David McNamara, managing director of Legal Futures Associate offers his reflections on 2011 and his predictions for 2012.
Software supplier consolidation has proved more beneficial than expected for independent providers
During the past year, many of the new software contracts awarded by law firms can clearly be attributed to the impact the consolidation of software suppliers is continuing to have on the profession. For a good many firms, this has meant their incumbent software, under new ownership, is no longer being developed and therefore they have been falling further and further behind in terms of the software functionality needed to drive their businesses forward.
The timing of course could not have been worse; firstly the recession and now the ever-nearer impact of the new world of alternative business structures (ABSs) meant that, at a time when firms needed to implement innovative new services, best practice, and more efficient processes and procedures, their existing software systems were just not up to the task.
Many predicted it would be the end of the independent legal software supplier; conversely however, it has been the independent vendors that have proved by far the most effective and successful in responding to the needs of the profession, best helping law firms gear up for the new legal landscape and gaining significant market share in the process.
Law firms will benefit enormously from having a close working and strategic-level partnership with their software supplier and it is clearly the independent vendors that are demonstrating they are able to deliver this in a way that the largest vendors are simply unable to achieve.
Rise in demand seen for improvements across the entire firm rather than just departmentally
Over the last two years, another strong trend has been the focus on business process management (BPM), which is replacing pure case management and accounts (or front and back office) projects. SOS implementations have increasingly seen our workflow consultants working very closely with firms to map out and improve their entire operational activities.
Having all their processes mapped out into Visio diagrams is very beneficial when it comes to demonstrating risk in relation to professional indemnity insurance renewals.
Matter management systems (basically case management but without high levels of automation) have also proved invaluable to the commercial and litigation teams within law firms, enabling a level of uniformity, compliance, and efficiency (particularly with regards to maintaining the electronic file) that has previously eluded them.
New business models for law firms will reduce overheads further
With the imminent arrival of ABSs, law firms will undoubtedly continue to seek efficiency and productivity gains throughout next year. Whilst established law firms have traditionally operated with a very high cost-base (high ratio of support staff, expensive city centre premises etc), a new breed of law firm is emerging that is using IT extensively to reduce the support staff/fee-earner ratio and that is swapping city locations for more economical ‘out-of-town’ premises.
Some are even operating without traditional offices at all, instead opting for a modest admin/support office with all fee-earners working from home.
We will also see further take-up of several new business models that were launched during the last year, including QualitySolicitors, Lawyers2you and face2face solicitors. Franchise business models are in fact extremely well suited to the new legal landscape.
Firstly, they enable smaller businesses to compete against national brands in a way that would simply be impossible for an individually-branded firm. Secondly, they enable much of the cost overhead to be removed by delivering extremely efficient systems, processes and compliance that have been developed over many months, that a franchise business can simply ‘plug into’ rather than have to re-create themselves.
More online legal services level the playing field
Many new ABS entrants will be focusing on the delivery of legal services over the web and law firms will also need to be able to operate this way should they wish to compete, particularly in the ‘commoditised’ arena. Neither is it likely that these online services will just apply to private client work, with small-to-medium-sized businesses being the target of these online ABSs also.
However, whilst few law firms will have the marketing budgets of the bigger ABS players, through the effective use of comparable technology, all law firms – both existing and new – have the potential to compete and differentiate.
Choosier clients will increase demand for CRM within firms
As it becomes easier to make service and price comparisons online, clients are likely to become even more selective when choosing a solicitor. Clients have the potential to become less loyal because it is easier to shop around and law firms can no longer rely on repeat business as a matter of course.
The progressive law firm will define and decide what it does well, communicate that to the market and develop client relationships with proactive cross-selling of additional services to nurture and build long-term relationships – just like any other modern business. And like any other business, they will need modern tools and business methods such as customer relationship management systems to help them know their clients well.