Are law firms immune to the march of technology?

Law firms remain slow adopters of technology. Although there have been some improvements in efficiencies, technology is not having the transformational effect it has had on other industries, such as retail or media.

The question is whether the sector is simply a slow starter, or whether it is immune to the march of technology. To our mind, there are a number of reasons why the legal profession has proved resistant to technology improvements.

A relationship-driven profession

The first is that legal services are still driven predominantly by relationships. Clients are paying to have a personal touch and what they believe to be bespoke guidance. The view is that a lot of the advice lawyers provide is not readily replicated by a robot. Artificial intelligence, for example, works well where there are commoditised processes, but how much legal advice and interpretation can be automated? For contract drafting, there will be some form-filling and template documentation that can be done automatically, but there will be differences in the nature of the transaction. That means some level of tailoring is required and the assumption is that a human input is required. However, do clients really want bespoke services and would they be willing to pay the same for a service that is delivered much more efficiently particularly as technology advances mean so much more can be achieved.

At the same time, there is little impetus to change. Law firms are currently very profitable and partners considered to be well rewarded. Why take a risk and invest in technology when your business is doing very well as it stands?

Traditional fee structures

Equally, the traditional fee structure of law firms risks reduced fees – does fewer hours on the time sheet translate into a lower bill? Perhaps clients will start to challenge on fees. At the same time, there are signs that some law firms are focusing more on ‘value’ billing. For example, if their work has saved a client £100,000 worth of tax, should they charge a percentage of that saving? The shift is slow, however.

As it stands, we see firms investing to protect themselves - investment in cyber security and risk management - with incremental investment to improve the service they are currently providing as opposed to using technology to change the way the service is delivered. They are not, on the whole, investing in cutting edge big data technology. Where they are investing, it is in document management systems or workflow improvements, rather than artificial intelligence.
We see no significant evidence or impetus for a shift in the way law firms use or adopt technology in the short-term. However, those firms that do successfully make the change have the ability to set themselves apart from the competition.

Source: Companies House. Data analysed May 2019.

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