By Andrea Foot, director of Leaf Logic
Ask any technology consultant worth their salt about IT direction for any business and they will typically reply with a cloud-first strategy. They will cite any number of reasons to support their opinion, usually including that cloud technologies are:
- Mobility and accessibility
- Continually developing offerings
The legal technology landscape is abuzz with cloud-based offerings. Investors are pouring money into this underdeveloped sector, putting in more than a billion US dollars in just nine months in 2021. Hell, legal tech investment even made it to the Financial Times in their recent article titled – ‘Why are investors pouring money into legal technology?’ (https://www.ft.com/content/b6f0796e-0265-40c6-ad4c-a900cd788c39).
Consider, then, a most significant chunk of mission-critical legal technology that all law firms have – Practice Management Systems (PMS). PMS offer the software backbone that carries legal businesses’ financial, client and reporting data. What does the cloud-based landscape look like for this slice of a law firm’s technology stack?
If you’re a firm of fewer than 25 people, you have a swathe of Software-as-a-Service (SAAS) cloud choices open to you, regardless of which continent upon which you practice. To break this down a little further, you will find that systems like Leap, Clio and Smokeball, which are:
- designed for your size of firm, with one-stop-shop features and smart integrations
- built by businesses with the investment clout to make the technology for this market segment accessible and who also have the money to continue to invest in their product sets
- international presence
- designed to fit your small firm, with no/low service implementation costs and with an ecosystem of consulting partners who can help you with the transition/ongoing use of the systems
If you’re a firm of 500+ people, you have the budget, expertise and resources to do your own thing, along with an innovation strategy focused on your clients and your work. This opens the door to the large law firm tier of PMS:
- Thomson Reuters (TR) Elite, Aderant and, if you’re feeling flush with a high tolerance for expensive technology projects, SAP
- These firms can afford to build their own cloud platforms and host them somewhere secure
So how does the PMS landscape look for the mid-tier law firm with between 25 to 500 people? The view here is quite different, with the segment populated by legacy PMS. These systems, almost universally, have the following characteristics:
- built by small tech companies in late 1900s and early 2000’s
- have evolved over time to meet mid-tier law firm’s changing needs
- SQL/Oracle/relational databases
- Server based
- they meet the pettifogging but existential needs of the local legal accounts rules in their region
The big thing about mid-tier PMS is that they provide a ‘one-stop-shop’ system to firms who need all the usual law firm functionality – legal accounting, firm financials, document management, case management, reporting, maybe even a bit of marketing – in one handy package. The vendors tended to be companies with a history of providing PMS for many years and perhaps their clients are on their second or third generation of offering from them. In this tier, the technology’s extensibility is limited because of underlying proprietary design. If one is lucky, your vendor may have come up with a limited set of integrations, perhaps even application programming interfaces (API).
In the past two decades there has been substantial consolidation amongst the mid-tier PMS vendors. Acquisition models sprang up, hoovering up PMS vendors and handily providing retirement options (and an Aston Martin or two) for the owners of these businesses.
The theory of vendor consolidation makes great sense in this relatively tiny corner of the technology industry. In theory an acquirer will accumulate several mid-tier PMS vendors, pick the best one and migrate the cheerfully compliant users onto the chosen PMS in the stable resulting in cost reduction and client service efficiencies all round. In reality, having bought a basket of PMS, the decision is made to end of life the unfavourite PMS in our stable forcing the defunct PMS client base back out to market in a huff or, even more annoyingly, to cling to their ageing platform to spite their acquirer. But as to developing brand new SAAS PMS platforms, there has been very little apparent activity.
The result is that mid-tier firms around the globe are stuck on a shrinking pool of legacy platforms that are server based. At best, these are hosted off site, at worst they are grinding away on dusty servers in the firms IT room. These PMS have (over)delivered on their return on investment and are frustratingly complex and costly to migrate.
The pandemic dramatically brought a change that was glacially moving through the legal work system, that of supporting flexible working. Suddenly, secure, robust and reliable access to law firm technology became essential wherever one was working. Technology that needed bodgying up with things like Citrix to make it work over a couple of offices makes life hard when you’ve workforces that can be working anywhere, anytime whilst still having to service client demands.
Where are the heroes in this story, I hear you asking? We’ve seen Clio and ATI both drive investment to provide a range of legal technology solutions across the westernised legal world. Aderant and Elite have both had a go at ‘scaling down’ their big solutions for the mid-tier but being second best is never going to be good enough for a market with similar demands to any large firm but without the budget or resources to match.
What about the mighty Thomson Reuters and LexisNexis with their listed company budgets for innovation and development? Their appetites for growing a SAAS mid-tier PMS offering appear muted. For those of you that recall LexisNexis journey through LexisOne and TR’s attempts with Envision and ‘Elite in a Box’ they never made much headway.
What are the remaining mid-tier vendors doing? A tiny number have announced their ‘next generation’ cloud platforms. Some of these are more cloud-like than actual SAAS offerings. Some are hosted versions of their old server-based solutions. Some are a pricing-conceit, where the old lump sum investment has been converted into a monthly fee that we can call a subscription, so it must be like a cloud-version – amirite?
The problem is that building a nex-gen solution is expensive, complex, risky and difficult. It’s harder if you’re a small, self-funded legal technology business without deep pockets and with a demanding client base who need the current product to keep on evolving. Then migrating the buggers takes decades. Does anyone remember when 3E was launched? Elite has been trying to shift their last generation Enterprise clients over for well more than a decade.
Are you asking yourself, why does this matter? Well, it’s because there is a real need:
- mid-tier firms need flexible, robust and secure legal technology to ensure their safe and effective operation
- cloud-based technology is the de-facto standard for business technology
- hybrid workforces are now with us for good and technology has to be suited to this
Mid-tier PMS may not be sexy or cutting edge, but they are critical to the operation of these law firms. Who excites you in the mid-tier PMS vendor world? Who’s got a modest $50m or so of funding to build the brave new global mid-tier SAAS PMS, designed to integrate, be secure and cope with the gnarly vagaries of the local legal accounts rules that must be complied with? Does anybody care, especially anybody with global ambitions?
Perhaps one mom & pop legal tech vendor in each region will drag themselves into the century of SAAS and they will clean up. And just perhaps we will find a couple of big-minded investors willing to invest to change the game in this cloudless desert of legal technology.
Andrea has held senior roles at legal tech companies including Tikit (acquired by Advanced), Caseflow, and Axxia Systems (acquired by LexisNexis). She coaches leaders to help them grow their businesses and find better ways for them and their teams to work. Her work encompasses Boards, c-Suite leaders and business owners, especially in support of individual progression, senior role transition and organisational change.