Where will your law firm be in ten years?
Before you answer that question, you might first want to consider where your law firm was ten years ago. Ten years ago, law firms were just starting to use tools such as e-discovery, management software, and document automation. Today, most lawyers couldn’t imagine running their practice without these tools. And in ten years’ time, the same will be true of analytics, artificial intelligence, and other burgeoning legal technologies.
Technological advancements are constantly creating new winners and losers.
Consider technology-based products that didn’t exist ten years ago, but are now indispensable: the iPhone and iPad, Uber and Lyft, Airbnb, streaming music services, virtual reality, and cryptocurrency. It’s no coincidence that as these products have risen, their predecessors have fallen. Ride-sharing services decimated taxi businesses. Airbnb bookings are outpacing hotel growth. Streaming music has mostly replaced physical music collections.
Across industries, rapid technological change is opening a so-called “innovation gap” between early and late adopters. The legal field is no exception. We’re already seeing sophisticated law firms separating from the pack by leveraging technology to solve business and legal challenges.
Which brings us back to our original question: Where will your law firm be in ten years? If your firm hasn’t started to invest in legal tech, it’s not too late. Firms that don’t have a technology plan, however, are at a significant disadvantage compared to those that do.
Failing To Plan is Planning to Fail
Since the economic crisis of 2008, there has been a fundamental shift from a seller’s to a buyer’s market for legal services. Legal clients are demanding greater efficiency and personalized customer service. If a law firm can’t meet these demands, another provider will.
To help them achieve better outcomes and offer higher value, legal professionals are increasingly turning to technology. As such, technology is a key enabler of future success for law firms of all sizes. But too many firms are failing to make the most basic investment in technology: allocating money in their budgets for software and other tools.
According to an annual survey of American Bar Association members, only 57% of firms surveyed said that they budgeted for technology. That means that more than 40% of law firms aren’t setting aside any money for technological investments. Moving forward, the failure of firms to allocate resources to technology could hurt their ability to compete with competitors and tech-first alternative legal providers, like Rocket Lawyer and LegalZoom.
Is Your Firm Future Ready?
Legal technology is already creating significant advantages for early technology adopters. In Wolters Kluwer’s 2019 report “The Future Ready Lawyer,” 700 firms were asked to assess their current state, future priorities, and preparedness to identify what it will take to be future-ready in three areas, including tools and technology. Survey respondents were grouped into three technology categories:
- Leading (49% of law firms): Effectively leveraging technology today, and will continue to invest in new technologies moving forward.
- Transitioning (47% of law firms): Somewhat leveraging technology, and plan to invest more in the future.
- Trailing (4% of law firms): Not currently leveraging technology, and have no plans to do so.
Although the number of firms that identify themselves as Leading and Transitioning are very close, they’re far apart in a number of key metrics, including:
- Higher profits: 68% of Leading firms reported higher profits from 2017 to 2018,compared to only 52% of Transitioning firms.
- Preparedness for the future: 50% of Leading firms said they were very prepared to keep up with expected changes in the legal marketplace, compared to only 19% of Transitioning firms.
- Ability to improve client services: 40% of Leading firms reported feeling very prepared to use technology to improve client services, compared with 25% of transitioning firms.
Automation is just one possible reason why law firms that embrace technology are reporting higher profits. Administrative processes that distract law firms from their primary responsibility—legally representing their clients—are ripe for automation: Take human resources, for example.
According to Altman Weil’s 2019 Law Firms in Transition Survey, more than 48% of firms surveyed are using technology to replace H.R. Of these, around 43% are “experiencing significant improvement in performance as a result.” Nearly 83% view “technology replacing human resources” as a permanent trend. And 22% said they were losing business to alternative legal service providers using technology tools that reduce the need for lawyers and paralegals.
Gap Widening Between Leading Tech Law Firms and Trailing Firms
Given the competitive advantages that tech-first law firms are reporting, it’s no surprise that the more they invest in technology, the more likely they are to continue investing.
Data analytics is one area where lawyers are reporting particularly high levels of satisfaction. In a 2019 report from ALM Intelligence and LexisNexis, “Data & Analytics: Transforming Law Firms,” more than 90% of legal analytics users reported the technology provided value, including 13% that found it “extremely valuable.” Lawyers that used legal analytics said the technology improved the speed of case assessments (50%), made their firm more competitive (49%), helped expand and retain existing clients (34%), and landed new business (25%), among other benefits.
Given the varied benefits of legal analytics, it’s no surprise then that most of the firms that use this technology will likely continue to do so. Over half of users said they plan to increase their investment in analytics over the next twelve months.
Look for the gaps between Leading, Transitioning, and Trailing firms to widen in the years ahead. In the Wolters Kluwer study, sixty-five percent of Leading firms said they plan to increase technology investments over the next three years, versus 45% of Transitioning Firms and 20% of Trailing firms. Wolters Kluwer concludes that the current competitive advantage realized by Technology Leaders will only accelerate as they invest more aggressively.
Change is never easy, but law firms that invest in technology sooner rather than later will be in a better position to succeed as law moves into the 21st century.