SME law firms are falling behind in their use of technology by failing to invest, jeopardising their business, a new report says.
The report, 'The Race to Evolve,' finds that despite advising increasingly tech-saavy clients, 81 per cent of independent law firms spend less than 10 per cent of their turnover on legal tools and 58 per cent of firms spend less than five per cent. The failure to invest in technology, despite agreeing that active use of legal processes, tools and technologies are drivers of efficiency and 92 per cent of lawyers asserting that continued investment in technology is no longer optional, indicates that SME law firms are falling behind in the race to survive. They are also ignoring clients who value efficiency as one of the key ways lawyers can enhance their offerings.
The report revealed that most lawyers who use legal tools agree they make a difference - with well over half stressing that the contribution is significant. Nearly one in three (30 per cent) of non-users agree that investing in legal tools would significantly increase their efficiency. However, 49 per cent of lawyers consider their law firm’s efficiency to be average, with 36 per cent rating their firm’s efficiency to be above average, suggesting that they do not see the need to make immediate changes in this area. The report proposes a holding pattern has emerged, whereby firms have identified the changes necessary to improve efficiency but have not yet made the leap from words to action.
Ratings were mixed as to which activities lawyers considered the most important drivers of efficiency in their law firms, but “not dabbling outside your practice area” emerged as the frontrunner (41 per cent) – higher even than investing in new technology (17 per cent). Ninty five per cent refer enquiries outside their firm’s specialism to other firms. Given that 75 per cent of firms are actively involved in generating new business, the report suggests that investing in the right tools and processes may give more firms the opportunity, resources, skills and procedures, to start accepting more of the potential business that comes directly to the door.
'Law firms must align their working practices with that of their increasingly tech-savvy and informed client base,' commented Jon Whittle, market development director at LexisNexis. 'One of the problems is getting lawyers to take a long term view. While their firms may be thriving now, if they don’t take a commercially savvy, customer-centric, progressive view of the business and invest in solutions that drive efficiency today, this will not be in the case in five years.' He went on to say that clients noticed which firms were outpacing on investment. ' While it seems many law firms understand where the gaps are, there is a push and pull phenomenon between traditional and modern working practices, and a disconnect between words and action. Ultimately, while many lawyers are still charging by the hour they are not understanding the value of their time – and this needs to change.'
The Bellwether Report 2017 by LexisNexis is the fifth annual report in the series and explores the current and future state of the legal landscape from the point of view of independent law firms.