2022 Legal Business Trends Report
Recovery and Growth: The role of technology in helping firms achieve their post-pandemic goals
Introduction
This paper summarises research conducted in 2021 on legal business trends, particularly in relation to technology.
We wanted to get a better understanding of business priorities, how companies use and value technology, and which issues are shaping how organisations plan to move forward. For answers, Advanced commissioned research among 1,078 senior decision makers within UK businesses that have more than 100 employees.
Of this total, 77 of our respondents worked in legal firms and were personally involved with the day-to-day charting of the organisation’s future. This paper details the responses from the legal sector, which were given between the 3rd and 17th September 2021, alongside some wider contextual commentary.
The areas of focus are:
- Business growth and technology
- Security and compliance
- Employee wellbeing, development, and retention
- Environmental sustainability
Business growth and technology
Across all the firms surveyed, our research revealed that business growth and development is the top area of focus for the next 12 months.
This is the priority cited by just under two thirds (65%) of our respondents, and just over half (51%) felt that increasing profit was a priority for the leadership of their firm.
This desire is likely driven by the fact that, in the wake of Brexit and COVID-19, turnover and gross value added (GVA) in the legal sector as a whole (solicitors, barristers and other legal sector providers) was down by around 10% in 2020. The Law Society does not expect a recovery to previous levels until the end of 2022. This is what our respondents are now focused on achieving in the short term.
In the longer term, there are bigger gains to be made. The Law Society forecasts that by 2028 turnover in the sector will exceed pre-pandemic levels by 14%. It’s interesting to note that despite this sustained increase in turnover, in the
same timeframe, headcount is only expected to grow by 3%.
It demonstrates the degree to which there’s an expectation that productivity growth (mainly enabled by technology) will continue as it did in the decade following the financial shocks of 2008. Between 2009 and 2018, the average number of people employed in the sector per enterprise fell, even as turnover and GVA increased.
Business growth and technology
In all this, what’s the link between business growth and technology? We found that less than a third (30%) of our respondents see technology as a top priority for their firm. This is possibly because tech isn’t really an objective, but rather a means to an end. And most of the time, the end goal of technology will be to support business growth. In recognition of this, our firms have said that among the important issues remote working highlighted for their firm in the past year, nearly half (44%) identified the need to improve the software they use, while only a quarter wanted fewer business apps.
The technologies in use
As to which technologies are valued, Oxford University surveyed 900 firms regulated by the Solicitors Regulation Authority and concluded that, largely because of COVID-19, there’s been a step-change in the adoption of legal technology in the sector.
More than half (51%) of their respondents increased the use of technology to manage or process work, 48% to interact with clients, and 26% to attract new clients. They found the five most prevalent types of technology in use were for videoconferencing with clients (87%), storing data in the cloud (66%), practice management software (62%), legal research software (50%), and e-verification/e-signature software (37%).
Business software
When we asked which technologies our firms relied on in 2021, and which were supporting business growth, 97% cited at least one type of business software that was helping them deliver. Of this total, fewer than the Oxford study said they relied on collaboration tools like Zoom and Microsoft Teams in daily working life (58%), but this was still the most used technology.
Meanwhile, 45% said they relied on real time reporting, 44% on business intelligence technology, followed by 36% on predictive analytics, and only marginally fewer (35%) on artificial intelligence (AI) e.g Siri, Alexa, or other smart assistants.
Almost a third of respondent firms use single sign-on systems (32%) and automation tools (31%) daily. Just under a quarter use carbon footprint tools (23%), with the same proportion using virtual assistants, including chatbots and predictive modelling. As stated, a negligible 3% use none of the above.
As to what these firms gain from the software they use at work, almost two in three see it as a tool that enables them to complete their job both effectively (61%) and remotely (58%). Matching this at 58% was collaboration. There is a dip when it comes to “the information I need to make the right decisions” as the key deliverable (45%). And over a third (38%) of respondents felt that a real-time view of the business was what the software gave them. Just under a quarter (23%) cited one unified system that minimises distractions as the key deliverable.
We asked if the speed of implementation of new technologies over the last 12 months had increased, decreased, or stayed the same. For the majority (68%) it increased, with 94% of this group saying this was due to more user-friendly technology. For 16%, the speed of implementation decreased. Meanwhile, only 3% didn’t roll out any new technology at all.
Takeaway:
What matters most when firms adopt new technology?
Our research identified that the ability to meet present needs is what’s perceived as the most important factor when adopting new technology. To that end, the ability to adapt to remote/hybrid working (48%) – which is key both to client service delivery and staff well-being and the need to measure performance (45%) were the two most important factors for our respondents.
