Technology drives change and creates new solutions for legal clients

“If you don’t like change, you will like irrelevance even less” is a quote from retired US army general Eric Shinseki which Barry Devereux, managing partner at law firm McCann FitzGerald, uses to illustrate his company’s reasons for adopting an innovation-led approach to business.

Market factors have driven the need for change, with a thirst for “more for less” from clients, as well as the liberalisation of the profession which has seen the growth of new entrants such as Legal Process Outsourcing (LPOs) and other alternative service providers, says Devereux.

There are several other factors driving innovation in an industry that’s worth upwards of $700 billion and is still growing, as regulations get increasingly complex and global trade boundaries are redrawn.

These include globalisation, as clients become accepting of remote service delivery; and advances in technology, allowing automation of legal processes, according to David Halliwell, director of knowledge and innovation delivery at Pinsent Masons.

There are other factors at play too. “Unlike its near sibling industry, accountancy, the overall market among law firms is highly fragmented. The Big Four’s joint turnover for audits for 2014 represented 23 per cent of the global audit market, but the total revenue of the top 100 US law firms represented only 13 per cent of the global market for the same year.

“Fragmentation might indicate that poaching of clients takes place easily. However, the knowledge of clients that flows from embedded relationships means that switching costs for clients can be high, if they have an expectation of bespoke services.

“That said, price pressure from alternatives and substitutes based on different business models mean clients are demanding more with less, and some firms are starting to look at combinations of people, process and technology to deliver services faster, better, cheaper, becoming more efficient and incrementally innovating,” Halliwell says.

Julian Yarr, managing partner at A&L Goodbody, says law firms work in an environment that reacts to clients’ needs, whether that be an economic cycle, or a change to a regulatory environment.

Technology – and legal technology in particular – continues to drive change

“Those are the sorts of things that they will come to you to look for advice on and so at one level there is often a reaction to what clients are doing in terms of how you deliver a client service,” he says.

He says there are two key ingredients to providing for those clients’ needs: the people who work for you and the technology that supports them.

Technology

Technology – and legal technology in particular – continues to drive change and Devereux says its adoption has led to better collaboration, new workflow management and new solutions for clients.

“In addition to improved efficiency and effectiveness, the adoption of technology by our firm, for example, has freed up lawyers to concentrate on value-adding and strategic advice.

Changing employee preferences also builds pressure from within law firms to change and evolve – younger lawyers who are digital natives understand what technology can do and look to their employers to embrace this,” he says.

Law firms, clients and new entrants are introducing incremental improvements in technology, process and resourcing, but are still essentially engaged in an artisan services model, using more-or-less expert capability to deliver legal services, Halliwell says.

“New technologies will first replace manual delivery, and then provide the consumer of legal services (B2C or B2B) with a self-service solution. Instead of relying on a service provided by a professional, those wanting legal advice will access it on a self-service basis, either as and when needed, or embedded into the technology-enabled business processes they are engaged in,” he says.

That sort of facility is already in the consumer market, with apps allowing filing of court claims from smartphones, for example.

“Commercial lawyers around the world will say ‘You’d never be able to reproduce the complexity of what I do with technology’. But this has the hallmarks of a disruptive innovation: an initially inferior product that leverages new technologies to produce a ‘good enough’ product that turns the market on its head,” he says.

Threats

Perhaps better described as alternatives or substitutes, the biggest current threats to law firms are the Big Four accountancies.

“After a period of retrenchment in the early 2000s, facing tighter regulation in the wake of high-profile accounting scandals, they [the Big Four accountancies] are making a renewed effort to target legal services, and now compete directly with law firms by offering services that combine legal expertise with other disciplines, as well as using technology and resourcing models to deploy large-scale solutions,” Halliwell says.

Meanwhile, the success of law firms – and their perceived high cost and profitability – has led to corporate businesses having significant in-house legal functions, some of more than 1,000 lawyers.

“However, all companies will rely on one or more outside provider, for reasons of specialist expertise and capacity,” he adds.

Economic cycles

Market forces, including the banking collapse, the property crash and the wider economic crisis, required many law firms to “face up to an entirely new Ireland” and this was the starting point for A&L Goodbody doing things a little bit differently.

At the time of the banking collapse, and for a bank that was going through an insolvency process, the firm created a project management team that was able to bring a new skillset. This included a 30-strong legal project management team, a tech platform and a system with dedicated resources, who worked alongside the firm’s lawyers to drive more efficiency and bring forward information to clients in a very different way.

“It’s helping them understand risk a little better, economic cycles can throw up different types of cases you have to react to. When it comes to political change, regulatory is the most obvious area. We dedicated a combination of court lawyers with non-court lawyers, working together with financial institutions. This is a system that uses a couple of different enterprise products that we bolted together for our own specific platform, that meets our own needs but is both used as an internal user interface and external interface for clients,” Yarr says.

The bottom line is, in order for a law firm not to be left behind, it needs to innovate.

“Overall, innovation is about fundamentally changing how high-quality legal advice is formulated and excellent service is delivered.

“Rather than stick our heads in the sand and hope this all goes away, we are embracing the opportunities that doing things differently presents,” Halliwell concludes.