The new reality

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By Legal Futures

7 June 2010


Dominic Cullis, chairman of the Legal Software Suppliers Association, considers what alternative business structures mean for high street firms that want to retain their current model and the role IT has in the new legal landscape

The happyl client: firms are having to adopt a client-centric approach

With alternative business structures (ABSs) due to come into effect from October 2011, change is in the air for the UK legal services sector. They are already attracting attention from outside the industry, as ABSs will allow much wider options in how lawyers and non-lawyers can share the management and control of a business which provides reserved legal services to the public.

Firms which decide to take this route and accept third-party investment (or are indeed purchased), will no doubt face a number of new challenges. But what about traditional high street firms that simply want to retain their current model? Will the arrival of ABSs have any effect on them?

A “client-centric” approach

The ethos behind these changes to the Legal Services Act is to put the consumer at the centre of the legal services market. As a result, traditional law firms are already looking at new ways of adopting a more “client-centric” model in order to compete with new – and potentially larger – players entering the market.

However, even though some firms have made progress in this area, many traditional high street practices have been slow to embrace areas such as marketing and contact relationship management, although these changes to the Legal Services Act may now encourage them to take action in this regard.

“The Legal Services Act is changing the way many lawyers do business,” says Catherine Bailey, head of marketing at IRIS Legal Solutions, a legal software supplier and member of the LSSA. “Given that the whole ethos surrounding the Legal Services Act is to put the consumer at the heart of the operation, there is no doubt that we will see an industry-wide move towards more ‘client-centric’ operations.”

A changing market

As part of this shift to a more client-focused approach, many firms are feeling pressured to offer ever-greater service for ever-lower fees. As a result, industry analysts have begun to ponder whether the kind of customer ‘self-service’ that has permeated the financial services sector will come to the legal market as well.

“Brutally put, once some of the larger players enter the market, traditional law firms will be asked to deliver more for less, and so it’s fair to say that ‘self-service’, at least to some degree, will be an essential strategy to win business and manage cost,” according to Catherine Bailey. “The Legal Services Commission’s schemes will continue to drive the market towards value-based pricing, which means that there will be a commercial need to use technology to automate as much of the legal process as possible in order to preserve margins. Automated case, practice and chambers management systems will therefore be essential for legal services providers, with web-enabled solutions and other products that allow remote access likely to be the most sought after.”

In the UK, however, clients have been very slow in obtaining legal advice via media such as the Internet, according to Mark Garnish, business development director at TikitTFB, another LSSA member and legal software supplier.

“Although this ideology is beginning to change, any legal ABSS who wants to do business via any form of ‘self-service’ (whether that be over the Internet or via touch screens in a shop), will have to gain consumer confidence in the first instance,” he says. “In order for this shift to gain any real momentum, however, a large and trusted corporate would probably need to pave the way for such services.”

Legal services enter the mainstream

One of the largest changes that ABSS will bring is the availability of legal services from a wider ‘point of purchase’, such as inside a supermarket. Legal services from providers like these are more likely to be available out of office hours, and therefore perceived as offering greater convenience for consumers.

“Traditional high street firms will definitely need to adapt to a whole new generation of open-all-hours legal services,” says Mark Garnish. “However, provided they look carefully at their practices and can develop and promote their own specialised services, they can still thrive. This shake up will be radical, yes, but I am confident that law firms will adapt.”

One of the most ubiquitous media buzzwords surrounding ABSs relates to the arrival of “Tesco Law”, a term sparked by the possibility that a prominent law firm could, indeed, be bought by the likes of Tesco. Clearly, this would raise some operational – and technological – challenges for Tesco, but what about for the firm being purchased, as well as for the developers of legal software?

“Certainly an organisation such as Tesco would look long and hard at the sort of software being used to manage caseloads,” says Darren Gower, marketing manager at Eclipse Legal, another LSSA member. “They will want to see flexible systems that can be managed and tailored ‘on the fly’ without the need for specialist knowledge of niche technologies and systems. As such, case and matter management software that has a good track record of being used in commercial organisations, not just law firms, would probably have a distinct advantage in that regard.”

