Playing the technology field

On 19-20 January 2004, Ark Group’s business strategy and solutions forum, Lex Connect, will bring together legal solution providers and law firms to discuss the challenges of effectively managing law firms and the technology solutions that can potentially help firms drive their business forward. In preparation for the event, Caroline Poynton talks to representatives of the solution providers that will be at LEX, including Canon, Computacenter, E1 Business, Nortel Networks, SAP and Voicepath.

The world is getting smaller, with law firms expanding across every frontier in the search for new business and greater profitability. Success has far from been assured, however, and the prolonged economic downturn of recent years has impacted law firms and their technology solution providers alike, with firms looking to maximise the efficiencies of their IT investments through streamlining their existing infrastructure and, more seriously, cutting costs. Thankfully, there are signs that older solution providers have learnt important lessons from their years in the market and there are still plenty of opportunities from law firms looking to buy. And, in a more exciting development, the industry is witnessing some newcomers to the legal IT arena, companies that will hopefully provide a much-needed breath of fresh air and some healthy competition to what might otherwise be a niche and somewhat stagnant marketplace.

Many firms now enjoy multi-jurisdictional offices across the globe, reinforcing their competitive capability but demanding seemingly limitless resources to maintain and support the growing infrastructure. With firms needing to link teams of lawyers across different cultural and geographical locations, the demand for effective means of integration and collaboration has never been greater. Similarly, security has become a real concern, with disaster recovery and business continuity becoming major issues of the moment.

On the other hand, small single-site firms have requirements born of a competitive landscape, in which traditional work in specialisms such as conveyancing and personal injury has dwindled under the impact of an increasingly commoditised marketplace. To meet such challenges, firms are turning to volume-driven, legal-service delivery supported by an advanced IT infrastructure that can enable even the smallest firm to effectively compete and grow.

Legal solution providers appear to be fully aware of the many opportunities to be won from this varied landscape. Steve Warren from the City sales force at Nortel Networks explains how the company is structured to manage firms of all sizes, with Nortel’s business partners directly managing the smallest firms, and the direct touch sales team, on which Warren sits, managing larger accounts, talking to customers and finding solutions to meet their needs. Similarly, Computacenter has three divisions handling procurement of IT hardware and software, infrastructure integration, and managed services. As Simon Gay, consultancy practice leader, says: “If we’re selling a type of IT equipment then there has to be economy of scale, but for consultancy work, then it can be the very small firms that need your expertise to get them up and running.”

New entrants to the legal space are also wisely looking to make the most of the many different requirements of differently sized firms. SAP, a global provider of business-software solutions, has recently completed its first major deal in the legal sector, implementing an enterprise-resource-planning (ERP) system across Linklaters’s 30 offices worldwide. The deal, worth up to £40m, has led to reports that SAP is only relevant to the largest of firms, but Andrew Miller, business manager for legal, and Rob Harrison, head of the professional services sector, are keen to dispel the myth. “It’s fair to say that while SAP can support end-to-end critical business processes, it is not a prerequisite for implementing SAP. There are many areas where we would be able to deliver parts of functionality to customers on smaller projects,” says Harrison. The company’s applicability to smaller firms is also demonstrated by its recent deal with Haarman Hemmelrath, which has about 400 lawyers and a turnover of 102m euros.

While the legal market may provide numerous opportunities for solution providers, long gone are the days when law firms would effectively write a blank cheque for technology, understanding the need to remain competitive but knowing little about the best means of achieving that. Solution providers now have to work hard to understand the motivations and requirements of the firms with which they do business as law firms have become far more sophisticated in their understanding of IT capabilities and cost. According to Francis Davis, head of sales at Voicepath, a digital dictation and transcription company, the legal market has become very dynamic: “Once you get to know the right people in a law firm, and you can prove you have a sound business case that will make them some money, then they’ll usually move quite quickly because they know that they’ll miss an important business opportunity if they don’t.” Making a good business case, however, has become an imperative, Davis adds, with law-firm IT managers expecting solution providers to provide much more comprehensive proposals or solutions.

