The Good Times for Firms Continue; Cloud Adoption and Billing Efficiency Help Firms Stay Competitiveaderantuser
by Stephanie Erbesfield, Aderant Marketing Content and Research Manager
Aderant’s annual Business of Law survey was released; we’ve had the pleasure of capturing valuable input from professionals about how the business of law is changing – and it is resoundingly positive. We see a push toward innovation, cloud adoption, and more efficient billing, all as ways to say one step ahead of the competition.
The cloud is the big winner of the survey, with nearly three quarters (74%) of professionals reporting their firm is slightly or somewhat cloud-based. Even more interestingly, is how many firms are open to the possibility of moving a critical system to the cloud, but more on that later.
The most interesting finding deals with invoicing and competition. We found law firms that publish invoices in a timely fashion are more likely to look at the competitive landscape differently.
The survey found that law firms that publish invoices in a week or less are more likely to consider client in-housing as more considerable sources of competition for their business.
Billing efficiency and innovation came out as the big winners, but how does this all tie together, and what does it mean for your firm? Let me walk you through the survey data that surfaced this finding and offer analysis for consideration.
The Embrace of the Cloud and Better Technology
While our study shows that only 2% of firms are completely in the cloud, 74% are slightly or somewhat on the cloud, whether that is storing data, hosting applications, or using cloud-based tools. Firm size did not play a role – both large and small firms are equally as likely to embrace the cloud.
As far as innovation goes, 34% of firms are living the window open to moving to the cloud in the future. Only 1% of respondents defiantly refused the move, and of those firms that were unsure of the future, security cropped up as a concern.
And while the American Bar Association does say that smaller firms (between two and nine lawyers) are concerned with security, a lot of it has to do with the lack of control over the data. Yet, there is a case for the cloud supporting stronger security, disaster recovery, and yes, savings.
However, the cloud wasn’t the only place we saw innovation; respondents kept placing importance on tools that enable lawyers on a day-to-day basis. When it came to innovation and technology, most firms saw the biggest impact come from Document Management tools, with Time and Billing a close second. Blockchain and Artificial Intelligence ranked low, having little to no impact on efficiency for the firms we surveyed – for now.
The Correlation Between Law Firm Billing Efficiency and Competition
Among the questions we asked in the survey was one about competition. We asked this question in 2017 and skipped it in 2018. However, there’s been considerable discussion about where firms see the most competition [including use of alternative legal service providers (ALSPs) in Europe and legal services moving in-house] in the last year or so, we wanted to put this question to the test.
While there are several different services now competing with law firms, competition remains inter-firm. Our survey found “other law firms” represented the most significant source of competition; a majority (53%) of respondents said as much. The next two sources of competition are “clients taking more legal work in-house” (22%) and “alternative service providers” (15%).
Another question we asked was how much the time it takes a firm to publish a client invoice. It’s a question we’ve asked for three years in a row, and the answers have been consistent from year-to-year.
This year, the answers are broken out into five categories by time. Including prebills, the time respondents said it takes their firm to send out client invoices was as follows:
- 72 hours or less: 16% of respondents;
- 1 week or less: 22% of respondents;
- 1-2 weeks: 24% of respondents; and
- 2 or more or unsure: 37% of respondents
In isolation, the answers to these questions aren’t especially interesting. However, when we cross-analyzed the answers – that is compared the time it takes to send client invoices with who they view as competition – a clear trend emerged:
Firms that get client bills published more efficiently were more than twice as likely to worry about alternative service providers and in-housing. By contrast, the longer it takes for a firm to get a bill out the door, the more likely it is to view other law firms as the top source of competition.
Freeing Up Law Firm Resources to Focus on Other Matters
These two things are strongly correlated in this survey, but does that mean they are causal? Probably not. Instead, an efficient billing process is more likely to be part of an overall law firm innovation strategy to promote efficiencies.
Think about the common problems that typically slow the billing process: time entry, prebills, and compliance with outside counsel guidelines. When these routine operational tasks are choppy and uneven, it draws the firm’s attention inward. The monthly task of getting paid becomes a systemic stress that is essentially a tax on law firm resources.
When these processes are documented, analyzed, improved, and automated, it frees up resources to attend to other matters. Investing in technology that provides automation, mobility throughout the office, and collaboration gives law firms the space needed to examine the market trends, evaluate the competition, and think more creatively about the delivery of legal services. We’re seeing that this technology investment simplifies access to a consolidated view of all client and matter information for both the front and back office teams.
To increase efficiency, a law firm has to be willing to do things differently. To do things differently, a firm has to be willing to challenge the status quo and embrace change where it’s merited.
The Correlation Between Law Firm Efficiency and Change Management
A trend emerges in the survey analysis that augments this line of thinking, and also takes it a step further: It demonstrated a strong correlation among change management and several other factors involved in efficiency.
For example, we asked respondents whether or not it was challenging to obtain partner buy-in for new business of law initiatives or new legal technology projects. Here’s how the answers stacked up:
- 32% of respondents said “yes,” getting partner buy-in is challenging;
- 18% of respondents said “no,” getting partner buy-in is not challenging;
- 43% of respondents said “sometimes,” getting partner buy-in is challenging; and
- 7% of respondents were unsure.
Our survey isn’t the only source data driving this perspective. For example, there are several other law firm economic studies, including both surveys and analysis of law firm revenue, that, in our assessment, point in this direction. Some firms are outperforming others, but they are doing it at the expense of their competition. Even if the market has returned to modest growth in the demand for legal serves, the vanguard of alternative providers of legal services is liable to widen this dynamic.
Every year, Aderant’s Business of Law and Legal Technology Survey yields findings that represent the challenges facing the law firms of today, and this year’s survey was no exception. While some findings have remained consistent year after year, others have revealed underlying law firm challenges on a global scale that are important to discuss.
One of the challenges discovered in the survey was the correlation of law firm billing efficiency and competition. Once a firm has worked out an efficient billing strategy, more time is available for concentration on other matters. Lastly, the study showed that achieving efficiency is made possible when a firm is successful at managing change within the firm. Challenging the status quo and investing in an innovation strategy to improve efficiency, collaboration, and agility will lead law firms on the path to success.
* * *
The full report is freely available for download in PDF format without registration here: 2019 Aderant Business of Law and Legal Technology Survey.