On the tech list
The legal tech ecosystem has always been in a state of growth and flux – but at no time more so than over the last five years. Navigating this increasingly complex world of vendors, products, services and third parties is throwing up new challenges for IT leaders.
But navigate it they must – the same timeframe has also seen a slew of ‘New Law’-styled tech businesses entering the fray. What does this mean for a firm’s tech spend? And to what extent does remaining competitive even depend on that spend? After all, some of the most common obstacles to realising the benefits of new technology (shelfware, to name one) are not even directly related to IT spend.
Competitive tech
“Most of them are not doing law, but enabling the practice of law through new technology – the threat is overstated,” says James Alexander of some of the latest players. He worked as a technology consultant before joining Fletchers in 2019 as director of digital and disruption, and he doesn’t see new legal tech companies as great competitors. He, like many others, is more concerned about the increasing capabilities of the Big Four firms. “They are better placed than startups to harness technology in order to move into the market – process automation is just one example,” he says, predicting that these inroads will gain traction over the next three to five years.
However, he notes: “Law firms that can spend on tech can compete.”
But whether the competitive driver is fending off New Law, other law firms, or the Big Four, how much tech investment is enough to remain competitive? Briefing’s Legal IT landscapes 2020 report found that firms spend an average of 5% of annual revenue on IT spend. But the question is not so much whether the figure is too low for a firm to be competitive. It is where that spend is focused. And CIOs are increasingly vocal about the IT function being seen as more than just a cost centre – it needs to have a seat at the table.
Mark Parr, global director of information technology at HFW, distinguishes between business as ususal (BAU) spend and technology spend that can serve to differentiate HFW (a specialist mid-tier firm, he says) from its competitors. And he’s driving a different view of the IT function: “That I am not just a cost. I take part in client conversations to demonstrate where we can bring in technology offerings that are a differentiator,” he says. He is also keen to change the ratio of BAU to the “differentiating” tech spend – it is currently about 85%-95% BAU.
Alexander concurs. “In the legal industry, IT is still seen as a support structure – a scope-driven cost centre. However, when you start looking at the function in terms of driving efficiency and profit, IT will need to sit with the decision makers.”
“I’m surprised it’s so high,” he remarks, of LITL’s 5% finding. Although he notes that much of law firms’ IT spend is on maintaining legacy systems rather than on new technologies. “Just 5% is low for a tech-focused industry; it’s around 7-8% in the banking sector. If a law firm wants to transform core functions, it needs to undertake significant investment,” he says.
Read the full feature in Briefing April 2020, here.
