IT investment is not a one-off. For medium-sized City firms like Lawrence Graham, where the IT budget is about 5 per cent of turnover, it is a constant battle to keep up.
Head of IT Allan Bower says: "In terms of the future we have to keep updated to maintain compatibility. Old systems are not supported once the new system is out and there is pressure on suppliers to make the move to the new version."
One thing is clear, whether you are one of the magic circle or a medium-sized regional practice, your IT requirements are often fairly similar.
David Forrest, head of IT at Nottingham firm Freethcartwright, says: "Even if a firm is twice as big as we are, in terms of infrastructure you will often find that we've got the same as they have. For example, if a firm had six sites across the UK, we would need the same type of equipment as it had for its structure. Despite the fact that we are more regional, our costs are not that much different than from theirs, because in IT it makes little difference if you are passing information from one room to another, or one town to another."
But limited resources force the smaller firms to be more cautious. They simply cannot afford to pay money for a system which has yet to be proven. Martin Bird, head of IT at South Coast firm Blake Lapthorn, says: "When we went for the Videss system three years ago, we looked at some of the new systems coming in, those being pursued by the magic circle firms. But they were not developed enough to make us follow them down the road. We're not the people to be breaking ground, we wanted a system that was good and up-to-date, but not to be the first ones to have it."
But one major investment is never enough. Bird says: "After the initial investment you have to keep it up-to-date – developments move at tremendous speed and you've got to keep moving to be able to cope with the latest systems. We have intranet, we are currently developing extranet and are in the process of enabling client access. We are looking now at deal rooms and already have a customer relations management (CRM) system."
Athough they seem more simplistic than others, PC operating systems can create more difficulties than elaborate systems based on a browser, because of compatibility problems. Almost 100 per cent of the firms which answered the survey are working on a Microsoft system, whether it be Windows 95, 98, NT or 2000.
Lewis Silkin's head of IT Jan Durrant says: "We made quite heavy investments this year in microsoft file and print. We're having to make the change from Norwel Netwear and going completely Microsoft. We'd have had more problems keeping Norwel than replacing it. We needed to standardise it because it was causing us problems with losing formats in emails and documents."
But Bird denies that Blake Lapthorn's move to Microsoft Office-based systems is due to compatibility problems. He says: "When we were looking at new systems we didn't look for Microsoft to fit our needs. We chose Videss Legal Office, it just happens that Microsoft fits around that. What was most important was the practice management and case management systems, although Microsoft is a leader in the field."
Compatibility may become an even greater concern if Microsoft's stranglehold on the market is broken – 95 per cent of the world is using Windows.
It is certainly a concern when two firms merge. Forrest says: "We've had a couple of small mergers since I got here. It has implications for the accounts system particularly – it is more difficult to change accounts systems than anything else. What tends to happen is that any new work is put onto the normal accounts system of the larger firm involved and the account is run down on the old system. It is possible to engineer a process to transfer balances but it is a lot of work. However, in the merger of two large firms you would probably need to do that."
But avoiding any incompatibility could be as simple as switching to browser-based systems, such as intranet, extranet or deal rooms. And as with PC operating systems, Microsoft is leading the way with Internet Explorer.
Deal rooms are the trendy option of all the browser-using systems, although there is by no means universal acclaim about their productivity. In fact, there is a general consensus that most firms have higher priorities.
Lawrence Graham's Bower says: "There's been lots of hype about deal rooms. It's okay if you are using them for a number of large customers, but a lot of large corporates use more than one law firm and so there is a situation where they are using half a dozen different deal rooms to get hold of half a dozen different lawyers. It's the trendy thing to have and would work for a one-to-one client-solicitor relationship but the real world is not like that."
Document assembly systems are also suffering from a low take-up rate. This is mainly because much of the work done in document assembly can be provided by case management systems which are preferred on the whole by smaller firms.
A back-up system would be of higher priority to most firms. There are two options: a single back-up mechanism for all of the systems in the firm or a number of separate back-ups. This is one area that is turning away from Microsoft. Veritas, which grew out of a Microsoft environment, is now lagging considerably behind its rival ARCserve.
What is now of ultimate importance for firms is not the name on the box but the notion of added value. Bill Kirby, sales and marketing director at Axxia, says: "Market dynamics and priorities have changed, firms are not going for technology per say, they are seeking added value to improve their working capital. The emphasis is on buying systems to improve management information. They have to get efficiency and must provide the opportunity of working closer with their clients."
