UK 200 Business Services 2016: Key findings

This is the second edition of The Lawyer UK 200: Business Services report and, like last year, it takes as its starting point an apparently simple equation: what is the optimum number of business services staff a firm should have when compared to its total number of fee-earners? Or, to put it more bluntly, do you have too many?

This is far from a simple – or academic – equation. Since last year’s edition was published the world has changed, and not just in the light of Brexit and Trump. The rapid increase in the use of technology in the legal market across an ever-growing range of uses is changing everything.

Over the past year, ever since Berwin Leighton Paisner (BLP) broke new ground in the UK legal market by becoming the first to use artificial intelligence (AI) software, an ever-growing roster of firms have adopted AI for a growing range of uses.

Indeed, the list of other firms and providers using AI is now so long that its use has rapidly moved from ground-breaking and award-winning (BLP picked up the Best Big Data Initiative award at this year’s The Lawyer Business Leadership awards for its RAVN deal) to commonplace and verging on the mundane.

In a year the question from clients in a growing number of areas has shifted from ‘are you using or planning to use AI?’ to ‘why aren’t you using AI?’

And this shift naturally raises another question: what impact will this extraordinary development have on business services teams and, ultimately, their jobs?

In 10 years, what will look most different?

This question is a particularly live one. While not directly attributable to the rise of AI, the large-scale business services roles consultations this year at both DLA Piper, which cut 175 business services roles this September, and CMS Cameron McKenna, Nabarro and Olswang, where 850 business services roles are in consultation, underline the changing shape of the UK legal market.

Indeed, the news that was breaking at press time that King & Wood Mallesons had failed to complete its recapitalisation programme and faced an uncertain future, suggested that further significant restructuring was on the cards.

“What with the CMS merger and now this, it looks pretty catastrophic in my view for support services and lawyers in a market that is already right-sizing in London,” says Alexander Low of real estate specialist JLL.

From a specifically technology perspective business ­services roles are also changing, with new job titles such as legal ­technologist (mentioned by one firm in this year’s research) becoming more common. This is the ­future outlined years ago by legal futurologist Richard Susskind and it is ­happening now.

Underpinning firms’ ability to reduce headcount while still improving efficiencies is the use of new technology. This partly explains why it has rocketed up the strategic agenda at most
UK 200 firms, as our survey reveals.

“It remains challenging for firms to prove the value of technology and innovation investments” Haig Tyler

As Herbert Smith Freehills’ CIO Haig Tyler points out, “the results of The Lawyer survey indicate the strategic value of technology is now recognised at most law firms.

We are entering exciting times. However, it remains challenging for firms to prove the value of technology and innovation investments.

“Those firms able to rapidly show a clear  connection between investment and positive  business impact will surely reap the biggest rewards.”

Emulate the Amazons

The changing shape of the law firm business services model was the topic of discussion at a breakfast briefing at RPC in October. As keynote speaker Lee Bryant of consultancy Post Shift put it, in five years’ time law firms might look very different, more like software companies than professional services businesses. And at the core of this argument is the impact of technology.

Bryant’s argument is that law firms are what he calls ­“platform businesses”, like major online retailers such as Amazon, and that in time the headcount mix will change to reflect this.

The RPC session focused on how the disruptions in the legal market, from technology, including AI, to more powerful general counsel coupled with societal changes such as the influx of millennials in the workforce, are posing significant challenges to the way firms organise their work.

According to Post Shift CEO Christine Overby, these ­disruptions are chipping away at the social structure that has long served the professions, “which assumes the continuation of a slow conveyor belt from qualification to partnership for ­specialised professionals, with all other value creation ­activities delegated to ancillary support functions”.

Some of these support functions, such as technology, ­analytics, consulting and even design thinking, adds Overby, are “fast becoming a core part of the value proposition that clients expect”.

Overby believes that these rapid changes and challenges to the status quo are in turn demanding new organisational ­structures and practices that are more agile, “in terms of structure, ­management and team shapes”, and also that they need to be more connected.

“It also means that what were previously seen as support functions are becoming potentially a source of differentiation and competitive advantage,” adds Overby.

Marked for demolition

Clearly, this shift could have significant consequences for business services teams and also raises questions for firms’ top level management.

At last month’s panel discussion RPC’s director of knowledge management and capability Andrew Woolfson and its director of brand and talent Clint Evans revealed how RPC has been putting this platform model into practice.

One of the most important takeaways was that platforms ­create a “self-service environment” that increases the ­autonomy of client-facing teams and distributes accountability.

“We try to develop accountability by building micro-enterprises within the firm,” said Woolfson. “It is about decentralising accountability and investment, which, in turn, empowers more people across the business.”

“We try to develop accountability by building micro-enterprises within the firm”  Andrew Woolfson

For Evans, the impact this vision of the future will have on RPC’s staffing model over the next decade is clear.

“I anticipate we’ll be a lot smaller in terms of headcount but for the same or better economic returns,” said Evans.

Technology shift

This year we have augmented the headcount-­focused data that is the cornerstone of the UK 200: Business Services report with ­technology-specific research.

In October The Lawyer surveyed all of the top 200 firms with a short technology-related ­questionnaire. Our aim was to pin down whether the recent deluge of ­technology-related stories emanating from the UK’s largest
firms meant that technology was genuinely moving up firms’ strategic agenda. If so, was this resulting in increased levels of investment in technology and higher technology budgets, and in what types of technology were firms investing? And, perhaps most importantly, were they seeing any return on that investment?

And here the big takeaway: 84 per cent of respondents say ­technology has gone up their agenda, 66 per cent say the tech budget has increased, but only 31 per cent can point to a correlation between their technology investments and an improvement in their financial results.

