Talk about playing to the crowd. The recent Legal Week Strategic Technology Forum featured a pre-recorded interview between David Morley, senior partner of Allen & Overy, and Jeremy Hand, chairman of the British Private Equity and Venture Capital Association (BVCA), on the future of legal services.
Hand, whose private equity firm, Lyceum Capital, is targeting the legal market for investment, said he believed technology personnel would fare better than some lawyers in the ‘brave new world’ heralded by the Legal Services Act (LSA).
His comments drew a mixture of applause and laughter from an audience long-used to playing second fiddle to their high-maintenance employers.
The LSA will usher in one of the most lightly regulated legal regimes in the world with the aim of boosting competitiveness and innovation within the legal market.
When its provisions come into force — by 2012 at the latest — lawyers will be able to enter into partnerships with non-lawyers and sell shares in their firms to outside investors.
Hand told Morley that the legal sector represented a very exciting investment opportunity, given its value, fragmentation and the fact that law firms were often accused of being expensive and delivering a poor service.
Central to his message was the ability of outside investors such as private equity firms to act as catalysts for change by helping firms improve their governance structures and strategic thinking at the same time as injecting the necessary capital to underpin long-term strategies for growth.
Unsurprisingly, technology forms a pivotal part of Hand’s thinking.
He recently appointed a panel of senior advisers, who include Richard Susskind, the well-known legal technologist, to brief Lyceum on the opportunities that the LSA will throw up.
In his interview with Morley, Hand said IT would have a crucial impact.
“At the volume end of the market technology is already having a very dramatic impact on the way legal services are delivered and that is going to accelerate and move further up the complexity chain,” he said. “In other areas, technology will be an enabling tool.”
Unsurprisingly, the prospect of better-managed firms, better strategic thinking and large dollops of cash to invest in new technology went down well with an audience bracing itself for tougher times ahead, given current market conditions.
As Chris White (pictured, below right), conference chair and head of IT at Ashurst, observed: “We are seeing the cool wind starting to blow through law firms.”
He warned that this would put IT directors under added pressure to ensure the systems they oversee do not fail. It will also become even more difficult for IT directors to persuade law firm management teams to invest in technology just as fee earners come under even more pressure to deliver.
One of the forum’s panel sessions saw four IT heads with considerable experience of working outside the legal sector assess the current state of play within legal IT.
David Coates, former global IT head for UBS’ trading and sales division, said money was no object on the trading floor when it came to investing in IT because it was so important to the traders.
“Within legal it is very much how you align your IT strategy with the business strategy — in financial services it is usually the other way around,” said Coates, IT director at Bond Pearce.
The unique challenges of working for partnerships were also underlined. Malcolm Simms, IT director of Eversheds, said the fact he worked for 26 different businesses at Disney made him particularly well-qualified for a move to a law firm, where he was accountable to each individual equity partner.
The panel agreed that the partnership structure of law firms made it difficult for IT heads to influence strategy and implement change. Getting access to clients is even harder, not because partners are deliberately obstructing them, but simply because providing such access is not part of the culture.
And the good news? While law firms may not invest as much money in IT as financial services firms, there is a similar emphasis on the need for robust and effective systems.
Allen & Overy’s IT director, Jason Haines, is former global chief technology officer at PricewaterhouseCoopers. He said the pressure on lawyers to hit their targets made them extremely demanding, leading to “fantastically high levels of service”.
Simms agreed: “It is world-best standards you are delivering.”
The level of expectations was underlined in a panel session featuring three associates from leading law firms — Caroline Copeman of Linklaters, Adrian Rainey of Taylor Wessing, and Nadim Zaman of SJ Berwin.
Top of the trio’s technological wish list was a time-recording system capable of tracking and recording advice automatically. It is easy to see how cutting-edge technology such as this could boost a law firm’s performance.
But despite the advances that have been made, many firms continue to struggle to align their technology strategies with their business strategies. This was the subject of a session chaired by Chris Bull, chief operating officer of Osborne Clarke.
Ian McFiggans, IT director at Lovells, said formulating an effective technology strategy came at the end of a process that involved several stages. It began with the firm’s business strategy, which was influenced by such factors as the market, client needs and the requirement to develop talent.
