Mergers and acquisitions in the legal sector ramped up significantly in 2017. Between January and April alone more than 35 deals involving US and UK law firms were announced, the largest being the merger of CMS UK, Nabarro and Olswang. At a regional level, deals involving UK regional law firms were up 27% in the first half of the year, compared to the same period in 2016.
It’s a trend that’s set to continue. Top 100 law firm, Gordon Dadds, has clearly stated its ambition to continue on the acquisition warpath by becoming a “major consolidator” of both top 200 law firms and smaller practices. Demonstrating that law firms, both big and small, are forming alliances to stay relevant and remain competitive in a traditional sector that has yet to embrace the pace of technological change. As the Financial Times points out, “leading firms seek to avoid being squeezed between bigger and more powerful players and smaller, technology-focused innovators.”
Of course, acquisition is not just about technology. With firms feeling pressure from corporate clients (who are increasingly sending more of their legal work to fewer law firms in exchange for lower prices), consolidating with rivals means less competition and potentially a bigger slice of the pie. But with things set to change further in 2018, law firms face bigger challenges than the cultural and physical integration of once separate workforces.
Data, for example, is a particularly prevalent issue. Much like the wider trend seen across all business industries, digital transformation is now pervading the legal sector. Which, despite its traditional roots, has not been able to remain completely immune to emerging technology to support business practices.
Getting IT right is critical
In part this increased reliance on technology is because the core asset of every law firm is data. If data becomes corrupt and can’t be recovered quickly, firms risk losing clients’ trust, their firms’ reputation, as well as billing opportunities, and of course regulatory compliance issues. It means that IT teams in the sector have more of a spotlight on their work, and have been busy assessing and deploying technologies such as virtual machines (VMs), increasing security policies and technologies, while no doubt using cloud computing-based services, and leveraging data centres to improve their service delivery to internal stakeholders, and ultimately safeguard the firm’s prized possession, data.
The issue is that against the backdrop of mass law firm consolidation, integrating the data and critical IT systems of previously disparate companies is no mean feat. And, the potential dangers of getting it wrong are costly in more ways than you might think.
One hour of downtime a month costs the average law firm £45,000 in lost billing over the course of a year (based on 25 lawyers billing at £150 per hour). When law firms merge, the volume of owned data increases enormously, meaning fast, efficient migration is a must. Critical VMs running key applications like the mail client Microsoft Exchange, bespoke apps for the legal industry or even custom apps for the firm itself, dictation tools, customer relationship management software and document management software must all be seamlessly combined from different sources, with no impact on revenue and uptime.
Therefore, there’s more to legal M&A and consolidation than meets the eye. Even the most sedentary or cumbersome firm relies on technology to conduct business. So, when it comes to tech consolidation, reliable backup and fast recovery serve as the backbone of the process. Without a marker for what once was, you cannot even attempt to risk live data systems.
Meanwhile storage must be agnostic to software and file systems, and of course, easy to integrate. Advanced monitoring, reporting and capacity planning are critical tools to aid the IT teams’ visibility into a new firm’s legacy infrastructure, be it on-premises, virtual or in the cloud, and their ability to identify and resolve issues before they impact users and the business. Finally, tech consolidation in the legal sector must be underpinned by a solid availability strategy that supports 24/7 operations – it sounds obvious, but making sure data is available when it is required is not an expectation that all businesses can deliver.
Changing times for legal tech
Despite its importance and popularity, mergers and acquisitions are by no means the only reason for law firms to get their IT houses in order. According to a report published by business advisory service BDO, the global legal profession is facing a period of unprecedented change, with technology set to have a huge impact on law firms over the next five years. As firms vie for competitive advantage, seek to engage better with the customers and create workplace efficiencies, technology has been touted as the solution.
Concerningly for some, a Deloitte report in 2016 predicts that around 114,000 jobs in the legal sector are likely to become automated over the next two decades. As software capable of executing more traditional, routine tasks leads to self-learning algorithms replacing human input, and driving efficiencies and cost savings in delivering legal services. However, this should not be a point of concern – shipping out menial tasks allows IT staff to focus on more strategic and meaningful projects, that better engage a firm’s leadership and show return on investment in IT projects. The good news here is that BDO’s recent findings suggest that 94% of law firm leaders consider technology to be strategic priority with significant investment expected in the area.
Technologies getting hyped up such as AI, automation and virtual assistants may eventually become the de-facto norm in law firms in the future. Right now, a foundation layer of availability is needed to ensure that data is protected and managed to consistently high standards. Without this, new technologies cannot be adopted and the exponential growth of data anticipated cannot be managed.
Regardless of whether your business is likely to be merged or acquired, availability is an IT strategy that can equip the legal sector for years to come, and deliver innovation and growth. Getting it right now, will prepare your law firm for tomorrow.
By Mark Adams, regional VP, UK&I, Veeam
This article first appeared in our February newsletter. To sign up for your free copy click here: https://legaltechnology.com//latest-newsletter/