A large majority of law firms think that, over the next five years, “innovation in providing legal services will be paramount” as they reach the limit of cost-cutting measures, a survey has found.
Some 78% strongly agreed with the statement, with most of the rest agreeing, the survey by legal process automation company Zylpha discovered.
Researchers said law firms could only reduce their administrative costs by “so much” and needed to look beyond short-term cost reduction measures.
Instead, they should consider “innovative sourcing and procurement techniques”, strategic human resource management and “an overall modern attitude” towards technology and business practices.
“These tactics would provide firms with the capability to build flexibility and agility into the business, rather than undertaking ad-hoc reactions such as headcount reductions and hastily conceived business alliances.
“Such methods do not necessarily address deep-rooted business problems triggered by the commercial climate.”
The Legal Landscape in 2015 considered the views of 150 managing partners and IT directors at the top 200 law firms. It found widespread agreement that in the coming years alternative business structures will challenge how law firms deliver services, making improving client service a major consideration for them.
There was also majority support for the statements that clients will choose law firms based on brand trust, while a significant amount of business will be satisfied using DIY/online legal services – most firms saw new technology as a key element of their survival.
Asked about current priorities, firms ranked controlling operating costs and profitability (89%) above marketing and gaining new clients (75%).
“For many legal practices, operating costs remain the top concern for 2015,” researchers said. “Whilst profit margins lie well above the average of other key industries, there appears to be a growing concern about the increase in ‘non-core costs’ which are impacting on the bottom line.”
Only 20% of firms thought quality and availability of graduates was very important to their practice and even fewer believed the same about mergers or being acquired by another firm.
Law firms were not very positive about their case management software (CMS), with only 38% saying they were using it as efficiently as possible.
When asked what would improve their CMS over the next five years, just over half said integration with other software, followed by improved reporting and integration with online services.
A total of 35% cited simpler operation, followed by better mobile or tablet applications, and client access.
Tim Long, chief executive of Zylpha, said: “There are many reasons to be optimistic about the profession. Profit margins are still relatively high and look healthier when compared with alternative industries.
“It does seem from our figures that technology can be used to drive down costs, boost profitability and support business development. Whether we address these changes and opportunities head on, or wait until the last minute, the sector we once knew is gone, and a new more innovative legal landscape is here.”