The state of affairs for the business of law in Europe
Technology isn’t replacing people in laws firms, but it is changing the roles people fulfill within those firms. That’s Eric-Jan van Alten’s observation, who has spent the better part of 20 years working with law firms from around the globe.
While he’s a native of the Netherlands, he previously spent several years with us in Atlanta consulting with US law firms. He is now back in Europe crisscrossing the continent talking to law firm professionals about legal technology and the state of the legal business.
As such he has a worldly view of the business of law. One only has to look at the effects of GDPR to understand that the legal business is increasingly subject to a global influence. So, we thought it would be helpful to sit down with him for a question and answer (Q&A) piece for our Think Tank community.
1) After about a decade, the US legal market appears to be picking up according to public research. Has the downturn in Europefollowed a similar pattern and are things picking up as well?
EJvA: “The downturn throughout Europe followed a similar pattern to that which the US experienced, with some differences. Europe also felt the effects of the mortgage crisis, but it was smaller and from a business perspective, we seemed to climb out sooner.
However, several regional events, including the debt crisis in Greece and Spain, for example, dragged Europe into another economic downturn. More recently Brexit has taken center stage and I think that’s created a lot of uncertainty. No business, especially the legal business, is fond of uncertainty.
Things do appear to be picking up. The 2018 Aderant Business of Law and Legal Technology Survey, which this year polled firms globally, showed that most say business is “better” or “much better.” It also found larger firms were more likely to say things have improved, which is consistent with other studies. In my observation, that’s true among firms across the European continent as well.
While mid-sized firms are growing some, it’s those bigger firms that serve corporate clients across a range of practice areas that are really growing quite fast. I’ve noticed those with core competencies in mergers and acquisitions (M&A) see business increasing to the extent that the growth has also become a bit of a challenge.”
2) That brings us to our next question: What are the top challenges facing law firms in Europe?
EJvA: “Our survey found that one of the top challenges firms are facing in Europe is improving operational efficiency. Still, it’s challenging to lump all of Europe together, because even though we have the European Union (EU), it’s still made up of many different countries with their own laws.
It’s not possible for a lawyer to be active in both France and Germany for example. What this means is, for a law firm in the Netherlands to grow as fast as a firm based in London, it must think about merging with other firmsor opening new offices in different countries.
On that note, continental Europe is seeing a lot of new competitors – large firms coming from the UK and US, precisely for that reason. For example, many of the firms I have visited with across the continent say these larger firms are looking for acquisition opportunities within the EU.
It’s worth noting that firms based in the United Kingdom are finding organic growth in that market too. In some of my conversations, these firms say they expect to grow 50% or more over the next few years. This is where growth is also a challenge because they are competing for the same talent from the same law schools in London.”
3) What are the pressures firms in Europe are feeling from clients?
EJvA: “Europe certainly has some of the conventionalchallenges we see among law firms in the US. There is plenty of pressure on pricing and the hourly billing model. The difference is, when European law firms feel those pressures, they contend with them in an international context. This often means those challenges come with added compliance hurdles to remain in good standing amid regional and local regulations.
Electronic billing (e-billing) is a good example of this pressure. While in the US, e-billing has largely been a client-driven initiative to control legal costs, in Europe that pressure stems from local governments. It’s the local governments that are advocating e-billing. I’d say Europe is seven to eight years behind the US in terms of e-billing adoption, but it’s certainly a trending compliance requirement.”
4) How would you characterise the state of innovation across European law firms?
EJvA: “The state of innovation is really mixed. If there’s a division, I’d suggest it comes between larger and smaller firms, at least initially. This is because innovation comes with more complexity – you must deal with a growing number of systems and platforms – and that requires both capital expenditure and technical expertise. These are usually attributesof larger firms.
Smaller firms tend to be nimbler and have an advantage in adopting new technologies. Cloud is a good example. Many of the tech startups we see across the EU that have cloud products, tend to design these for smaller firms.”
5) What legal technologies aregetting the most attention across Europe currently?
EJvA: “There’s an event in Amsterdam called Lexpo that is like the big legal tech show in New York, but for Europe. Like America, artificial intelligence (AI) and blockchain make the headlines, but law firms struggle to come up with practical use casesthat can actually be executed.
Interms of technologies that can realistically be implemented and have a tangible impact are cloud and business intelligence(BI). The cloud promises law firms access to newer machines, and as many as they need on demand, to perform calculations. With BI, there’s a large group of firms trying to catch up with the early majority who implemented BI five years ago and are benefiting from it today.”
6) How is technology changing the business of law across firms in Europe?
EJvA: “Technology is changing the roles and responsibilities people have within firms. This is an important point because these roles are evolving, not being replaced by technology.
One area where we see this a lot is a shift from data entry to analytics. Years ago, firms needed people to enter data so that computers could be used to analyse it. Today, those processes are highly automated, but firms still need people to make sense of the analytics and interpret what it means for the firm, and what to do about it.
There’s a competitive edge for firms that facilitate this transition for their staff. In fact, that technology decisions should be made with the team in mind. In other words, when a firm procures a new IT system, part of the due diligence should be understanding the impact that system will have on the billing teamor the finance team for example.
This is one of the areas where I believe Aderant is well positioned to really help law firms. This is because we spend so much time with firms and see firsthand the effects of technology in the legal environment. The knowledge we gleanis re-invested back into our products, support and indeed, our customers.”
