One of the many striking oddities of law as a business is that because lawyers bill by the hour, the entire legal industry is powered by a disincentive to be efficient. The longer something takes, the more money lawyers make. Imagine owning a vineyard and increasing your income when the harvest is late or profiting because your automotive assembly line can only manufacture a hundred vehicles a day instead of a thousand.
Welcome to the industry of law, where revenue is based on inputs rather than outputs. The industry’s cost-plus model guarantees a profit at the expense of clients. For decades, this model has worked while firms tinkered with technology around the edges, stuck to traditional methods and prospered. And clients paid for it all without question.
The last 10 years have demonstrated that for a lot of firms, this practice is definitely over. One place this is playing out is legal IT, where there is an enormous disconnect between what the market needs and what law firms have. Several patterns are emerging.
In the past, thanks to the efficiency disincentive, legal IT mostly focused on back-office processes. There are lots of software packages out there for filing, time recording, billing and HR processes like performance management. These technologies help reduce back-office costs, and firms, especially big ones, have jumped in with both feet.
Legal tech has not focused on providing the same efficiency to the actual practice of law, however. Firms have yet to invest much in legal process automation like case management. Some high-volume low-complexity practices such as conveyancing, leasing and debt recovery have improved with narrowly built automation software, but the complex and most profitable legal work has not benefited from automation.
However, while law firms have been happily looking the other way when it comes to technology, their clients are paying attention. Pushed to the wall by ever-increasing hourly rates and pressure to decrease legal spend, they are demanding transparency, demonstrated efficiency and predictability. Firms struggle to deliver because their compensation models actively discourage it. Therefore, in-house counsel and corporate legal departments have been voting with their feet and exploring their own automation platforms.
Traditional legal software, designed for the law firms of the past, is almost always built on outdated but ubiquitous 1980s client/server technology. These elderly platforms have several major deficiencies: huge cost, enormous complexity and the need for an army of fickle IT specialists to run them.
The solution — whether attorneys are ready to embrace it or not — is in the cloud. We know, old habits die hard. In so many other industries, cloud solutions have become standard and especially for smaller businesses which cannot afford their own IT departments. A few years back the major legal tech vendors asked their law firm clients about their appetite for cloud solutions. The response from their biggest, most profitable legal customers was a resounding “no” because of concerns with security and control.
What the legal tech vendors should have done is dug a little deeper and asked, “Why not?” In other words, queried their customers along the lines of “What are the barriers to deploying new technologies?” Everyone would have answered “spinning up and maintaining servers and applying software upgrades.” The answer to these challenges, of course, is the cloud.
A handful of legal tech vendors had the foresight to develop solutions that were only ever meant to be cloud-based. There are platforms today — like Salesforce – that vendors are using to develop integrated apps to help law firms and legal departments finally apply automation to more complex legal work. And while Salesforce is traditionally known as a customer relationship management platform, its AppExchange includes thousands of applications built for specific processes and industries — like legal — that are cloud-based and come with the security Salesforce is known for.
Finally, few legal CIOs are saying no to the cloud today. The market is ripe for cloud-based case management technology that will deliver more cost-effective and higher-quality legal services. If law firms don’t invest in these emerging platforms, their clients will.