Underpinning this was an operational strategy that addressed how a firm’s various support functions could work together to support the business. Then, said McFiggans, you needed to decide on the information people needed to fulfil their roles. Only then could you draw up your technology strategy.
“All your technology plan is doing is supporting the information strategy, which is supporting the operational strategy, which is supporting the business strategy,” he said.
Simon Thompson, chief operating officer at Linklaters, said getting the right governance structure with clear lines of accountability was crucial.
“Unless you get those foundations right, you’re going to get caught up in a lot of politicking and a lot of detail that you don’t necessarily need to be involved in,” he said. “At Linklaters we talk about discipline and innovation working side-by-side. If we decide on a process, if we decide on a policy within the organisation, then we stick to it, because having the discipline to stick to it frees up our time and ability to start innovating.”
The panel agreed that in the absence of a chief operating officer driving through this process, it was often incumbent on the IT director to play this role, not least because IT permeates every part of a law firm’s operations.
This is precisely the position many people are finding themselves in, leading panellist John Alber, strategic technology partner at
Ultimately though, they will only succeed if they are valued by the partnership. And not just when the emails are down.
“Do firms really believe that IT can generate revenue, save costs, manage risk, enhance work-life balance and attract and retain people?” asked Bull. “I am not totally sure that law firm management teams have quite got to the point where believe that.”
Enter Hand and his ilk, stage left.
Jeremy Hand on the ‘Legal Big Bang’
The forum screened an interview between David Morley, senior partner of Allen & Overy, and Jeremy Hand, chairman of the British Private Equity and Venture Capital Association and managing director of Lyceum Capital, on the impact of the Legal Services Act.
Hand on:
The drawbacks of partnerships
“If you are used to drawing out your profits, perhaps as a partnership you do not necessarily want to choose to make a one or two-year profit investment in the firm to really position it properly for ten to 20 years of success. Personally, I have never given a guarantee to the bank over my house and I think it is an obligation that would cause me to behave in a highly conservative manner.”
The failings of law firm management
“Very often the managing or the senior partner does not actually control, run and manage the firm in a way that other professionally-run organisations would expect to see. In fact, making quick, effective, efficient, and in some cases bold commercial decisions to take advantage of opportunities like the Legal Services Act is simply beyond the capabilities of the partnership
group as a whole to make. I do not
necessarily think that the best outcomes are going to be delivered by lawyers who happen to have been promoted into senior management roles.”
The threat to law firms
“The reality is that today there are literally hundreds of well-capitalised, well-run businesses that are looking at the legal services market and saying, ‘We’ll have some of that, thank you very much’. So whether people like it or not, the Legal Services Act is going to create significant external pressure. If you are not well-run, well capitalised and strategically well-positioned you may be a loser. And you probably will be a loser.”
The importance of technology
“At the volume end of the market technology is already having a very dramatic impact on the way that legal services are delivered and that is going to accelerate and move further up the complexity chain. In other areas technology will be an enabling tool. It is not just document assembly, it is workflow and business practices. There will be significant changes that may well be driven by external firms that are not currently providing legal services — investment banks, accountancy firms and other professional services organisations.”
To view the full interview, go to legalweek.com/handinterview.
Quotes from the conference
“Instead of helping companies take costs out, what lawyers are doing is using innovation to put costs in. So what used to be a 25-page document that would be enough to transfer one group of companies to another, is now 160 pages long — and it is 160 pages of complexity that takes everybody a long time to read.”
Rosemary Martin (pictured), chief executive of PLC and former general counsel of Reuters on IT implementation.
“It is interesting to see the traction that products like the iPod, Sky+ and BlackBerrys get… in contrast to the convoluted way in which many of things we use in our office environment operate. And then we compound it by the over-engineering which we do in law firms and the over-customisation.”
Jon Gould, IT director, Burges Salmon, on the difference between good technology and bad technology.
“The thing that I would have liked to have known before I joined the legal industry is how much fun it actually is. If I had known that a lot earlier, I would have joined a lot sooner.”
Ian McFiggans, IT director, Lovells, on the benefits of working in the legal sector.
