Cut Costs vs Client Focus: New Survey Results

July 1, 2012

New research commissioned by business technology services provider, Avanade, suggests that UK law firms are jeopardising their own growth by failing to align technology purchasing decisions with key business priorities. Nearly two-thirds (65%) of firms cited their main technology investment was in cost cutting, while less than a third focus on client-orientated and business planning technologies. 

The research (conducted via Survey Monkey in conjunction with The Lawyer Magazine) which included half of the UK’s top 50 legal practices, questioned 74 senior IT decision makers and lawyers to help gain a better understanding of how the legal industry is coping with the host of new pressures it is facing, such as increased competition from non-traditional businesses entering the market place. 

‘One of the biggest challenges to come from the competition between traditional and non-traditional law practices is that new market entrants, such as retail brands, are historically much more focused on consumers,’ says Daryn Edgar, Avanade, Senior Director, UK. ‘At a time when many law firms are cutting costs, these client-focused firms are investing in new IT systems that are both consumer-savvy and efficient — already ensuring they are a step ahead of traditional firms, where conflicting strategies seem to be causing some technology paralysis.’ 

The study highlights that while the majority of firms cite client and resource management (65%), finance and billing (50%) and business growth (50%) as their main business focus, nearly two-thirds (65%) reveal their next technology investment would be directed towards outsourcing. Inside the top 25 law firms, this move to outsourcing increases to over 76%.  

Interestingly, the research also highlighted that over a third (38%) of firms hadn’t made a significant IT upgrade in the past year. Avanade believes that this itself shows a clear disconnect in UK law firms business and technology strategies.  

‘As the legal landscape becomes more and more competitive, the natural inclination is to cut costs as a first step. The danger is that firms will render themselves unable to innovate and keep up with industry changes if they cut too deep. An outsourcing strategy based on old technology platforms can be detrimental to the business, as it often results in low returns,’ said Edgar. ‘Outsourcing strategies that utilise new business- and client-focused technology platforms are where the opportunities often lie, as they can leverage business processes to be more unified and as such provide much greater returns.’  

Two of the more client-centric technologies, enterprise resource planning (ERP) and customer relationship management (CRM), rank low among the list of potential investments for law firms, with just 15% and 37% respectively. This comes despite the fact that nearly half of those surveyed (45%) ranked ‘client demand’ as the number one reason for considering investment in new technology. In a further demonstration of client-focused attitudes, 56% of firms indicate that client pressure on fees represents the greatest threat to their business.

Edgar concludes: ‘In a time when the client is clearly king, it is vital that law firms take a top-down approach and concentrate on their critical, client-centric technologies to help deliver the best service and run a smooth, cost-effective practice.’