No one would argue that the past three years have brought profound change to the legal market, presenting significant law firm challenges. The pandemic was certainly a big factor, but it was more of a catalyst than a cause. COVID prompted a response to pressures that have been brewing for some time: higher performance expectations, growing talent strains, new competition, and expanding compliance requirements, to name a few. (1)
Central to these pressures, and perhaps the common antidote, is technology. In the most recent Future Ready Lawyer report (2), 79% of lawyers surveyed said the “increasing importance of technology” will have a significant or some impact on their firms over the next three years. Yet, only 35% believe their firms are prepared to deal with it.
Why is technology increasing in importance? Consider this fact: 63% of Technology Leading firms report their profitability increased over the past year compared to 46% of other firms.
In this post, we highlight the top five challenges lawyers and their firms will face in coming year (and beyond) and how technology can help deal with them.
1. Client Expectations
Clients are placing growing pressure on law firms to provide more cost-effective services with an increased focus on alternative fee structures and value-based billing. Clients are well aware of the role technology can play in lowering costs. So, it’s not surprising that client demand for tech-enabled law firms hit a record high in 2022 and is expected to continue to climb.
2. Data Privacy and Cybersecurity
As legal services become increasingly digitalized, protecting client data and confidentiality becomes more complex. And with increasing regulatory scrutiny, it’s an issue that can’t be ignored. Here, technology is both the source of the challenge and the solution. Products like secure document exchange portals can provide the proper level of protection that email attachments or public file-sharing services cannot.
3. Economic Uncertainty
Aside from the looming threat of recession in 2023, firms face internal economic challenges, with expenses growing faster than at any time since the Great Recession of 2008. Associate compensation is the primary culprit. It spiked in 2022 in response to the competition for talent. Rate hikes have helped to mitigate the impact, but client expectations (see above) suggest that technology-enabled efficiency and productivity growth will be essential to maintain profits.
4. Competition for Talent
Few firms have been unaffected by the talent wars of the past year. “70% of law firms report a very or somewhat significant impact from The Great Resignation”. While technology is not the only solution, “83% of law firm lawyers say it’s extremely or very important to them to work for a firm that fully leverages technology.”
5. Demand for Alternative Legal Services
Alternative legal services attract clients through greater efficiencies and lower costs. These providers often use technology to automate repetitive tasks, allowing them to charge less than traditional firms. There’s nothing unique about the enabling technologies these providers use, and traditional firms can beat them at their own game by adopting technologies such as document automation.
There’s much uncertainty about what the year ahead will bring. But one thing is for certain: technology will play a major role in helping lawyers and their firms confront the challenges they face. If you are one of the firms that consider themselves technology leaders, congratulations; you’re already well positioned for resilience and profitability in a changing market. If you’re an organization that considers itself transitioning, stay the course, and you’ll be ready for whatever the new year brings.
About Michael Sauber
Michael Sauber leads the marketing program for Korbitec, producer of Automated Civil Litigation Software (ACL) and xchangedocs. He has worked with document production technologies and professional services for over 30 years and is a frequent blogger on these topics.