Convincing law firms to invest in technology part 2
What legal tech should be on your radar
INSIGHT ARTICLE |
As the legal industry in the U.S. and other parts of the world begins to come out of the forced pause brought on by the global pandemic, law firms will have to grapple with some of the same problems they were facing before going into lockdown. Chief among those is the technological shortcomings of many law firms themselves.
In a two-part blog series, the Thomson Reuters Institute (TRI) speaks to Michael Gerlach, partner and business and professional services senior analyst at RSM US LLP. In part 1, he offered his insight on the new thinking that is urgently pushing law firms to address the technology question. In part 2, transcribed below and edited for clarity, we seek to understand what tech tools and processes would benefit law firms the most.
TRI: Last November, Thomson Reuters conducted a law firm business leaders survey that asked about steps to improve law firm performance. The majority of respondents said they planned to emphasize greater use of technology to cut costs. From your perspective, which areas or types of technologies can result in the greatest cost savings?
MG: Recently I spoke with the executive team of a client who made some significant investments in their firm’s digital technologies about five years ago. They told me their firm has never been more efficient and they have experienced accelerated top-line growth as a result of utilizing much of the data they had captured about their clients and their own internal operations. In addition to reviewing basic back-office technologies that law firms can purchase or subscribe to, which address such items as accounts payable, payroll, etc., we frequently meet with clients to discuss the following technologies:
Project or matters management tools — Clients are looking for total client servers to handle all of their legal matters; but while many attorneys excel at practicing law, they are not always the best project managers. Project management tools assist attorneys in ensuring their clients’ needs are being met across practices.
Corporate performance management tools — These valuable productivity and data analysis tools allow firm leaders to have a much deeper understanding of how their firms earn money, what service offerings provide the highest profit margins, how productive their attorneys are across different practice areas and how best to allocate resources.
Client relationship management tools — These can help law firms and partners manage their client relationships and cultivate new ones in various ways, most importantly by identifying new business opportunities.
Data and data feeds — Law firms haven’t begun to fully understand the data they have stored in their systems and, even then, how to utilize that data. Once they establish an effective data governance and reporting strategy, there is great opportunity for increased profitability through identifying different and potentially new perspectives.
TRI: Due to the vast increase in working from home, collaboration tools and platforms have been talked about with greater emphasis. Now that firms are looking to return to the office sometime this year, what are your thoughts on investing in this technology?
MG: These platform operability tools are table stakes. They allow for a new wave of practicing law, and they are mandatory for firms to attract not only law students graduating from school but also laterals seeking to advance their careers. In addition, for firms to remain competitive, it’s going to become necessary to have a fully cloud-based platform that allows your attorneys to operate from anywhere in the world.
TRI: In our recent biennial ALSP report, we saw a surprising statistic in how law firms are using alternative legal service providers. Some 30% of law firms use ALSPs as consultants for the firm’s legal technology, and among large law firms it was 44%. How have ALSPs developed their own legal technology in a way that makes law firms want to enlist them? And what value are firms trying to gain from these consultations to get better results from their own tech investment?
MG: There is a lot to unwind with this question. Obviously, ALSPs have made an investment in a solution that, in theory, can provide some legal services cheaper and potentially more efficiently than larger law firms. The major investment has been put up commonly by private equity or venture capital firms that bear the risk of loss that comes with the technologies. The ALSP founders are typically tech-focused entrepreneurs that have identified a need for a more efficient process or tool and have the ability to fast-track and streamline the development of the technology.
Law firms, on the other hand, don’t typically have the resources and potentially the knowledge and skills to develop that specific technology.
As a result, law firms are teaming up in an effort—or more accurately, a sort of trial run—to see if the new technologies can in fact work in their favor. If they find success, there is more data to support going back to the partnership in an attempt to obtain support for a new investment in technology. While ALSPs could eventually be seen as competition, I believe they have been an open door for firms to experiment with alternative legal services.
TRI: Finally, let’s turn a bit to what your firm is doing. During the recent Thomson Reuters Appreciable Assets webinar that explored the intersection of talent and technology, you mentioned the RSM eminence program. Can you describe the program?
MG: Our Industry Eminence Program is really an acknowledgment of all that is happening in the world of tech and innovation, and that we as a firm see the opportunities for businesses to thrive.
It comes down to understanding that our profession needs to change. If we want to be successful and maintain our position in the marketplace, we need to change our legacy audit-tax hats and become more advisory focused. In order to do that, we have to expand our knowledge set. We need to offer more than just our legacy accounting and audit tax courses that we built our careers upon, and start thinking about learning Python and Tableau and other business intelligence tools.
We need to be able to handle our audits once they are streamlined by the artificial intelligence that is advancing—because there are firms out there hitting the marketplace saying, we can do what you do in a much faster, much cheaper way.
So the industry needs to be able to understand how they can analyze data and truly become advisors for their clients versus compliance people that are ultimately just checking a box for clients. In our eminence program, that's what we're doing. We’re giving our analysts access to media and research tools they need to truly understand what's happening in their ecosystems and, more importantly, where they need to be focusing their efforts to elevate conversations with clients.
This interview was originally published by Thomson Reuters.