COO & CFO Forum Poll: Law Firms Waking Up to the Necessity of Tech Investment

Topics: COO/CFO Forum, Data Analytics, Efficiency, Law Firms, Legal Innovation, Midsize Law Firms Blog Posts, Surveys, Thomson Reuters

tech adoption

NEW YORK — As of late, the data demonstrating the need for technological investment within law firms is mounting. No surprise given the emergence and accessibility of new (and disruptive) technologies as well as a more sophisticated client driving the ship.

Today’s clients demand real-time information, predictability, transparency as well as security and efficiency — all areas in which technology can influence the re-engineering of the business of law as well as the client-facing aspect of the delivery of legal services. The importance of leveraging technology to gain a competitive edge in the marketplace does not appear to be lost on law firm leaders.

In fact, a recent poll taken during a panel, entitled Some Assembly Required: Discerning a Bespoke Technology Investment Strategy at the 15th Annual Law Firm CFOCOO & /COFO Forum showed that 73% of law firm leaders view IT as a strategic differentiator. While the sentiment is nice, it doesn’t appear to be lip service. If you look at law firm spending, on average, technology investment makes up 8% of overall spend within a firm, according to Peer Monitor. While that figure pales in comparison to the portion of spending on talent and occupancy, its growth blows these areas out of the water. As of Q3 2016, technology is one of the fastest growing expense items on the budget, with a year-over-year growth of 5.7% in comparison to last year at this time when growth in tech spending was a modest 2.5%.

Tech Investment Leads to Better Performance, Reports Show

Moreover, for those firms pursuing these strategic investments the return on investment (ROI) is undeniable. Two reports from earlier this year — the 2016 Report on the State of the Legal Market from the Center for the Study of the Legal Profession at Georgetown University Law Center and Peer Monitor, and Altman Weil’s 2016 Law Firms in Transition — show the strong correlation between top-performing firms and strategic technology investment. Compelling results that make it hard for firms to ignore the need to invest.

So, where are these top performing firm’s investing? When the same law firm leaders were asked, “Other than cybersecurity, what is your firm’s top priority in terms of IT strategy”. The top results included information governance, knowledge management and infrastructure. These areas translate into technologies that enable matter management, experience management, resource management and pricing. In other words, areas that provide the transparency and predictability that clients are increasingly demanding. Moreover, technology around process automation solutions empower process excellence which drive efficiencies and cost savings. (Yet another area that resonates with clients.)

As technology becomes more available the real question becomes: Where to start? In what areas should law firms pursue innovation? It comes down to the client: What are they demanding? It is a buyers’ market after all.

Other than cybersecurity what is your firms top priority in terms of IT strategy?

tech investment

These questions aren’t easily answer with conflicting interests vying for limited resources and cultural mores presenting hurdles. The hurdles aren’t new to legal. Most are rooted in the fear of change — the automation of work processes disrupts and challenges the way things have been done. Another resounding resistance we hear often in the marketplace: Why would I want to become more efficient since I am compensated on the hours I bill? Why would I want to implement technology that allows me to bill less hours? It’s a good question, but arguably flawed as technology enables law firms.

Putting all that aside, selling technology investment within the firm can be more of an art, especially for projects where the expected return is longer than 12 months (which many infrastructural projects can be).

Panelists Provide How-to for Tech Investment

On the Forum panel on technology investment, each panelist voiced one consistent message when it came to gaining momentum — tie the use case to a strategic initiative at the firm. Specifically, don’t bring a new technology to the table unless you have a well thought-out business case that is directly tied to a strategic focus. This is how you get funded (coupled with choosing a project to quickly get started). Lastly, the panelists suggested to start small with a group of champions that can help spread the word.

With the emergence of new technologies to help drive business and support revenue growth it is no surprise that technological investment is piquing the interest of law firm leaders. Frankly, they don’t have a choice as some of these technologies have become table stakes.

Technology is altering the way lawyers work, but it isn’t making lawyers obsolete. Technology is dependent on lawyers to customize and interact with. The bottom line is, the incorporation of technology in law firms allows those firms to be smarter and more agile in how they exceed the needs of their clients and gain market share.

If lawyers would embrace this change and support such investment, they would see that technology empowers them to do the work they want to do… the fun stuff that is the reason they became lawyers in the first place.