The point of view from the other side of the table is worth having at this point. Jon Davies, one of the founders of ­technology leasing business 3 Step IT, says: “What strikes me is that most of the responders’ are recognising that technology and innovation has become more important from a strategic point of view, however only a third can definitively point to a financial improvement from the investment. This leads me to ask the question – what is driving the recognition that technology and innovation is important? And are firms really prepared for change that real innovation will bring?”

Davies says these questions are important because firms may be looking at new technology because they just want to fix ­current issues (eg inefficiencies) or ‘keep up with the Jones’.

“If this is the case it will be very difficult to show tangible ­financial benefits,” adds Davies. “Whereas true innovation is likely to be more disruptive but is more likely to bring the ­demonstrable financial benefit if successful.”

Among a variety of trends highlighted by the research, the responses confirm that technology-­related innovation is by no means only found in larger firms. Several of the firms with standalone innovation teams or tech-­focused R&D budgets are in the lower half of the UK 200.

We asked a series of questions, anonymising the results to encourage greater input from firms. The findings, along with a selection of the responses, are detailed below. In certain cases firms granted permission for The Lawyer to attribute ­comments or for additional information.

Tech as a strategic tool

Has IT and technology-related investment moved higher up the strategic agenda at your firm?

The responses to this question remove any doubt that most firms regard technology as now at or near the top of the agenda in terms of its strategic importance. That said, as TLT’s head of transformation Jeff Wright points: “How significant this really is depends on where it was in the first place.”

An overwhelming majority (84 per cent) said that it had moved up the agenda at their firm. Investment is now seen as a strategic priority. In short, it is rocketing up the agenda.

As the COO of Simmons & Simmons’ new Innovation Group Ben McGuire puts it, “there’s a lot of noise around tech but innovation is a much broader topic. For us it’s absolutely about being focused on our strategic objectives.”

The two clearest reasons why technology is now ­strategicaly so vital also emerged through the series of ­comments. The first is to deliver better services to clients while the second is to do so more efficiently. Though they are ­obviously directly causally linked, what is less clear from the responses is the order of priority in which those two imperatives are ranked by firms.

In other words, are firms primarily looking to increase ­efficiencies, which ultimately should improve their bottom line, or is their number one priority to improve services to clients, which in theory at least should have the same effect though perhaps less directly in the short term? Perhaps, ultimately, it amounts to the same result.

As one firm put it, “it’s imperative to improve operational efficiency in the delivery of legal services, to maximise value to our clients and to remain competitive”.

Mishcon de Reya said investment in technology was now one of the “cornerstones” of its new 10-year vision and associated business plans.

“As part of the process of developing these plans, we looked carefully at what our clients wanted from us and what our own employees expect from us,” explained Mishcon. “It’s clear that, as technology becomes an ever bigger part of modern life, its impact on the delivery of legal services is also increasing. We want to be at the vanguard of these trends – our 10-year vision makes clear that we will be technologically transformed. And so, we are investing behind that.”

Eversheds echoed Mishcon, saying that ­technology had “most definitely” moved up the strategic agenda and that it along with digitally-fuelled growth was more important than ever.

“It’s been fuelled by two things,” Eversheds continued. “Opportunities to use technology are increasingly accessible and cost-effective and our clients are demanding a more digital service.”

Click on box and graphics above to enlarge

The Lawyer UK 200 Technology 10
(For the full top 10 profiles, see the report)

Gowling WLG (edited version)

Major events often serve as a catalyst for innovation, and in the global legal market context, events don’t come much bigger than a transatlantic merger.

The merger in February this year of UK firm Wragge Lawrence Graham & Co and Canadian firm Gowlings to form Gowling WLG has certainly resulted in some big changes. Integrating various platforms is always a significant part of any merger, and according to partner Derek Southall, the merged firm is currently in the phase of “working smarter to help with the day job of our people, and all the while ramping up in legal technology”.

In practice, this has meant a whole string of major projects, few of which are more significant from an efficiency point of view than the digitisation of the entire KM function.

“We reduced our space requirements by 85 per cent,” says Southall. “We replaced two big libraries with knowledge points and all of our training and communications are now done via knowledge pods. It has come a massive distance.”

“The key question facing every law firm is where will you see growth coming from. And at the heart of the answer is technology” Derek Southall

The organisation is also projected to make a significant difference to overall costs – saving £167,000.

The renamed Digital Information and Legal Systematics team, headed by Southall, is embarking on a major new project to measure what Southall calls the “digital fitness” of every support area and practice area. “You need that visibility on how people are performing digitally,” he adds.

At Gowlings, technology is divided into three areas. The first it calls ‘digital basics’, which includes essentials such as document management, finance and the CRM system (“the stuff you just have to do well”, as Southall calls it).

The second area is “enabling technology”, which includes a menu of technology available to the firm’s lawyers to enable them to do things better, such as document assembly and case management tools.

Lastly comes “digital futures” – new and emerging technology that could have a profound impact on how firms operate.

The third block is where you will find artificial intelligence, analytics tools and emerging technology, such as blockchain, the increasingly important online ledger.

“Any law firm going through a journey has to get its investment right in each of these areas,” argues Southall. “You can’t ignore any. But equally, you need to stand back and look at the investments you’re putting into each area. You have to look at the economic models and decide what’s right for you.”

Investment levels in technology at Gowlings year-on-year are similar but, as the firm outlines in its response to The Lawyer’s survey, there has been “a shift in focus from infrastructure/merger to transformation and efficiencies”.

It adds: “We anticipate investing in AI and analytics tools, but these may require us to adopt different internal financial models.”

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