Technology and legaltech skills needed to compete in legal services industry says study by Esade Law School
Nine out of ten law offices recognise that they need to modernise with more flexible models, fixed-price billing, and collaborative cultures. Innovation combined with an understanding of technology and legaltech is needed to satisfy new demands – this is one of the main conclusions of a study entitled ‘El sector legal de los negocios 2011-2021’. The study has been prepared by Esade Law School and published by Wolters Kluwer with the collaboration of IurisTalent. It analyses the performance of the legal services industry over the last decade and is based on more than 200 interviews and 500 questionnaires completed at a key moment for the industry by independent professionals, in-house lawyers, and law firms.
The study notes that during the next five years, technology will have a significant impact on innovation in new areas of law and collaborative working models, as well as improving processes and efficiency. New delivery models, creative billing, and the application of legal project management techniques are also important themes. According to Eugenia Navarro, author of the study and lecturer in legal services marketing at Esade Law School: ‘the legal profession has evolved much more in recent times than during the whole of the last century. Technology, the democratisation of information, and the changing needs of legal service buyers have led to a rethinking of law firm business models’.
A new way of thinking and key challenges
Some 63% of legal departments report growth during the last five years. Efficient processing is key for a sector that demands profitability and more competitive prices. Profitability, rather than total billing, has become the measure of a firm's efficiency and sustainability. The report concludes that without good business management it will be impossible to compete in the legal services market in the future. An understanding that firms are businesses regardless of their size will be one of the major changes in thinking.
The main challenges for legal departments are reducing fees for external lawyers, achieving greater involvement in corporate strategic decisions, and the implementation of technological models. For law firms, the central challenges are internationalisation, achieving equality among partners, improving profitability, and greater innovation in services. Some 84% of those interviewed say that technology is a tool that heightens efficiency and legal departments expect firms to invest more to provide ‘better, faster, and more definitive’ services. The study indicates that the areas that will attract the most investment are cybersecurity, competition, e-commerce, compliance, and digital law.
More technological services
Legal departments will require their legal service providers to accompany and assist them in this change of approach and vision – and technology will become one of the selection criteria for tenders. An evolution in the provision of legal services is expected to produce improved delivery and reporting – both in terms of invoicing and services. According to the qualitative result, technology will have a greater impact on the standardisation of processes and contract review. Communication with external firms is also expected to improve with the implementation of common work platforms, legal project management systems, and transparent invoicing models. Nevertheless, the professionalisation and optimisation of management will be the great challenge of what the report calls ‘the efficiency era’. The traditional lawyer profile must be complemented with an understanding of technology, legaltech, and legal operations.
Decline of hourly billing
In 2011, 95% of firms preferred hourly billing and it was a requirement to be eligible for some tenders and to work with certain clients. However, the hourly billing model has more recently been relegated to an internal management model. Clients will increasingly avoid hourly billing in the years ahead. Hourly billing does not reflect the value and quality of time billed and is inefficient. Clients want certainty and predictability in fees, and this means law firms must focus on management, process efficiency, and technology.
Covid-19 is a catalyst for change in the legal services industry and when combined with a downward pressure on prices, the result will be a new business reality. Internal legal advisors consulted during the pandemic tend to say that the control of external lawyers will be one of their priorities as their firms experience economic difficulties. For this reason, they will also be more open to change and new models that they were previously wary of using. The legal services industry will experience downward price pressure and become more competitive. New models will further segment work and use technology for standardised tasks.