CRM solution provider, E1 Business, has similarly had to work hard to determine the particular needs of law firms to ensure that its relative inexperience in the market can be played off by a proactive understanding of the key motivations of UK law firms. In particular, UK firms have developed significant strengths in marketing, running specialised departments that manage an array of activities, from marketing campaigns and events to core business and client development. In contrast to US rival Interface Software, with its market-leading product, Interaction, E1 Business is approaching the CRM space with a specific marketing angle, underpinned by a generic product, Sage SalesLogix, which has a very strong CRM and marketing capability. Conversely, Interaction was written by a fee earner for a fee earner in America where even today, most US firms do not share the same concept of marketing operations as in the UK. Interface has recently reinforced Interaction’s marketing functionality, particularly in the UK, but newcomer E1 Business may still have the advantage, supported as it is by the strong reputation of Sage (which currently has 3.6 million users).

Ben Knight, business-development manager at E1 Business, knows, however, that even if it is able to offer the best, most informed product, the newcomer’s task in a niche market is never going to be easy, especially if faced by the dominance of more established solution providers. “I think we’ve identified areas where Interaction has or will be winning business where we haven’t really had the opportunity to engage with a firm,” he says. “There’s a mindshare that some other firm has got this system or a fee earner has moved from a firm where they’ve used it and they want to use it again. That’s going to happen and you have to understand that.”

Having said that, the newcomers are doing well. Since E1 Business signed up Irwin Mitchell, it has won business with Pinsents, Langleys and, most recently, Robert Muckle, and Knight expects to have three or four more firms signed up before the end of the first quarter of 2004. Similarly, Voicepath, which commenced business in 1998, has some major competitors in digital dictation, including BigHand, WinScribe and nFlow, but Davis is full of confidence. Since January 2003, he says that the company has enjoyed phenomenal growth of about 150 per cent and it has recently taken on two more sales people to support that growth. He admits that the competitors are currently leading the field but he argues that Voicepath has an important differentiator in that it is the only digital dictation provider that also has an integrated transcription solution. Moreover, the company has a unique financial model charging in pence per transaction/audio file rather than requiring capital investment upfront. Most importantly, Davis believes the company is set for a very big future. “All of our competitors have the market share for the moment but we will take over. And, with our current growth rate, we are on route to do that,” he says.

Miller and Harrison are equally enthusiastic about the prospects for SAP following the success at Linklaters. Miller explains: “We have a relatively conservative approach, so before jumping into the UK legal market with both feet, we wanted to focus on the implementation at Linklaters. However, the covers are coming off now and we believe the time is right.”

Emotive rhetoric, perhaps, but one backed by action. Just over two months ago, the legal team expanded, with Miller’s appointment to head of the legal sector. In addition, the company has confirmed a partnership deal with legal IT provider, Pilgrim, to develop SAP’s practice-management (PMS) solution for law firms with a turnover of £20m-£150m. Clearly, SAP is keen to demonstrate its readiness to take on the entirety of the legal market.

SAP also has the advantage of experience in 23 sector solutions, the most recent being professional services. As Miller says: “If you look at how SAP has developed over the years then you will see that we have an enormous internal capability to take on new markets.” Considering the sheer size of a company such as SAP, with its 12-million users worldwide, Miller clearly has a point. And, if the time is right for SAP, then surely it is also time for other solution providers, faced with the threat of such powerful competition, to rethink their place in the market?

In their favour, solution providers that have enjoyed dominance in the legal space for as many as 20 or 30 years, are now enjoying the brand awareness and reputation that only time and experience can buy. However, there can be some inherent hurdles in surviving for so long, especially, and ironically, if characterised by success. Canon, for example, provides multifunctional devices to law firms, that is, photocopiers that can also be used as network printers, faxes and scanners. It has recently combined this with its eCopy system, allowing users to scan documents directly to their e-mail accounts, network-file servers or document-management systems. Despite such innovation, however, the company has had its challenges, as solutions manager Chris Tickler explains: “The legal market had a perception of Canon as ‘the photocopier company’ in the IT department. This meant that IT managers were initially reluctant to replace their trusted laser printer with our multifunctional device.” The message is that experience and market reputation must be balanced with an ability to re-brand and innovate. Companies that prove unable to do this may find themselves drowning under the weight of an outdated business proposition, and the fresh-faced confidence of new entrants.

