Photo by Nick Harris (Flickr/ Creative Commons)
Photo by Nick Harris (Flickr/ Creative Commons)

Big Law Firms Spending More on Technology, Experts Say

U.S. law firms are devoting more of their budgets to technology, investing in practice and financial management systems, network upgrades and other areas, although the activity has been measured, according to legal experts.

About half of the 281 law firms that participated in a 2014 survey by International Legal Technology Association (ILTA) and InsideLegal said they had increased their technology spending budgets that year, six percent more than the year before.

More recently, legal software companies have reported an increase in business from big law firms. Software provider Aderant, for instance, reported adding Holland & Knight, Maynard Cooper & Gale PC and Miller Thomson LLP as clients in recent days.

Peter Zeughauser, a legal consultant with the Zeughauser Group, said that he “can’t think of any major firms that aren’t spending materially more on technology than they did five years ago.”

The uptick should be put into context, however: The ILTA survey showed that the majority of the 281 law firms — described as firms with either less or more than 50 attorneys — spent between two and four percent of the firm’s total revenue on technology. Sixty two percent of them spent more than $8,000 on technology per attorney.

Chris Cartrett, Senior Vice President of Global Sales at Aderant, said the market for legal technology tools is seeing growing interest from law firms, but many are “in the evaluation stages.”

“There is without question a larger number of people who are truly in that discovery phase that we’re expecting to come to market here in the next 12-18 months,” Cartrett noted.

He pointed to the financial pressures law firms are feeling as a primary trigger.

“Because of all the expense cutting, you’re now having to realize how can you do more with less, and you’re leveraging technology to help you with that efficiency,” Cartrett said. “They’ve got to come up with better matter management tools. They’re having to deal with pricing challenges.”

Jeffrey Rovner, managing director for information at O’Melveny & Myers, explained that while his firm is using more technology year-over-year, it can be a challenge to keep its busy lawyers up-to-speed.

As a result, the firm has tried to make things simple for its lawyers and created a single internal firm platform, called ommni, where lawyer can access more than 100 technologies O’Melveny utilizes. These include “not only technologies for the practice of law, but also tools to track budgets and fee proposals, assess staffing needs, and delegate tasks,” said Rovner.

On top of simplifying technology for its lawyers, Rovner said “ommni helps us hold more robust and transparent conversations with our clients about staffing, fees, alternative billing arrangements, and management of their matters, which strengthens our relationships.”

According to the ILTA report, top tech purchases in 2014 included computers, network upgrades and servers, printers and antivirus protection.

Neota Logic, which offers document and process management solutions, is also reporting more business from law firms.

Michael Mills, Co-Founder and Chief Strategy Officer of Neota, ties the increase tech investments by big firms to infrastructure and device upgrades that were deferred in the wake of the recession. These include security updates and software tools, he said.

“Law firms have in fact invested in advanced technology for many years. Document management software was invented for law firms, and so were text search engines,” Mills said. “That said, the ‘great reset’ of client expectations after 2008 has intensified focus.”

Zeughauser, the law firm consultant, said that in his opinion, the push for big law firms to spend more on tech and software started even earlier – perhaps as early as the 1970s, when word processing, photocopying and fax machines were introduced.

What’s driving the firms, he said, is “the need to improve the quality of work product, deliver better service, and the need for increased productivity to cut the cost of people.”

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