P2P

81 I L T A N E T . O R G L aw Firm business and technologies are intertwined now, more than ever. Technology is transforming the way law firms do business. Understanding the hows and whys of the technologies used in law firms along with the way law firms work, means you will be able to help in the transformation of your law firm. Law Firms as Business In the traditional law firm model, the value proposition is there are clients who have a need for legal advice and a law firm offers to do transactions or handle a litigation matter. The basic revenue model has the law firm charging for each hour an attorney works on a matter – the "billable hour". The operating model is that the "work" is done by attorneys, manual labor, with a cost structure that is based on "people-power". The law firm organization is a traditional pyramid partnership model. with shareholders at the top, the business owners who are directly impacted by the revenue and costs to the firm. When they act like they own the place, it's because they do!! They must be convinced of the ROI for them personally, to invest in a technology. The middle of the pyramid is the associates, who are the attorneys who execute and work in the trenches. They are often the primary point(s) of contact for project work. They are the future owners of the firm. The base of the pyramid is all the business services departments. The business services departments range from Litigation/Practice Support, Client Technology/Development, Innovation, Knowledge Management, Consulting Services, HR, Library Services, IT and Finance/Billing/Accounting, who are all about the money. They are the recipients of all the time entry to legal matters that they translate into the client bills they send out. They deal with the firm and practice economics, provide all the reports to the shareholders about how well the firm is doing. A lot of technologies in a firm support the business of time entry, billing, reporting, collections, metrics related to the finances of the firm, as well as economics. The Reality Today As the world has evolved, so have client needs from law firms. Now clients need legal advice AND project management and efficiency. Law firms are offering full product portfolios including advice, project management and legal technology consulting services. The revenue model is more often a fixed price, rather than the billable hour. The value chain is becoming more disintegrated, with a law firm automating more and outsourcing some services. The cost structure is about people AND technology. And the organizational pyramid is flattening in many instances. Law Firm Challenges Despite increasing complexity in the economy and regulatory environment, legal functions face pressure to maintain or reduce their budgets. With the entire structure and culture of the majority of law firms driven by the billable hour, partners succeeded through leverage i.e. the more junior attorneys working long hours on your matters, the more profitable you will be. Efficiency didn't pay. Some firms have used technology to turn the commercial model on its head, charging a premium for early closing, and showing the benefit of charging extra for speed, as well as many other efficiencies. At the individual client project level this has still not taken hold in the majority of law firms. Law firm clients, whilst frustrated about fee estimates that bears no relation to the final invoice because the review took so much longer than expected, are forced to accept the status quo because nobody is changing this meaningfully enough. Law firms are growing and delivering profitability under the existing system which doesn't make this an easy environment to foster innovation. There is still a massive cultural change needed to fully transform the legal industry away from the billable hour. Leadership resists investing in legal transformation. Perceived as a cost center, legal struggles to gain approval for large investments in technology and capabilities to modernize the department. Administrative friction wastes time and increases risk - manual, repetitive processes create room for error and absorb lawyers' time away from practicing law and partnering with the business on strategic matters. Clients want – Solutions, Options, Confidence, Opportunities. If law firms meet those needs, they will succeed. Those who don't, they face a lot of competition. The Alternative Legal Services Provider (ALSP) Ecosystem There are a number of ways that legal services are now being provided outside of law firms, or as adjuncts to law firms. These continue to evolve and put pressure on law firms to keep up.

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