Nortel, Canon and Computacenter, all old names in the field of IT, appear to be coping well with these challenges, as they work hard to meet any changing requirements of the legal industry. Gay works on the infrastructure and integration wing of Computacenter, which looks at removing cost and improving performance for customers within their organisations. For the legal industry, however, he knows that a particular focus is in document management, as firms face increasing amounts of data and the regulatory demands of the Data Protection Act. Gay says that archiving has also become an important issue. “As data is amassing, you could just throw more infrastructure at it, which is not good for our customers, some of which are dealing with huge growth rates of more than 100 per cent per annum,” he says. The company is also keen to keep up to date with the security requirements of the modern organisation and has invested £11m in a proof-of-concept solution centre, which can test new systems, updates or migrations with user load-testing before deployment. For a profession as necessarily risk averse as the legal one, it is surely a wise move.

Nortel is also keen to keep up with the times and is particularly focused on the convergence of voice and data, something that has been promised for years but is only now, Warren says, becoming a reality. Although Nortel talks to end users, creating demand and explaining Nortel’s solutions to them, everything it sells goes through one of its business partners. These partners are now an important element of Nortel’s ongoing strategy as it works to ensure they are trained properly to deliver the benefits of multimedia.

With newcomers fighting for a piece of the legal pie and established solution providers working hard to maintain their ground, the competition looks likely to be fierce in the months and years ahead. All the companies interviewed for this article had a very clear idea of why they’ll be the success of the future, and what will differentiate them from this burgeoning competition. For example, SAP’s Miller and Harrison are critical of a market that is “attempting to do everything with bits of sticky tape”. Where firms might currently have five or six different best-of-breed systems, they argue that SAP can provide everything to support all business processes across the whole firm. On the other hand, Knight of E1 Business argues the case for best of breed, saying that one company is unlikely to be able to provide top-quality systems across the board, and is likely to fall short of delivering the necessary level of service in such crucial areas as CRM. Consequently, he believes that many firms will continue to look for the specialist expertise of companies such as his.

While intense competition looks certain, integration and consolidation will also likely prove a major theme, both in law firms and within legal solution providers. A criticism of years gone by was that firms were unable to integrate the systems of different solution providers, forcing them to part with more money to ensure workflow continuity. Solution providers are now keen to profess their ability to integrate a firm’s existing systems with their own so that they are able to provide all, or merely a part of, a firm’s IT requirements. In another vein, as with SAP’s partnership with Pilgrim, E1 Business is now working with several large PMS suppliers, including Axxia and Civica, to provide a quality CRM capability as part of the complete solution such companies offer. It is a development that may very well reconcile the debate between best-of-breed and end-to-end solution delivery.

Of course, the real winners of all these developments are the law firms. Canon, Computacenter, E1 Business, Nortel Networks, SAP and Voicepath are all united in one important respect: the cost-effective quality of the products they are offering. And, with intensified competition, solution providers cannot afford to rely on mere rhetoric; proven results will bear testament to the promises made and those lacking will pay sorely for their failures. As for law firms, they have their own challenges, but in one respect they can be assured: the technology market is opening up and there will be exciting opportunities for those looking to invest.

Francis Davis is head of sales at Voicepath. He can be contacted at: fdavis@voicepath.net.

Simon Gay is consultancy practice leader at Computacenter. He can be contacted at: simon_gay@computacenter.com

Ben Knight is business development manager at E1 Business. He can be contacted at: ben.knight@e1business.com.

Andrew Miller is business manager for legal and Rob Harrison is head of professional services sector at SAP. They can be contacted at: rob.harrison@sap.com and andrew.miller@sap.com.

Chris Tickler is a solutions manager at Canon. He can be contacted at: chris_tickler@cuk.canon.co.uk.

Steve Warren is from the City sales force at Nortel Networks. For more information, contact: bishopj@nortelnetworks.com.