Tech demands will force firms to merge into the 21st century
Savvy clients expect more and more, and growth is often the only option, Simon Adcock writes
Lawyers’ fast-growing appetite to invest in technology has seen banks providing increasing amounts of funding over the last 12 months for everything from global practice management systems to agile technology and cyber security.
As the naturally risk-averse profession embraces technological innovation, there is also the prospect of consolidation for law firms as they adapt. The driving force behind this has been the demand from clients for faster and cheaper services. Various reports and surveys suggest that law firms now invest somewhere between 2 per cent and 8 per cent of their turnover in technology. And those figures are only going to grow.
Tech-savvy clients expect greater visibility on price and progress on projects but they also want cheaper bills. They see technology, particularly automation and artificial intelligence, as the route to achieving this. Established law firms are also being challenged by “lawtech” start-ups that can meet these demands for routine aspects of legal work and undercut traditional firms.
All this means that the case for investing in technology is becoming critical for ambitious firms. Many now offer a seat at their boardroom tables to a chief information officer or technology director, while others have created “innovation” committees that report to the board. Recent high-profile cyber attacks have only served to underline the importance of tech investment and acted as wake-up call for those firms that are not routinely audited for cyber security by clients or through panel reviews.
While cyber security and the development of artificial intelligence dominate the headlines, the reality for many law firms has been less high-tech and more practical. Consolidation over the last decade has led to significant numbers of firms having to update IT systems to replace disparate legacy technology and platforms from firms they have acquired that are no longer adequate. This is before they can even consider investing in the next generation of technology.
Meanwhile, firms that have made the necessary technological investments are now facing a dilemma. With clients squeezing them on rates because of automation, firms are seeing their margins being eroded.
In a profession where the traditional partnership structure discourages shrinking, the only option is to grow domestically or internationally to achieve the economies of scale necessary. So technology could also herald a new wave of mergers and acquisitions.
Simon Adcock is head of professional services at HSBC