Standby for reboot

The challenges of operating in a recession are tough, especially for smaller firms, but the potential challenges of the Legal Services Act may prove to be tougher. There have been many articles written on the likely outcomes of the Act. Most of these describe the landscape of high street law firms and how larger non-legal enterprises will be able to muscle in on their patch. The common reasons cited for this possible future are: brand awareness, media exposure, IT capability and retail purchasing power.

The IT side of this argument is for me the most pertinent; while technology has provided firms with efficiency gains for a long time, there has never been an event such as this to provide the motivation for all firms to review their technology.

For several years the average IT spend in law firms has hovered around four to five per cent of turnover. For larger firms, this figure has traditionally bought economies of scale, and thus more technology per user. As you travel down the size ranks, firms get less bang for their buck. The high street lawyer has traditionally been doubly disadvantaged, lagging both in per fee-earner spending power and in terms of value for money.

The reasonable expectation might be that, if major retailers enter the legal services arena, they will use their spending power to produce technological advantage, thus providing services at lower (possibly fixed) cost allowing them to gain market share. The upshot is that the incumbent service providers will need to lower their costs to compete.

There may be some changes in the way technology is developed for law firms,

especially the smaller practices. To compete with the larger brands, smaller firms may have to deliver more of their services online. The lawyer can then simply check through a document submission and email clients with the changes. This reduces the interaction between lawyer and client, and thus potentially reduces the cost.

This would mean legal software developers have to adopt more Web 2.0 technology techniques and incorporate them into their software offerings. Good software does not do all the work though. Lawyers have to put the hours in to make sure the software reflects what they do.

All law firms make use of IT to improve their efficiency in one way or another '“ even if, in some instances, it is simply using Microsoft Word rather than a typewriter and sending emails rather than letters. So, the pre-requisites for further efficiency gains '“ predominantly, owing a computer and, for all but the smallest practices, having some sort of computer network '“ are already in place.

Where firms use practice management and case management systems, leveraging the workflow element of these can bring greater efficiency. Closer tie-ins with document management and contacts information will help to speed up internal processes and provide better quality information to clients.

Document automation is also an important consideration. This can take the form of off-the-shelf applications through to leveraging the power of Microsoft Office to automate your own specific documents.

Out and about

Home working can be a key contributor to improved efficiency. Improvements in technology have enabled more people to work at home, with improved communication, better software delivery and greater security all playing a part. There are now a handful of firms where the staff mostly, if not wholly, work from home. This can significantly reduce overhead costs, not only in terms of accommodation cost saving but also from using staff from areas with lower pay rates.

Home working also has the potential for firms to offer clients more flexible working hours. Some see this as a crucial component in the anticipated fight against big retail law services and their ability to apply more resources for longer hours.

Outsourcing and cloud technology can also help a firm reduce its infrastructure costs, while allowing them to leverage more IT. Outsourcing is a topic that can mesmerise law firms, but the reality is that you can outsource some functions simply and quickly and gain from that rather than worrying about outsourcing everything and fearing a loss of control.

Cloud computing can give firms access to products on a rental basis that they may not have been able to afford previously. For example, you can now rent digital dictation software and outsource the output to a transcription service. You therefore get the best software with the most flexible transcription facility, all without adding anything to staffing or software costs.

Start now

The Legal Services Act will require law firms to look carefully at the way they use technology and see what more they can do to improve their service. Those that do not are likely to be swallowed up by an increasingly technological delivery of services from competitors.

It is not all doom and gloom though; those firms that want to meet the challenge head on need to start investing now. Firms that reinvent themselves as efficient technology-driven, consumer-friendly practices should be in a position to more than match the challenges presented by the Act.