The strategic use of IT in law firms

In the first part of two features, Neil Cameron examines technology strategy, from outlining a framework for strategy analysis to identifying the key business objectives, and how your clients can play a part.

All law firms use technology to run their business and to deliver services to clients – they have to, as do all businesses. What characteristics make the use of technology, as applied to the practice of law, strategic as opposed to, presumably, tactical?

Depending on the size and growth pattern of the firm, the areas it wants to specialise in, its current financial performance, the state of the market and other external factors, a law firm’s key objectives will change constantly. They will always include key elements such as generating new work, recording more time, increasing realisation, saving costs, compliance, managing risk, attracting and retaining good people and so on – but their relative importance will (or should) change from time to time – sometimes rapidly.

Many law-firm heads of IT feel they have to operate and make decisions in a vacuum as they are not involved in business planning and are not sufficiently – nor frequently – made aware of the firm’s constantly changing business objectives and their relative priorities.

This can be very frustrating for those in charge of IT; especially, for example, when they are told that they need to open a new office in Eastern Europe in four weeks, and find out that it has been planned for months or that a partner has ‘sold’ work to a client on the basis of an advanced extranet delivery capability that the firm does not actually have yet. To my knowledge, both these things have happened in more than one law firm.

In such a vacuum, an intelligent IT director will make intelligent decisions about the firm’s IT ‘plumbing’, infrastructure and applications in the light of current industry best-practice, but will struggle to ensure that the firm’s systems are directly driven by the relevant business objectives. The use of technology becomes strategic if it is driven by, and implemented in a way that supports, the firm’s business objectives.

Strategy

There is no magic in the use of the word ‘strategy’. To paraphrase Mark Twain – a strategy is nothing but a plan with a college education. It should not be necessary to ask anyone in business management whether they believe they need to plan: unfortunately, in the legal profession, it often is.

If you do not plan, then what happens to you is what happens to you. If you plan, then what happens to you is a mixture of what you plan and what happens to you. Planning does not mean that you have absolute control over events, but it allows you to take control over events as far as possible and thereby maximise the opportunities and minimise the risks.

One of the main reasons for planning is to determine what to do, in what order, and by whom. The process of going through the planning stage in itself is extremely valuable as it provides a mechanism not only for determining what needs to be done but in the process, if properly handled, it also ensures that the result is achieved by consensus of all interested parties, and this means that the plan is far more likely to be put into effect satisfactorily.

In any normal law firm there are many different potential projects, each with their own tireless champion, vying for the firm’s finances and the attention of the IT department or the partner in charge of IT. One of the unnamed laws of computing states that, no matter how big the IT resource, the number of these projects always outgrows the ability of the IT resource to cope with them. As a result, the IT department ends up having to set its own priorities without any clear lead from the firm about the relative business importance of each project. This means that almost no one is happy, either because their project is not being undertaken at all, or because it is getting fewer resources than they feel it deserves. As a result, it often means that the morale of the IT department is poor. Furthermore, the priorities change constantly as pressure is put on the IT partner or the head of the department from a number of different sources.

The formulation of the IT strategy, as long as all appropriate parties are involved, should result in a clear and generally understood and agreed document which sets out the relative priorities of each approved project together with the identification and allocation of the appropriate resources and delivery dates.

Following such an exercise, the IT partner or manager can marshal his team in order to meet the agreed strategy with the confidence that the best use is being made of his people for the good of the practice.

When asked whether their firm has an IT strategy, most solicitors will reply in the affirmative. Upon closer examination, many of these strategies disappear, either because they are undocumented, or because they are not real strategies at all. Some examples of fake IT strategies include:

A budget;
‘Buy IBM’;
‘Buy what Allen & Overy buy’;
‘Buy what the average law firm has’;
‘Buy Microsoft’;
Something known only to top management;
A ‘knee-jerk’ IT department response to short-term exigencies;
Something carved in stone; and,
A stand-alone process performed once every five years.

A strategy must provide much more than any of these. It should guide the direction and scope of the whole IT development of a firm allowing it to match the resources available to the changing environment and enable the firm to meet its primary business objectives.

It must be like a blueprint (an overall design working together as a whole), a jigsaw-puzzle (with suitably shaped places left for future developments) and a route-map (how to get ‘there’ from ‘here’). This final stage is very important because, given the choice, no IT manager would start from ‘here’ in order to get to where the firm ought to be. He would start from somewhere else. Unfortunately, we do not get the choice – ‘here’ is where we are.

Even if we could choose, how would one go about selecting a system in a green-field site? The natural temptation is to look first at what is available, either in terms of hardware or software, compare them and pick the one that looks the best. This process, however, does not relate the different systems to the procurer's needs, only one to another and therefore is not a good way to select technology. Hardware and software are the servants of IT, not the masters. IT is not an end in itself, it should be subjugated to the needs of the business as a whole, the business of the law firm. Otherwise, the tail is truly wagging the dog.

IT should provide measurable business benefits to the firm, and it can only do this by providing useful functionality to users. Most organisations have reached the stage in their IT maturity whereby IT has been used to automate tasks previously performed manually or by obsolete technology. As a result, the lion’s share of potential benefit has been achieved. The next stage of IT development is to exploit the utmost that IT has to offer by re-engineering the processes with the aid of IT rather than just automating current processes: not just to change the way lawyers do things, but to change the way that ‘lawyering’ is done.

