The Technology Paradox Rule

Part of the lpc series The New Economic Rules

Some may regard it rather peculiar that a consultancy, whose DNA derives from a legal practice renowned for its advanced technology, should ruminate upon a Technology Paradox. But that DNA does not support a view that simply increasing expenditure on IT, or having the latest whiz bang software, in themselves, increase the productivity of legal practices. Even that old standard from suppliers that more hard earned moolah needs to be spent on training needs to be viewed with extreme caution (though training can be of help with certain types of systems).

While technology is indeed a pre-requisite to efficiently providing many legal services, it is the application of technology that is the decisive issue not its simple existence or how much has been spent on it. This gives rise to an important New Economic Rule - the Technology Paradox.

Imagine that a successful lawyer buys a Ferrari (some do). However, the lawyer simply uses it for day to day city driving - it cannot even be taken to the golf course (on the assumption that any lawyer with a Ferrari plays golf, naturally) because the luggage space is about as useful as the proverbial chocolate teapot. But on being challenged that he or she is using perhaps 5% of the car's capability, the lawyer will retort that the car lends weight to his or her rainmaking capabilities. Such a claim has always been a spurious basis for purchasing highly depreciating assets but any residual validity has surely been shattered by the downturn.

A lot of IT expenditure is pretty similar. There is a tendency for legal firms to overspend and over-specify. The procurement process with legal firms does not tend to be as exacting or as independent as within other industries There is a curious belief that the more something costs the better it must be.

The amount is often irrelevant - it is what a practice does with Legal IT that matters. Just like that Ferrari, much Legal IT is wholly underused. In many legal practices there is no prospect of the Legal IT being fully utilised or, indeed, being harnessed effectively. Take even the humble Microsoft Office products Word and Excel. It has been estimated that over 80% of their capabilities are not used by the average user.

For any legal offices being established, there is just no need to spend lots of money on Legal IT to carry out their main work - there are free, entirely satisfactory office packages which are compatible with Microsoft Office. Indeed there are entirely online systems from, say, Google and Zoho that allow a legal office to build an online, shared and distributed system for little or no outlay.

These services are part of a fairly new phenomenon called SaaS - software as a service. Other common names for this include “online applications?” and more imaginatively “the Cloud”. The quintessence of this breed of software (which is quickly gathering momentum) is that all those servers, tape drives and the whole paraphernalia of running a reasonably sized modern IT set up can be dispensed with. It is a powerful argument but there are contrary privacy and data security issues which need careful handling. In due course the SaaS model is likely to prevail - while an entire legal office can currently be run on SaaS, caution may dictate a pic'n'mix approach to software at this time.

In truth there is a balance to be achieved between the various sources and cost of Legal IT depending upon the nature of the legal business. There are various factors - the size of the business and the main types of work carried out are important but the most pertinent factor is where the business has reached on its IT evolution.

What is meant by a business's IT evolution? The use of IT in any business is never represented in a linear fashion. Those who took physics at school will recall the joys(?) of potential and kinetic energy. Imagine winding up a clockwork toy - energy is transferred to the clockwork mechanism and is stored as potential energy. When the mechanism is released that energy is discharged by the movement of the toy as kinetic energy and other things such as sound and heat.

It is similar when making investment in IT: time money and effort are transferred into the IT investment and create a potential benefit for the business which has invested. However the beneficial output of that time, money and effort is rarely completely fulfilled. It is as if the clockwork mechanism has either not been wound up properly - the input has been defective - or the mechanism is damaged - the output is defective.

The purpose of this rather painful analogy is to highlight that (a) legal businesses are invariably disappointed about the output of the IT investment and (b) why this is. The eternal problem is achieving real productivity gains from the IT expenditure. In the next graphic the experience of many businesses of IT investment is summarised. After the “quick wins” from an IT strategy, there is a disappointing period where IT spend increases but there is not a similar return in productivity - the “valley of despair” denoted on the graphic.

Provided that a business can maintain its resolve during this period there should be further and exponential returns at a later stage in the evolution.

Crucially a review of Legal IT expenditure and strategy should aim to eliminate or at least flatten out the “valley of despair”. This is achieved by focusing on (a) application and (b) actual realisable return rather than looking at potential return in a perfect world where goals are largely unachievable. This is an area where lpc can provide assistance to most legal practices - whatever their size. lpc's independence from all suppliers means they have no interests to protect and no agendas to make. They will provide a straightforward assessment of the business's IT strategy and implementation (a) in absolute terms and, most importantly, (b) with regard to the expectations and intentions of the legal practice. In most cases such a review will result in suggestions that will make or save the practice a good deal of money - or most likely both.

If a big spend has already been made by the business the emphasis should be on using the IT already acquired to its greatest advantage. If the business is at an earlier stage of evolution the spend can be meaningfully smaller than perhaps envisaged.

There are many other issues surrounding IT that raise similar paradoxes. Some of these occur because the culture of an organisation fails to match its IT evolution. An example of this are practices that install “paper free” case management systems and then continue to print everything out “just in case”. Airlines do everything in cyberspace these days and it would be easy to imagine the ensuing problems if they just printed everything out “just in case”. It rather emphasises an problem endemic to the use of IT in legal environments. The IT strategy should be central and integral to the legal practice's business's strategy whatever the size of the business. Just as importantly a spiritual understanding of the centrality of IT must exist among all the stakeholders of the business.

Given that legal practices are knowledge businesses, this centrality also encompasses weaving the knowledge and know-how of the business into the fabric of the IT systems. Knowledge management is often thought to be the preserve of large and wealthy firms. But this is where the pic'n'mix IT solution can work so well. In contrast to the position with legal accounts software, which is crucial to the regulatory environment of the business, knowledge management systems can be set up for relatively little, other than the hard work by the group of people implementing it. There are a plethora of such systems available as Open Source (i.e. free) software and because they have such massive user bases any flaws within the software are resolved by the army of techies that use and develop the software. A medium size firm for example could enable intranet with extranet capabilities in this fashion.

Specialist legal knowledge management providers may have lots of objections to this (mainly that they are not getting a fat fee) but the Ferrari analogy is germane. The medium size firm does not need the Ferrari type solution - using the Open Source software at this stage in the IT evolution of the business would be reasonable. At future times there may be advantages in upgrading. Look back to the graph detailing the return in productivity from IT investment; following the pic'n'mix approach eliminates or significantly reduces the “valley of despair”. In other words superior and more quickly realised productivity.

lpc's understanding of technology derives from implementing a successful IT evolution in a legal environment. They understand the place that technology will have in enduring the downturn and being ready to benefit from an upturn. lpc can assist all sizes and types of legal businesses achieve a superior evolution.