In 2020, the capacity to adapt to remote working was already well-established. But in 2021 the interest in measuring performance has more than doubled from the 22% recorded 12 months earlier. We think this is related to a more acute focus on cost in the current climate, and the attendant increase in pressure it puts on getting a rapid ROI.
The next most important factor in the adoption of new technology was said to be cost and the ability to measure ROI (45%), followed closely by embedded security (44%), commitment from leadership (40%), and speed of implementation (39%). While the ability to integrate with legacy systems (35%) was seen as only slightly less important. This was only a little more important than change management, which was important to just under a third of adopters (29%). Efficient change management was of course a vital differentiator in the transition to
home working. Trust in suppliers mattered least of all, but still does to nearly a third (30%) of respondents.
There is also evidence that the impact of a technology depends on how established it is. When asked if a chatbot/virtual assistant would provide information faster that their boss, 53% of our respondents said yes, while 38% said no. This does seem to indicate a growing acceptance of AI.
In 2021, what factors inhibited the adoption of new technology?
Firms can undoubtedly benefit from using technology that introduces new capabilities (or improves existing ones). The Oxford study notes that legal technology is adopted to improve quality, efficiency, and flexibility. And that the top five purposes of legal technology are: to improve service quality (72% of total respondents), improve efficiency of workflows (71%), allow staff to work more flexibly (44%), reduce the overall cost of service delivery (33%), and increase security/compliance (22%). Yet several factors still inhibit adoption.
Our finding was that the biggest inhibitor was concern around cost or failure to deliver ROI – cited by a significant 52%, followed by making the wrong technology choices (42%), with the latter increasing from the 29% recorded in the previous year. These figures indicate the pressure that firms are feeling around cost, perhaps they need vendors to better explain how technology doesn’t have to be expensive or disruptive.
Staff productivity
There was also significant concern around the possibility that new technology wouldn’t integrate with legacy systems (44%), which might be an education or vendor support issue.
Our respondents were also thinking about their staff. Almost half of respondents (45%) said that disruption to staff productivity was a concern, followed by more than a third (40%) that felt a lack of skills, training, or enthusiasm among the workforce was suppressing their firm’s appetite for new technology. A lack of management buy-in was cited by 29%.
Of concern to software vendors, a poor or clunky interface was a worry for more than a fifth (22%) of respondents. Almost the same proportion registered concerns about the threat of cyber-attacks (19%) as a reason for not modernising systems with new technology – even though modern technology is much more resistant to cybercrime.
And despite the disinclination to invest in new technology for the above reasons, almost two thirds of respondents (60%) also admitted that their organisation’s existing technology was providing only limited support to remote working, an aspect which has become hugely important to service delivery.
We also asked about the overall organisational appetite for new technology. Our respondents judged it to be reasonably strong, with 53% and 49% respectively reporting that their people are keen to adopt new technology
and are open to learning about the benefits.
Conversely, 39% are concerned about change, and 30% felt that staff feel overwhelmed with existing technology or “want to work their own way” rather than adopting new technology. Technology vendors must, however, be concerned that almost a third (30%) are sceptical about the benefits of adopting new technology.
Takeaway:
The trouble with innovation
Despite, or maybe due to the turbulence of the last two years, law firms on the whole are relatively reluctant to innovate with new technology. The SRA/Oxford research concluded that only 37% are currently looking to adopt new legal tech. Yet in the general business population, 75% of CIOs are “driving digital strategy development to take advantage of business opportunities and ward off competitive threats”. So why are those in law so hesitant around technology and innovation?
One reason might be that it is difficult for firms to find the money. Partnerships don’t have access to external capital and partners perhaps don’t want to sacrifice income here and now for a potentially more successful future. Lawyers are also trained to be sceptical, and to always have their eye on the ball. These traits don’t pair well with the idea of experimentation or innovation, which is perhaps further hindered by the number of partners it takes to get a firm to agree to a consolidated action. There’s pressure internally to maintain the number of billed hours. Utilisation can’t be sacrificed, which makes it hard to invest time in anything that’s not billable. Also, successful innovators accept the possibility that sometimes they’ll fail, which doesn’t sit well with lawyers.
But if today’s firms want to find a competitive edge, innovation – technology based and otherwise – will help them. One route could be to buy some thinking time, by moving away from the billable hour and venturing into fixed price models. Firms could also look to incentivise idea-bringers and widen the ways in which they measure success. Another investment could be to increase the diversity among decision-makers, by introducing non-lawyers who don’t share typical lawyer personality traits and can bring a new perspective, such as data scientists or legal technology experts.
Know too that the biggest barrier around embracing innovation in law firms might simply be complacency. But if the last two years have taught us anything, it’s that not being ready for change can be the biggest issue a firm faces.