An outline framework

There are many methodologies and mechanisms for developing an IT strategy, and there is no magic to be attached to any one way of doing it. What I present here as an outline framework for a strategy analysis is an approach that has been developed over the years to work well with law firms – but there are many other equally legitimate methods.

This is an approach for organisations to develop IT strategies that takes into account the objectives outlined in the previous section. It is designed to ensure that the firm’s business objectives operate as the guiding principle throughout the strategic information systems analysis and uses proven methods to ensure that:

The right people are involved;
Opportunities are identified across the whole organisation and their costs and benefits considered;
These opportunities are prioritised in line with business objectives;
The full range of technical options are considered;
A full assessment is made by the firm itself of the strengths and weaknesses of the existing IT systems; and,
The resulting plan is feasible and any risks are clearly accepted by all concerned.

This framework contains the following elements:

Setting the business imperatives – what does IT need to provide for the business?
What are our industry and client drivers?
An IT baseline: where are we now?
Identify the systems needed – where do we need to be?
Formulate the plan: how do we get there?

The business imperatives: business understanding

As has been stated, IT is not an end in itself. This part of the planning process is the most vital as it should ensure that the time, effort and money put into IT developments by the firm over a period of years are utilised in a manner which support the overall business aims and objectives. This is the difficult bit.

A good way to undertake this exercise is for the key partnership decision-makers to familiarise themselves with the firm’s documented business strategy and annual business plan documents. These documents must exist and provide the key input if the IT strategy is to be successful.

Following this, you must determine the principal objectives of the firm and the critical success factors – what you have to do to meet these objectives. From this information, the key opportunities for IT within the firm can be identified.

So far so good. However, the nature of business objectives set out at this stage are usually to high-level, or too woolly, to be useful in determining the IT priorities. To do this it is necessary to drill-down to the key physical tasks or activities that must be done if the principal objectives are to be achieved. Reducing the key business elements to the task and activity level more easily permits the direct identification of IT opportunities. The firm’s overall mission may be to be ‘the most successful commercial practice in East Anglia’, and a principal business objective might be to ‘provide high-quality legal services to clients’. One related critical success factor might be to ‘have efficient processes for the capture, storage and retrieval of relevant know-how’.

The critical success factors need to be prioritised into high, medium and low so that the most important can be identified. These represent the firm’s critical potential bottlenecks for the future and as such also represent the areas where investment in facilitating the overall business aims and objectives will be most cost-effective. This is true whether this is achieved by information systems or any other method. Finally, a short analysis of the critical success factors will present a number of related IT opportunities which need to be documented for further consideration.

These could include:

Higher-quality word processing output;
Better internal communications;
Know-how databases; and,
Marketing systems.

During the course of this exercise, many firms find out things that did not fall out of the business-planning process which do not relate primarily to information technology. These may be significant enough to warrant documenting in order to be dealt with during the next business-planning process.

Client interviews

Most of the other elements of the research phase of the strategy are inward looking. It is also vital to get an idea of key external influences on the firm’s current and future business direction. The major factor here being clients.

Lawyers are not good at introspection, and they are even worse when it comes to having a dialogue with clients about what they think about the service being provided to them by the law firm. As a result – in my experience – lawyers make a lot of assumptions about what clients want, or do not want.

In many cases, when law firms are persuaded to challenge some of these assumptions by asking the clients themselves what they want, we find that the assumptions are wrong.

In one case, the law firm believed that clients were worried about the lack of security of internet email and that they needed to put in expensive (and awkward to use) email encryption facilities. Interviews with clients dispelled this myth – they did not have any real concern about the privacy of email.

Conversely, another firm had a strong belief that their clients would not wish to be billed any more often than quarterly. This assumption, however, had not really been tested. When it was discussed with clients, it was discovered that (apart from litigation matters) most corporate clients would prefer to be billed every month – a situation any enterprising law firm should want to exploit in order to reduce working capital locked up in unbilled work in progress.

This part of the strategy involves setting up a number of structured interviews with a range of clients representing different industries and client types – 12 to 15 should be enough. It is a key business-development opportunity, and so it should involve the cooperation of the marketing department, the client partner, and those conducting the IT Strategy exercise. The interviews should cover the following topics:

The various ways in which the client and the law firm communicate, and whether there is any scope for improved efficiency, usefulness and so on. This would include, for example, the ways in which draft documents and revisions are communicated back and forth;
A review of any electronic legal services that the firm uses, including those provided by other law firms, and the client’s view of their effectiveness and potential improvements;
A discussion on any new electronic legal services that the client might be interested in;
A discussion on the information provided to the client on the firm’s web site and client extranet;
A review of the billing process and the information provided to the client on billing, the frequency of billing and the likelihood that e-billing might rear its head;
A review of the range of work undertaken by the law firm for the client, whether this might change in the future, and the impact this may have on the firm’s future IT planning; and,
Any other issues that the client wishes to raise about the relationship between them and the law firm, especially in relation to IT.

(In the December/January issue of FD Legal, Neil examines the IT baseline review, the systems needed, how to formulate a plan and the next steps to take.)

Neil Cameron is the principal of Neil Cameron Consulting Group. He can be contacted at neil@neilcameronconsulting.com www.neilcameronconsulting.com