response from the market has been very positive. Given our unique selling proposition, we do not believe that a comparison as the one you propose to do, will benefit us, existing or potential customers.”

In fairness to both the newcomers to legal accounting, GhostPractice and LMS, the size of their market share doesn’t provide an indication as to their capability, since they haven’t been on the market long enough.

The table below shows the number of clients as reported in the LSSA survey in the “Research Focus” column, with the vendors’ own estimates in the ‘Figures given by Vendors’ column. As you will see with international products such as Elite and ADERANT, while their firms count may be low the user count is substantial, since they focus on large firms.

 

Client Base Table

 

Research Focus

Figures given by Vendors

Vendor name

Clients

Clients

Users

ADERANT

Not incl.

7

1640

AJS

749

500

9500

Elite Enterprise

Not incl.

6

2625

Ghost Practice

149

Did not participate

LawPac

203

350

1750

LegalAcc/ProkRek

Not incl.

95

95

LegalSuite

397

693

5931

Lexpro

1201

1850

15000

LMS

Not incl.

35

900

Winlaw/Lawplan

1255

1500

7500

Other/unknown

1382

N/A

N/A

Pastel

1263

N/A

N/A

No software

1649

N/A

 

N/A

 

 

Below is a summary of the vendors:

  • ADERANT is privately owned internationally, and is sold and supported in South Africa by Co-operative computing. ADERANT is targeted at larger firms. Co-operative Computing was established by Carlo Pagani and Virginia Stuart.

  • AJS has been around for some 25 years and was originally founded by Andrew Spagnoletti. Since then ownership of the firm has passed to O2Smart/Coleso, which is owned by Johan Venter and Digby Vickers, and based in Johannesburg. AJS focuses on mid to large sized firms, although the firm also has a number of smaller clients.

  • Elite is owned by Thomson Reuters internationally, and Emerald Consulting (recently purchased by DVT, a listed company on the Alt-X exchange) owns the South African agency, which was established by Hanri Edwards 9 years ago. Elite is the leading legal accounting system for larger firms internationally, but in South Africa limits its focus to large practices.

  • GhostPractice, another new entrant to the market, is owned by Korbitec, and is focused on mid to large sized firms.

  • LawPac, established by Reggie Govender over thirty years ago, is based in Durban and has a loyal following among small to mid sized firms.

  • Lawplan and Winlaw are owned by LegalInteract, based in Johannesburg. Together the two accounting systems boast one of the largest client bases in the market. While Winlaw focuses on small to mid-sized clients, Lawplan focuses on mid to larger sized firms.

  • LegalAcc/ProkRek is owned by Properdata, and was established in 1981 by Johan Rothmann, Helgard Scholtz, and Hercules du Preez. The system is aimed at small to medium sized law firms.

  • LegalSuite, established by Rick Jordan as MergePerfect in 1987, is based in Durban with a client base around the country. LegalSuite focuses on law firms of all sizes, although most clients are in the small to medium-large category.

  • LMS by AdvanceSoft is a new entrant to the market, and focuses on small to medium-large sized firms. LMS is developed by AdvanceSoft which is owned by Colin Bennets (previously Lawplan) and Ivan Volschenk.

  • LexPro, based in Pretoria, was founded by Chris du Plessis 22 years ago, and boasts one of the largest client bases in the country. LexPro’s target market is in the small to medium sized law firm market.

  • Pastel is not known as a legal accounting system although it enjoys a strong following among South African law firms. Whereas the specialised legal accounting packages cater for trust accounting, Pastel does not. Judging by the size of its law firm client base, the lack of trust accounting doesn’t seem to be a drawback.

 

Target Market Table

Key for below table:

Part focus  
Main focus  

 

 

Small

Medium

Large

 

ADERANT

 

 

 
 

AJS

 

 

 

 

Elite Enterprise

 

 

 

 

Ghost Practice

 

 

 

 

LawPac

 

 

 

 

LegalAcc/ProkRek

 

 

 

 

LegalSuite

 

 

 

 

Lexpro

 

 

 

 

LMS

 

 

 

 

Pastel

 

 

 

 

Winlaw/Lawplan

 

 

 

 

 

With the current economy being tight for most law firms it is tough going for vendors attempting to win market share at present. Nonetheless, the new entrants to the market are making a strong play to grow their client bases which is keeping the existing vendors on their toes. As with most competition the result is that vendors improve their service levels, sharpen their pencils, and come up with innovative new aspects in their products in order to retain their clients, which is good for the profession.

But is there room for 11 players in the legal profession? Clearly not, if we compare South Africa to the UK, where there are many more lawyers and about the same number of legal accounting systems. It is also unlikely that there will be any consolidation among South African vendors, partly because it will be difficult to merge different product/company cultures, and partly because vendors appear to have an optimistic idea of their business’ worth – and this makes it near impossible for other vendors to acquire them.

That’s not all that will make consolidation in the legal accounting market difficult. Unless vendors are in financial difficulty, it is unlikely that they will want to sell out. And at present, given their annuity income model, it seems the legal accounting vendors may be well placed to weather the economic slump.

So what is the future for legal accounting and practice management in South Africa? While it is true that South African vendors led the world in legal accounting software for many years, it now seems the world has caught up. Until a few years ago, overseas systems weren’t fully integrated, with time billing, accounting, and practice management as completely separate systems.

If legal accounting vendors want to grow their customer bases in South Africa they are going to need to do something to differentiate themselves. While top-rate customer service might be an advantage, it is likely that the product that does the most to help law firms maximise fees and reduce costs will be the winner. It won’t be that simple though – vendors will need to prove beyond any shadow of doubt that they can deliver on their promises.

It is also likely that it is just a matter of time before an online or hybrid legal accounting system is offered – where all that the law firm will need is a computer with Internet connectivity. One benefit of an online system is that firms can get up and running much faster than they would on a conventional desktop system. In addition, support is simplified, since the vendor can ‘peek’ over the operator’s shoulder to resolve a problem, backups are managed automatically which saves the law firm time, and software updates would be a thing of the past. All of this will drive down the total cost of ownership. Of course, it remains to be seen whether the bandwidth in South Africa in the next few years will facilitate online accounting systems.

But despite legal accounting systems becoming more and more sophisticated, law firms seldom use more than 20% of the functionality. According to one vendor “The small firms are generally better at embracing and learning technology. They learn faster, are more adaptable, and the attorneys get more involved in the IT part of the firm.” Given the state of the economy, law firms might just need to start making better use of their accounting and practice management systems if they wish to sustain their profitability.

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