IT SEEMS that every day the media reports the launch of a new e-venture, with comments about the death of the traditional business model. But what is e-commerce? Why should law firms get involved? And if they do, how do they ensure that such projects will be a success?
What is e-commerce?
E-commerce is the conducting of business online using the internet and a computer. Two business models currently exist: business-to-business and business-to-consumer (B2B and B2C). It is estimated that 80 per cent of e-commerce will be B2B, but both models offer a huge potential to cut costs and improve customer service.
What's more, the current market predictions are that in two years, over 80 per cent of e-commerce transactions will no longer be done on a computer. Instead, they will be conducted using Internet-enabled phones and digital television.
Why should firms get involved?
Many firms are deterred by higher priority IT projects, uncertain implementation costs and lack of proven benefits. The dilemma is whether to wait for client demand, implement to tight timescales and risk losing clients, or develop ahead of demand and risk implementing an inappropriate system.
There are two basic business models that may be relevant to law firms: client-specific websites, where clients can access a secure website and review relevant information to their legal affairs, whether it be documents, financial information or project status; and pure online legal services, where subscribers can analyse their own legal problems and consider the relevant regulations via a website.
Allen & Overy and Clifford Chance have each rolled out an online deal room system (a sophisticated version of a client-specific website), while Linklaters has launched online legal services under the Blue Flag umbrella.
Other examples of different models include Elexica, an internet service provider (ISP) which is "by lawyers, for lawyers" launched by Simmons & Simmons.
What should your firm be doing?
Some firms believe they should do nothing and avoid e-commerce, arguing that traditional business models are sufficient. But e-commerce erodes barriers to entry and product differentiation, so to "wait and see" may mean losing ground. Law firms should get involved in e-commerce or be left behind.
What are the first steps in e-commerce
1. Planning Examine your existing business strategy and link this to your e-business objectives. Ask, "What are we trying to achieve and when?", "Who is this service aimed at", and "How does this help us win traditional legal business?".Prepare a plan stating the e-business objectives, strategy, a marketing analysis including competitor initiatives, a realistic assessment of your potential market share and a description of your marketing strategy. A description of the e-business processes (particularly payment) should be included. Work out a realistic timetable and stick to it. Falling behind may allow competitors to win the race to market.
2. Structure the team Get high-level project sponsorship. A sponsor needs commitment, enthusiasm and a keen grasp of the business issues. Decide on the project team – internal or external? External staff (consultants or contractors) can bring valuable skills and experience to the project and will move on when it is completed. Facilitate communications between the project team and the firm via a steering group.
3. Hosting External or internal? Having built a system, it must live on a network somewhere. Some ISPs specialise in hosting and payment systems and possess sophisticated security systems. But do you want to hand over valuable or confidential data to a third party? Whatever you do, do not build your own security and payment systems – leave it to the experts.
4. Get buy-in Any new and untried IT project requires high-level buy-in. A sponsor and champion are key aspects of any successful project.
5. Create a detailed project plan Identify responsibilities, deliverables and deadlines. Insufficient resources (money, time, hardware, bandwidth and personnel) on e-commerce projects are a major cause of failure.
6. Identify and document workflow and processes If building a client-specific website solution, examine your existing internal processes. For example, if clients are allowed to view their accounts online, will incorrect or cancelled entries be shown? Robust processes must support the transparency that arises through e-business.
7. Comply with the regulations Firms need to comply with the Data Protection Act 1998, which introduces stricter provisions relating to the storage and transfer of personal data. Beware of copyright, particularly when using external website developers. Does your firm own all of the necessary rights on your site? Are you trading globally using your e-commerce initiative? If so, have you complied with the local regulations and statutes? For example, electronic signatures may be acceptable in certain jurisdictions, but not in others. The requirement to comply with VAT regulations in the UK still holds. Non-compliance carries financial and reputation risks.
8. Test the system Testing is vital. It should be carried out on real data, covering all anticipated interfaces and security conditions.
9. Train the users It is pointless implementing an e-commerce system if the staff do not understand what it does and how it works. Clients may reason, "If the staff don't take the new system seriously, then why should I?"
10. Post audit Monitor success – whether the original objectives have been attained or not, develop performance indicators so as to assess the project.
E-commerce is about building relationships with your IT suppliers and with your clients. The internet offers firms the ability to narrowcast – in other words, to market to an audience of one. There is no such thing as the average client or the average customer – each is unique, and that uniqueness must be respected. E-commerce is a major new opportunity for law firms to improve efficiency in their existing business practices and to develop new legal services. It is also a threat to the way they currently do business. The question is not whether to get involved, but whether to lead, or whether to follow.
Andrew Levison heads the consulting team at technology consultancy firm Baker Robbins & Company.