Comment: Law Firms Are Choosing Innovation To Drive Cost Control, Unlock Profitability And Support Marketing

Legal process automation company Zylpha has conducted an in-depth survey on the ‘Legal Landscape in 2015’. The survey’s aim is to identify the business and technological challenges facing private sector law firms in the provision of legal services. It also seeks to define the key pressure points on practices in changing times.

The accompanying report highlights that the rapid pace of change in the legal landscape is creating a more dynamic and commoditised legal services industry, which will not only attract new entrants but also see some firms leave. There are new opportunities for many practices as services become ever more competitive and accessible through different routes. This includes the adoption of new technology and the survey’s results suggest that innovation and systems investment hold the key to delivering greater cost control, protected margins and winning new clients through marketing.

The most striking figure to emerge from the research revealed an intense focus on operating costs. Some 89% of respondents confirmed that control of operating costs remains the top concern for 2015. This is especially significant as it is set against a backdrop of expected growth with revenues anticipated to increase at a compound annual rate of 3.4% to £38.4 billion over the four years to 2019. However, intensifying competition and the growth of ABS, over this period, is expected by many to act as a constraint.

A growing concern also exists about the increase in ‘non-core costs’, which are impacting on the bottom line.  The report confirms that lock-step is becoming increasingly difficult to maintain in this market and that the specific economic pressures of the legal services sector are forcing ‘change’ – in business operation, business model and organisation. Tactics such as downsizing, merger and acquisition and cutting administrative costs have been the typical methods adopted to maintain profits thus far. However, as many have now instigated measures along these lines, new solutions are required.

Those firms seeking to think beyond short-term, knee jerk cost reduction measures need to consider innovative sourcing and procurement techniques, strategic human resource management, business intelligence, cost/profitability analysis, and an overall modern attitude towards technology and business practices. This includes optimising their use of case management systems.

The research also highlights that 78% of the respondents surveyed cite investment in new technology and innovation as paramount. A total of 54% saw new technology as a key component in their survival.

Winning new business is also seen as another successful way forward to countering current pressures and in all 74% of those polled stated that marketing to gain new clients is essential. Here technology also seems to be a key part in plans with the expectation that web marketing and social media would play a major role.

Many of the recent sector changes are effectively driving a commoditisation of legal services. The challenge of course is to allow this commoditisation to augment the practice lawyer. Clients will be much more likely to “self-diagnose” and law firms must be prepared to adjust their role from one of “gatekeeper” of legal services to one of “custodian”. More help and information will have to be delivered to the potential client earlier on with a technologically acceptable route to the lawyer provided.

Technology has made such strides across all areas of the practice sector from areas such as court bundling and secure delivery through to online services and marketing. The efficiency benefits of these innovations will help control costs markedly. There will also be an additional benefit from the transformational nature of incoming technology such as the cloud, which significantly reduces internal IT costs and supports scalable agile practices such as mobile working and social collaboration.

All of these factors will have a tremendous impact on the legal landscape over the next 5 years. As a result, this survey has been carried out to help identify the business and technological challenges facing private sector law firms.

Tim Long is chief executive officer of Zylpha,