“In actual fact, if a huge conglomerate such as Tesco was to enter into this market, it is likely that its IT department would write its own bespoke system,” Mark Garnish adds. “However, as this would be a huge undertaking, it is also very likely that it would look to some outside assistance from suppliers who currently write such systems for extremely large global legal practices, taking into account the myriad of multi-discipline and multi-regulatory requirements which would need to be considered.”

An “end-to-end” service

With the arrival of ABSs, most industry analysts are expecting to see a rise in complete ‘end-to-end’ services for consumers, whereby law firms partner with accountants, insurers, and banks in order to provide a single seamless service for their customers. As a result, law firms will not only need the ability to interface quickly with one another, but also with anyone else in the value chain.

“Clients will increasingly expect, and to a certain extent demand, a complete end-to-end service in which firms and chambers form partnerships with players such as accountants, insurers, banks and other retail brands,” says IRIS Legal’s Catherine Bailey. “It therefore follows that staff will need the ability to access real-time data instantly from anywhere in the world.”

Although technology can certainly support these developments, there may well be questions as to potential conflicts of interest. Already, concerns have been expressed with regard to the relaxation of the rules which could allow ownership of law firms to fall into less desirable hands, a worrying prospect which has been dubbed ‘Maxwell Law’.

Even more worrying would be a situation in which a commercial ABSs puts pressure on the Head of Legal Practice to consider the business’s interests as much as (or even above) the client’s, according to Mark Garnish.

“For example, an ABS formed with a bank may be under pressure to sell financial services to a client where a financial settlement is reached through the legal action,” he explains. “To address potential conflicts like these, tight regulation will be essential, but it is already understood that an ABS could be refused on grounds of an adverse impact on access to justice.”

Legal software changes with the times

Because ABSS legislation will allow greater competition in service delivery and new ways of meeting consumer demand for legal services, traditional law firms will need to take action in order to stand out in this competitive new market.

“New players in this market will expect to see efficient, customisable case and matter management systems, and they will not expect these elements to be bolt-ons or after-thoughts,” says Darren Gower from Eclipse Legal. “As a result, the focus may well shift from simply counting beans (traditional legal accounts software) to making more beans (fully integrated case/matter management systems). In any case, I think there will be a greater emphasis on ‘front-end’ benefits for staff and fee-earners. The days of hard to learn, inflexible, and difficult to use systems will rapidly come to an end.”

As a result of changes like these, many feel that traditional law firms will need to get their houses in order to compete with ABSs. After all, the new breed of ABS law firm will be, by its very nature, marketing and IT savvy. A more commercial approach will therefore need to be taken, and technology will be one key area where changes will need to be made. According to Darren Gower, a serious focus on both service delivery and cost-cutting will be essential as competition heats up.

“Traditional law firms will clearly need to embrace more automation and ‘trim the fat’ from their work processes, but they will also need to consider services like online case tracking and text messaging to keep clients informed and make them feel valued,” he says.

Facing the future

As with any service industry, it will always be necessary for firms to review and consider their services regularly, and to pay attention to what their competitors are doing. The difference with ABSs, however, is that the competition may not necessarily be local.

Purely legal practices, such as the traditional high street solicitor, will therefore need to promote their ability to offer a highly personalised, traditional service that can only be obtained from a long-established practice whose solicitors and fee-earners are all fully trained lawyers.

“Firms need to reinforce this message, and to make it very clear that they can offer their clients a full service option,” says Mark Garnish. “Although many firms already do this already, others may get caught out if they allow themselves to be complacent in this regard.”

“In this changing market, Chambers and law firms will need to work collaboratively if they are to reduce clients’ costs whilst still retaining high levels of client care,” adds IRIS Legal’s Catherine Bailey. “They will need to optimise the value of their services and possibly look to include value-added content where appropriate in order to enrich the client experience. Finally they will need to track and monitor their clients’ behaviour in order to build an accurate profile of their behaviour and needs. Harnessing these profiles will then give them the ability to market other services that might be appropriate to that particular client. This kind of pro-active marketing will be essential for building new revenue streams and retaining loyal clients in what is likely to be a very competitive marketplace.”

To learn more about the Legal Software Suppliers Association, go to www.lssa.co.uk



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