Where will your law firm be in ten years?
Before answering this question, the first thing to consider is where your law firm was ten years ago. Law firms began using tools like e-discovery, management software, and document automation ten years ago. Today most lawyers could not imagine running their practice without these tools. Ten years from now, so will analytics, artificial intelligence, and other burgeoning legal technologies.
Technological progress constantly creates new winners and losers.
Look at technology-based products that didn’t exist a decade ago but are essential today: iPhone and iPad, Uber and Lyft, Airbnb, streaming music services, virtual reality, and cryptocurrency. It is no accident that their predecessors have fallen with the rise of these products. Carpooling decimated taxi companies. Airbnb bookings are outpacing hotel growth. Streaming music has mostly replaced physical music collections.
In all industries, rapid technological change is opening up a so-called “innovation gap” between early and late users. The field of law is no exception. We are already seeing highly developed law firms stand out from the crowd by using technology to solve business and legal challenges.
That brings us back to our original question: where will your law firm be in ten years? If your law firm hasn’t started investing in legal technology, it’s not too late. However, companies that do not have a technology plan are significantly disadvantaged compared to those who do.
To plan to fail is to plan to fail
Since the economic crisis of 2008, the market for legal services has transformed from a seller to a buyer’s market. Legal customers demand more efficiency and personal customer service. If one law firm cannot meet these requirements, another provider will.
To help them get better results and provide greater value, legal professionals are increasingly turning to technology. Therefore, technology is a critical factor in future success for law firms of all sizes. But too many companies fail to make the most basic investment in technology: allocate money in their budgets to software and other tools.
According to an annual survey of members of the American Bar Association, only 57% of companies surveyed said they had a budget for technology. This means that more than 40% of law firms don’t spend money on technology investments. Going forward, companies’ failure to allocate resources to technology could affect their ability to compete with competitors and technology-leading alternative legal providers such as Rocket Lawyer and LegalZoom.
Is your solid future ready?
Legal technology already creates significant advantages for early technology users. Wolters Kluwer’s 2019 report, The Future Ready Lawyer, asked 700 companies to assess their current state, future priorities, and readiness to determine how they could be sustainable in three areas, including tools and technology. The respondents were divided into three technology categories:
- Leading (49% of law firms): Use technology effectively today and continue to invest in new technologies in the future.
- Transition (47% of law firms): Use technology and plan to invest more in the future.
- Follow-up (4% of law firms): No technology is currently in use and there are no plans to do so.
Although the number of companies that identify as Leading and Transitioning is very close, they are wide apart on a number of key metrics, including:
- Greater profits: 68% of leading companies reported higher profits than just 52% of transitioning companies between 2017 and 2018.
- Readiness for the future: 50% of leading companies said they were very willing to keep up with expected changes in the legal market, compared with only 19% of transitioning companies.
- Ability to improve customer service: 40% of leading companies said they were very willing to use technology to improve customer service, compared to 25% of companies making the transition.
Automation is just one possible reason law firms interested in technology see higher profits. Administrative processes that distract law firms from their primary responsibility – legally representing their clients – are ripe for automation: Take the HR department, for example.
According to Altman Weil’s 2019 Law Firm Change Survey, more than 48% of companies surveyed are using technology to replace human resources. Of these, around 43% recorded “a significant improvement in performance”. Almost 83% consider “technology as a replacement for human resources” to be a permanent trend. And 22% said they are losing their business to alternative legal services providers by using technology tools that reduce the need for attorneys and paralegals.
Widening the gap between leading tech law firms and subsequent law firms
Given the competitive advantages that law firms report on, it’s no surprise that the more they invest in technology, the more likely they are to keep investing.
Data analysis is an area that lawyers are particularly pleased with. In a 2019 report by ALM Intelligence and LexisNexis, “Data & Analytics: Transforming Law Firms,” more than 90% of legal analytics users said there was value in the technology, including 13% who viewed them as ” extremely valuable ”. Lawyers using legal analysis said the technology improved the speed of case evaluations (50%), made their law firm more competitive (49%), helped grow and retain existing clients (34%) and, among other things, gained new business (25%) other benefits.
Given the many benefits of legal analytics, it is no surprise that most companies using this technology are likely to continue to do so. Over half of users said they would increase their investment in analytics over the next twelve months.
Be aware that the gaps between leading, transitioning, and trailing companies will widen in the years to come. In the Wolters Kluwer study, 65 percent of leading companies said they plan to increase technology investments over the next three years, compared to 45 percent of transition companies and 20 percent of lagging companies. Wolters Kluwer concludes that the technology leaders’ current competitive advantage will only accelerate if they invest more aggressively.
Change is never easy, but law firms that invest in technology sooner rather than later are better placed to thrive as they move into the 21st century.