Managing Director & Senior Partner
They supply crucial legal data to help lawyers serve their clients—and yet leading information providers are seeing sluggish, relatively flat revenue growth, on the order of 1% or less. Why? The reasons go back a number of years to when, roiled by the recession, law firms and corporate legal departments tightened their purse strings, became tougher negotiators, and adopted a more critical attitude toward their spending.
This heightened level of scrutiny, however, masks significant opportunities for providers that are savvy enough to seize them.
As firms and legal departments look to control costs, they are stressing efficiency but not always achieving it—at least, not to the extent that they could. On the basis of interviews with nearly two dozen legal professionals, The Boston Consulting Group has identified a number of pain points that hamper efficiency in lawyers’ daily workflow. By leveraging technology in smart ways, information services providers can lessen or eliminate these problem areas. In the process, they can boost the value that their own offerings deliver, enabling them to capture a larger share of the legal industry’s overall IT spending.
The recession fundamentally changed the relationship between law firms and information providers. At law firms, pressure mounted to do more with less, adopt fee arrangements that were less familiar and less lucrative than the billable hour, and stem declines in profitability. Staff reductions were common, and firms regularly dissected and debated spending on vendors. Meanwhile, many corporate legal departments, facing comparable pressures, increased their scrutiny of expenses.
Although the broader economy has recovered, market challenges persist. For many law firms, margins remain strained. Competition, meanwhile, is livelier than ever. Able to draw from a large pool of available, high-quality legal talent, smaller firms—which tend to charge lower fees—are often a viable alternative to large firms. In such an environment, many law firms are looking to efficiency as a route to savings and competitive advantage. And to achieve efficiency, some are turning to technology.
Other industries have boosted productivity, agility, and quality by using high-tech tools. But the legal industry has never been—and still isn’t—a particularly big spender on technology. On average, law firms spend some 2% of their gross revenue on IT, significantly below the average for the professional services sector as a whole—which, according to Gartner, is 4.6% of gross revenue. Even now, many firms take an outdated approach to developing and managing IT. Instead of maximizing their use of outsourcing, they employ large and costly IT staffs. In addition, they tend to be slow to adopt useful new tools. And often, the most experienced and influential partners—many of whom came of age in a low-tech legal industry—haven’t forcefully pushed a technology agenda.
These dynamics have made it difficult for lawyers to realize the full benefits of technology. New features and improvements always come faster when customers demand them. But at many law firms, senior management doesn’t view IT as a strategic and competitive differentiator. As a result, firms are more likely to push vendors on price than on functionality. This may save them money in the short term, but it also hinders any effort to gain efficiencies through technology. Indeed, our conversations with legal industry professionals reveal significant inefficiencies, particularly with regard to working with content. Overall, we identified four chief pain points:
Our interviews also revealed that integration between information services and law firms’ in-house IT systems could be improved. In many instances, lawyers must note the amount of time they use a service and manually enter that figure into a separate time-and-billing application. Keeping tabs on one’s time becomes, paradoxically, time consuming and burdensome.
These issues pose formidable challenges for lawyers, but they present opportunities for information services providers. Given the legal industry’s comparatively low level of technology-related spending, providers are competing for a pie that isn’t likely to get much larger in the immediate future. They can grab a larger slice of that pie by addressing the pain points described above and becoming more involved in and more essential to lawyers’ workflow. At the same time, by differentiating their products and value propositions, providers can stave off the threat from new market entrants, including startups backed by major VCs.
How, exactly, can providers boost lawyers’ efficiency and become indispensable? We recommend a targeted approach, prioritizing three core areas for improvement:
By taking this painkiller approach, information providers can provide the right tools in the right way, putting relevant content in front of users quickly and seamlessly. The arrangement boosts both the efficiency and the quality of lawyers’ work. As a result, law firms can meet their mandate to control costs while serving clients well—and, perhaps, better than ever.
In a perfect world, providers would simply check off the boxes noted above and deliver better, more efficient legal information services. But in practice, various obstacles may stand in the way. For one thing, many providers lack extensive capabilities outside their traditional fields of expertise. Although artificial intelligence, e-discovery, and practice management—all potential areas of expansion for product suites—are beginning to draw investment from large legal information services providers, they remain new and unfamiliar ground for many providers. Then there is the lingering resistance by lawyers to technology. For providers of information services, growth will always be a challenge if law firms’ senior management doesn’t view technology as a differentiator and doesn’t prioritize it as such.
In light of these obstacles, and in order to smooth the path to success, providers should consider taking two additional steps as they tackle user pain points:
By addressing common pain points in the use of law-related content, information services providers can give law firms what they need most: a smoother path to greater efficiency. Providers can help firms realize the full potential of technology and information in legal practice—and while they’re at it, they can realize their own full potential.