The difficulty in selling anything to firms is that the value of any IT product is difficult to quantify. Forrest says: "There's a balance – you have to prove that this system will save us loads of money and bring in business, give us a return on our investment. This is one of the hardest things, it's not always easy to quantify the benefits of a particular system in cash terms, especially if an alternative system is already in place. For example, email – we know now that it makes life easier, but at the beginning when lawyers used memos and telephones how could you have put in cash terms how much email is worth?"
New developments set to enter the marketplace, such as speech recognition, will face these same difficulties, but may become just another essential way of how we work. It will be interesting to note the development of deal rooms and document assembly systems, and whether the top City firms will forge a path along which the chasing pack will have to follow. However, perhaps the most fundamental change facing the IT infrastructure of law firms does not relate to a new system or piece of software, but whether the IT department is part of the firm or outsourced to an external agency.
Many firms are now considering the option of outsourcing their IT work. Bower says: "We do all IT functions in-house. But outsourcing those functions is easier to do now because of improved data communications and telecommunications, which guarantee a good first connection to a location outside the main office.
"Potentially it would be considerably cheaper to outsource, as it could halve our IT office. But you could loose control. You have to have an in-depth look at whether this exercise is worthwhile for your particular environment."
E-Manager IT Survey
In this, the second instalment of the e-manager survey of the top 100 law firms' IT infrastructures, The Lawyer looks at these key systems:
Document assembly systems
PC operating systems
IT Survey Commentary
The award for product penetration must go to intelligent document systems and in particular to HotDocs, which appears to have created its own market. These systems bring speed, efficiency and quality (see e-manager feature, The Lawyer, 22 January). But looking at it from another perspective, and notwithstanding the quality of the products, should we be surprised that only 23 of the top 100 firms say that they have this capability? One also wonders about the true level of development and usage within these firms – how many are producing documents online?
Nevertheless, HotDocs appears to have really got a good foothold in the marketplace – the web-enabled version and the Structured Query Language (SQL) database generation version also show immense promise in terms of client service. This is an area to watch. Everyform (the company created by Russell Shepherd which uses HotDocs software to allow access to downloadable legal forms) has now changed hands, and new owner Butterworths Tolley is also proposing to use HotDocs to boost its legal portal. The future starts here and the publishers could really accelerate this marketplace. Epoch has also recently brought out its new version of RapidDocs which will assist it in its refocused marketing campaign, no doubt helped by the arrival of Terry Lawley, Capsoft's former managing director, as professional services director. Other companies to watch in this area are GhostFill and SpeedLegal, which may be entering the market. KnowHow Systems are also renowned for innovation and already have the makings of a very good product.
The deal room results are interesting. IntraLinks was one of the first companies to set up deal rooms in the US in 1996. During the past couple of years there has been a proliferation of products in the UK, a number of which have been home-grown by law firms. But surprisingly, IntraLinks doesn't feature in the top 100 and many firms have no facility at all. A press release on IntraLinks' website reports that the company's client base has expanded beyond financial services to encompass six of the top-20 global law firms. It also cites $13.2m (£9.2m) sales in 2000 and the raising of a further $40m (£27.9m) in funding. So is a renewed attack on the UK market imminent?
A number of firms prefer to develop their own systems rather than rely on developed products with in-built security from experienced developers, but so far there have been no reported security breaches from either of these categories of product.
From a client-service perspective, it would be good to see one or two industry-standard deal rooms emerge, bearing in mind the dominance of two principle document management systems, PCDocs and iManage. PeopleDocs and Peapod are also well placed to achieve this status. With the advantages of increased security, transaction histories and speed of delivery, one can only predict deal rooms will continue to be a growth market.
In terms of basic law firm systems there are a few clear lessons to be learnt. Internet Explorer dominates over Netscape, although there does not appear to be a huge take-up of version 5.5 of Internet Explorer, while Windows 95 is the dominant PC operating system. Does this mean that there will be a huge take-up for Windows 2000 Professional this year? ARCserve appears to dominate for back-ups.
The good news from this survey is that law firms have clearly invested in some quality products and have established strong infrastructures – the necessary foundation for delivery of the highest levels of client service. We also appear to have entered an era of increased transparency which should be to everyone's benefit. Long may this continue.
Derek Southall is a partner and head of strategic development at Wragge & Co.