In the first of three comment pieces on the impact of the current economic climate in the UK, Legal IT Insider speaks to law firm IT heads and legal technology consultants about whether budgets and projects are being – or will be – cut.
With the UK economy in turmoil, many in the legal tech market have been wondering what that means for budget season, given that law firms are traditionally quick – we would argue too quick – to cut IT costs. Speaking to some of the most senior figures in the industry, the current picture is mixed. UK legal IT law firm heads unanimously strike a welcome note of optimism in telling Legal IT Insider that they are yet to feel the impact of the prevailing economic uncertainty, and have not been asked to cut budgets or projects. However, strategic advisers warn us that behind the scenes, the C-Suite at some law firms already look set to delay planned technology investments.
At UK top 100 law firm Keystone Law, director of technology and innovation, Maurice Tunney, is reassuringly upbeat, commenting: “We’re in budget season and there is no indication that anything is going to be different. We’re all far more technology led now so will continue to make sensible technology investments.”
Andy Beech, IT director at Farrer & Co, who was made a partner at the UK top 60 firm in May, added: “The demand that we have on our technology is continuing and projects are moving forward. We are hoping that will continue at the same rate as over the past year.”
And at magic circle giant Linklaters, chief technology officer Bruna Pellicci told us: “We’re obviously watching the economic situation closely but would recognise that investment in innovation and technology can be one of the drivers of more efficient and cost-effective delivery for our firm and for our clients.”
The legacy of the pandemic has certainly helped to ensure that technology remains high on most firms’ list of priorities, and IT heads are optimistic that management are unlikely to make any knee jerk decisions when it comes to continued investment.
Strategic technology adviser and interim CIO, Chris White who has held CIO or interim CIO roles at HFW, Clyde & Co, Kennedys and Ashurst, said: “Firms now have a better understanding of the value that technology can deliver,” adding, “I remember when IT was a necessary evil, whereas most firms understand that were it not for technology, they would not have survived the pandemic, and the firms that have invested more in terms of modernising their estate have had a far easier ride.”
There is no question that investing in technology gives firms the opportunity to be more efficient, and White said: “If they continue to invest it could give them a competitive edge. I remember in 2008 when a lot of banks were on the brink and there were a few law firms during that time that innovated and continued to invest, and they reaped the benefits. It’s not just about running innovation initiatives but being very targeted and focussed on and working out what the returns are going to be.”
Much is going to turn on how the economy fares in 2023, and Tunney said: “If the recession gets worse, then everyone will need to take stock and make sensible business decisions.”
Beech agrees, commenting: “If the recession gets worse, people might have to pause projects or reprioritise.”
However, Justin North, founder of Janders Dean and now partner at the independent strategic advisory firm Pickering Pearce, warns that delays are inevitable, commenting: “Contraction will come in waves. Large investments that are not seen as essential will be delayed. New tools, planned upgrades, even cloud migrations, will be kicked six to 12 months down the road during the budget cycle as firms redefine what is essential versus what is nice to have. Management will be pressured to hold on to cash in anticipation of revenue and profit dips that may or may not come. We are seeing nervous conversations between the CFO and CIO already.”
Janet Day, the former director of technology and infrastructure services at BCLP, turned independent consultant, says that she is specifically already seeing firms’ appetite for migrating their practice management system to the cloud reducing, and she observes: “From the firms I’m speaking to, people are starting to hold back from expenditure rather than cancel projects. They are extending projects that haven’t started and that are in the ‘nice to have’ but not essential camp.” Day agrees that what happens in the Spring will be key, commenting: “If in the Spring there is a big recession, it will impact on budgets, but one might hope that the market stabilises.”
While North anticipates that IT headcount will be relatively safe post Covid, ‘innovation’ roles are less safe, he says, commenting: “If you have innovation or legal ops in your job title, and you’re searching around for projects internally, or your value proposition can’t be clearly articulated by those you’re serving, I think you’re in a very dangerous position.”
North says: “Firms can be very short termist in an economic crisis. Reducing operating costs by cutting projects and staff and increasing revenue through a hardline focus on lawyer utilisation, are the first two reactionary steps typically taken. When the market gets tough and all eyes are on performance, lawyers are rarely up for involving themselves in innovation initiatives that could be seen as eating into their billable hours in the short term, even if it may result in greater profits in the long term.
“Firms talk about innovation when times are good and kill it off when times are bad, which is why there isn’t as much overall progress as there should be.”
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