Associate editor Caroline Hill reports…The attitudes of law firms and their clients towards technology and new legal service models are significantly out of kilter, concludes an extensive new legal market report out today (3 March), which also finds that over a quarter of in-house legal teams still have no technology budget.

The Winmark Looking Glass Report 2015 – produced in partnership with Mayer Brown and Thomson Reuters and based on interviews with 160 managing partners and other partners, and 122 leading general counsel – found that technology was cited by clients as a top 10 factor for starting and retaining a legal business relationship. However, it did not feature at all in the top 10 list compiled from law firms’ answers.

While many in-house legal teams continue to gain internal recognition and investment, with the Winmark report finding that the top 10% of in-house teams now have a technology budget of £200,000 per annum or more, over a quarter still have no technology budget at all.

Nonetheless, law firms, of which 47% had a technology budget of at least £1m, are often not taking sufficient steps to use that technology to help their clients. Speaking on the panel at the launch of the Winmark Report, Chris Fowler, general counsel for UK commercial legal services at BT, said: “If law firms can take technology and harness it, it can be a game changer.”

Elsewhere, the report found that 44% of in-house lawyers would consider giving work to virtual law firms, while only 10% of law firms said they see virtual firms as a major threat.

However, a significant 58% of law firms said they expect technology and innovation to result in medium-to-high levels of replacement of their services by other suppliers.

The findings come as the report highlighted that it is harder than ever for law firms to differentiate themselves from their competitors. Only 19% of in-house lawyers said their advisers can be clearly distinguished from each other. In this their views are not far from law firms themselves, where only 24% believe they are deeply differentiated from their competitors.

Samantha Steer, head of strategy, large law segment UK&I, Thomson Reuters, said: “The research shows there are clear differences in expectations between in-house counsel and large law firms and this is noticeable when it comes to areas such as technology. In-house counsel view the use of technology as one of the top factors influencing their decision to instruct a new firm, yet law firms do not see it as an influential factor at all.”