Press Articles & Comment

The Future of Technology Investment - A Rollercoaster Ride
PLC Article, October 2007

Investment in technology will be a key feature for both law departments and private practice in the next ten years. In the law department, the overriding aim will be to get the right service quality at the right cost level. In private practice, technology investment will emerge as one of the main drivers towards getting in external capital.

Richard Kemp, senior partner at specialist City technology law firm, Kemp Little LLP, sets out his predictions for the coming decade.

It is an axiom of the technology sector that people overestimate change in the short-term and underestimate it in the long-term. According to Moore’s Law - the empirical rule that computer power doubles every two years or so − the computer of 2007 is only twice as fast as the computer of 2005, but is 16 times faster than the computer of 1997. To hardened if constructive sceptics like lawyers, this law makes sense. When our firm started in 1997 we had Compaq PCs with 166 MHz processors; now, 3GHz PCs − 18 times faster - are mainstream.

Add to this the computer industry maxim that the price of computer power tends to zero over the long-term, and it is in the software that the value really lies - and it is here that the fun starts. The question is what can you do through software to enhance the efficiency and value add of legal services and still take out cost?

The last ten years

The aim of this issue of PLC Law Department Quarterly is to take a longer term view of technology and the law department; looking back ten years to 1997 from where we are today can give us an insight into where we may be in the future and provide a better window on what the world of the law department will look like in five or ten years time.

So cast your mind back to 1997:

Google had yet to be launched in 1998.
Netscape’s flotation, generally credited with starting the dot com boom, had taken place only two years before in 1995.
Microsoft, with Windows 95, Office 97 and Windows NT 4.0 (the first really reliable networked server operating system launched in 1996), was carrying all before it.
The internet was yet to take a real hold. Bill Gates had written about the coming ‘internet tidal wave’ in May 1995, but it had not really arrived in 1997 as it was still impossibly slow (remember how long it took for those basic pages to fill?).
There was still a ‘wow’ factor about e-mail.

And then look how far we’ve come today:

E-mail is the backbone of business.
Personal Digital Assistants (PDAs) have made the law department and in-house lawyers accessible 24/7.
Your children have never known a time without the broadband internet and live by Facebook, YouTube and MySpace.
There is some interesting stuff going on “down the corridor”, or in Ireland or in California, about enabling the business to sign up sales contracts without involvement from legal.

It is looking ahead from 2007 to that “interesting stuff” and where it is likely to take the delivery of legal services to by 2012 or 2017 that is really fascinating.

Slow start for the legal sector but major changes are in the pipeline

What is clear is that we have all rather been lulled into a false sense of security about the pace of change in legal technology over the last few years. But it is also clear that after a lengthy period of stability, the next three years will see significant changes in software systems.

Microsoft for example has a bigger product launch schedule over the next three years than at any time since Windows 2000. The new version of the Windows operating system (Vista) has been described as the largest and, potentially, most disruptive change in the operating system space since 2000. And it doesn’t stop there, with major architecture changes coming up in operating systems, middleware (products which sit between the operating systems and applications including line of business products like CRM Dynamics), and productivity applications like Office.

This is all before you even mention Google − carrying all before it today - and broadband internet, and the up and coming solutions like ‘Software as a Service’ (Saas), ‘Service Oriented Architecture’ (SOA), virtualisation and grid computing that could well see lawyers using software applications at the flick of a switch like electricity, in the not too distant future.

These changes to software applications will have a significant impact when taken together with other developments in the legal market place. My crystal ball is only as good as anyone else’s, but there are a number of clues which may shed some light on the changes that are likely to be seen over the next decade.

Sheppard, a former Addleshaw Goddard partner, will join the firm at the end of January. For the past two years she has been based at Expedia, a client of Kemp Little, providing competition and regulatory advice. Her appointment reflects the firm’s strategy of providing a full service to its technology clients. The launch of a competition practice follows the establishment of a litigation practice in April.

Law will follow developments in the wider business market

The first clue is to look at where technology is going in services businesses generally. Here, the same factors apply to the legal market − whether the law departments or law firms − as apply in other professional services functions, such as tax, accounting and finance, and other service sectors such as financial services and travel. So the trends that are developing in the legal market will be recognisable from the wider business environment, in particular:

Competition: the eternal quest for higher efficiency and lower cost.
Segmentation: different approaches are necessary for higher value work than for lower value work.
Commoditisation: repeat order tasks are ripe for computerisation to take out time and cost.
Outsourcing: repeat order tasks can be carried out more cheaply in countries where skills remain high but costs are lower.
Innovation: the incredible way that computer power is harnessed to transform the way business and processes are carried out.

Technology will have an important role to play in carrying out basic processes

A second clue, related to the first, is found in the 2007 PLCLaw Department best practice survey on using technology to reengineer the legal function (the Survey) in this issue of PLCLaw Department Quarterly.
There is little doubt in my mind that technology is likely to have a profound effect on areas where legal advice today really amounts to “information repackaging” or carrying out a basic process.

The survey reveals that many senior in-house lawyers believe that technology will have a “huge impact” on the lower value work within the next decade, whether it be through information services and help lines, basic processes like straightforward sales contracts (contract automation and databases), litigation (electronic document management and discovery), or transactions (due diligence tools).

What is clear is that even in the highest value contractual, dispute or transactional work, a significant part of what is done is relatively basic. It will be interesting to see whether these techniques are harnessed in the top end work as well as the more easily commoditised work, and if so how.

One of the issues that will need to be addressed here is how to resource these changes. The results of the survey show that while the vision is there, the implementation has not quite been achieved. To achieve these changes in-house there will need to be significant investment in technology and infrastructure support in law departments over the next few years.

New era of law firm liberalisation

The third − and perhaps most crucial − clue to the impact that technology will have in ten years time lies in the changes to the structure of law firms over the next few years.

The corporate law department has grown massively in size, reach, technical excellence and influence since the 1980s. In my view it is difficult to see this changing to a large degree; especially if the law department gets the IT budget to really deploy technology to support greater efficiency and lower costs.

In the next ten years it is the law firm world that is likely to see radical change. Aside from the pressures of competition, globalisation and commoditisation, structural change (in the UK) and technology innovation stand out as likely major change agents for private practice in the next ten years.

In the UK, liberalisation (when it occurs through the Legal Services Act) will allow law firms to seek non-lawyer investment and create alternative business structures (ABSs). These new rules, that are likely to take effect before the end of 2012, will herald an era of major structural change when viewed over a ten-year time frame − as with LLPs (where our firm was first to convert in 2001), if not as “big bang” then certainly as “slow burn”.

We believe theses changes will include the rise of specialist practices focusing on coherent areas of legal practice and may extend to as yet undeveloped structures. New structures, other than traditional law firms, are also likely to emerge from which legal services can be delivered efficiently and the business risk of providing legal services managed effectively. Many of these will be dependent on new technology.

Technology itself will fuel these changes and will in turn be fuelled by them; investment in IT will be a key feature of the law department and private practice in the next ten years. In the law department, the overriding aim will be to get the right service quality at the right cost level.

In private practice, technology investment − whether to computerise the more routine parts of the biggest transactions at the high end, or for “artificial intelligence” based computerised decision systems with a help line for the ‘last mile’ of the questions at the commodity end − will emerge as one of the main drivers towards getting in external capital.

And when we are looking back in 2017 and saying, “cast the mind back to 2007 and remember when”, what will we be looking at as the Google moment, the Netscape moment or the internet tidal wave moment? Who knows? But one thing is for sure; the ride will be bracing, invigorating and stimulating for those in-house and outside lawyers who stay flexible and alert to change, and embrace the challenge of technology.