ELM Challenges: How Can Legal Teams Manage the Technology Tide?
The new dynamics and upending forces that arrived, unwelcomely, with the pandemic have accelerated technology adoption in many sectors, including the legal business across Europe, the Middle East, and Africa. Yet that rush to adoption can create new risks.
In a previous post, we delved into the multiple benefits of transitioning to digital solutions for an organisation’s legal operations, including the value of ELM to processes such matter management and e-billing.
The pandemic is forcing legal departments – many already under formidable pressure from the C-suite – to accelerate technology adoption. In that, they’re only keeping pace with the rest of the business world.
Europe has been “lagging behind”
A study by McKinsey & Company found that many businesses have been almost shockingly successful in pivoting to digital solutions in response to the pandemic. The adoption of these tools has seen approximately seven years of progress in a matter of months, on average.
Much of this has been driven by the need to satisfy consumers who demand easy, omnichannel digital experiences. But B2B organizations have also kept pace, as 90% of B2B marketers evolved their digital marketing strategies over the past year to improve buyer experiences, as well.
Overall, though, Europe in particular has been “lagging behind” in the move to digital transformation even after the pandemic, according to Fortune. One reason? The lack of a transborder “ecosystem” to connect national initiatives. As one expert put it, “We don’t need 50 Silicon Valleys … a couple of them would be great.”
A diverse legal tech landscape
When it comes to legal tech, specifically, Europe entered the pandemic in a situation where the pace of legal tech adoption has varied from one country to the next. Comments by leaders of the European Legal Tech Association (ELTA) showed as much, though all of them saw bright prospects ahead:
I believe Bulgaria will just enter the Gartner cycle this year and may decide to experiment with various tools (the frontrunners, at least).
In general, we can see the legal tech market in Croatia waking up in 2020 and moving from “let’s see what others are doing” to “let’s make a viable product” phase.
For corporate lawyers (in Spain), it is clear that their organizations are putting pressure on them to reduce costs and be more efficient and proactive. Most of them are in the phase of receiving “in company” training, joining the masters courses of CEU and IE or taking the online courses of UNIR, Escuela de Práctica Jurídica de la Complutense or ESADE.
While the Legal-Tech is not a novel field in the ‘Start-up Nation’ of Israel, there is still much room for growth. The trend is promising, but it has not yet reached its full potential, as many ‘old school’ lawyers’ recoil from adopting new technologies.
(Russian) law firms are, albeit slowly, opening up to the idea that legal tech gives them a competitive edge. This could reverse the trend of legal work moving in-house and might open new market possibilities.
The pressure on legal departments to evolve
The pressures to perform like other business units has already impacted legal departments who once operated in a separate bubble, as Mark A. Cohen pointed out in Forbes:
The legal department has long occupied a unique corporate position. It has been exempt from speaking the language of business; operating at its speed; adopting its processes, metrics, and fiscal accountability; and value creation. Most corporate legal departments maintained a detachment from other business functions—perhaps because they regarded themselves as professionals, not as a business function.
As he explains, digitizing legal teams can deliver tremendous value to the rest of the enterprise – and enhance its standing within that organization:
The benefits of an agile, digital legal function extend far beyond its own internal efficiency and an ability to ‘do more with less.’ A digital legal team can create significant enterprise value as well as improve customer (end-user) experience. The rewards for the agile, digital legal function mirror its impact on the enterprise. Legal has an opportunity to elevate its corporate standing, have a voice in corporate policy-making, and attract top talent in search of purpose-driven work and collaborative, innovative work environments.
Some European law firms and legal departments have been quick to embrace the potential of technology. The Financial Times reports how patent lawyers and their clients realise how digitisation will be the largest influence on the patent law segment over the next several years, for example. Even so, two-thirds of IP law firms and departments had not yet digitised their recordkeeping and documentation.
The irresistible tide toward technology
So while some legal teams in Europe, the Middle East and Africa may be dragging their white shoes when it comes to digital transformation, they’ll soon be the exception. Now that the C-suite recognises the promise of digital transformation for Legal, it should not surprise us how legal departments and law firms across all regions are pouring budget into the movement toward digitisation and automation. An in-depth study by WiredRelease states how there are “key strategic opportunities both to recover from the COVID-19 crisis and [to become] boldly positioned for a successful future” for providers in this space.
Gartner’s findings reflect this: By 2025, they expect legal departments will increase their spend on legal technology threefold:
The COVID-19 pandemic has heaped even greater workloads onto already thinly stretched in-house legal teams, with staffing levels holding flat…Legal leaders are seeing that other departments have found success with their tech investments and also significant advancements in the legal tech market. This is driving their appetite to expand their use of technology to support workflows and meet productivity demands.”
By 2024, they predict legal departments will have automated 50% of the legal work involved in major corporate transactions, including M&As, as technology takes on a greater role and eliminates the need for some staff:
Eighty-seven percent of legal departments we surveyed in 2020 expected their total number of in-house full-time employees to stay the same or decrease…Traditionally, larger workloads could only be met through higher in-house productivity or costly outside counsel.”
How is this playing out, according to other research on the legal operations software market?
- The legal operations software market was worth slightly over $1.4 BN or €1.2 BN in 2020, and is expected to reach nearly $ 5.2 BN / €4.5 BN by 2029, a heady CAGR of 15.8%.
- Large enterprises drove the highest market share in this sector in 2020.
- E-billing applications represented the biggest product share of this market.
- Law firms made up the biggest share of end users in 2020, but corporate users make the fastest growing segment over the forecast period.
Keeping your head above the tide
The pattern at play in the legal software market should surprise no one who is somewhat familiar with how technology sectors evolve. There’s an initial spike of interest and adoption, as organizations hurry to adopt new tools in answer to competitive need or the advent of glittering new technologies with equally dazzling prospects; their willingness to invest funds a sudden surge in the number of would-be providers offering competing solutions.
According to the startup community AngelList, there were 2,726 legal startups as of this writing. Some will survive, a few even thrive, but the majority will vanish, either going out of business or being bought. There’s a fair chance those acquired may see their products sunsetted by new owners. In the end, there will be very few left standing, and a good many early adopters are left with obsolete, unsupported software.
Adopting an Enterprise Legal Management platform is a foundational step in a corporate legal department’s transition to greater efficiency, better client service, and stronger standing within the business hierarchy. The challenge, however, is to choose the right platform, particularly for an organisation that may be a first-time adopter.
The fragmentation in U.K., European, and African digital transformation mentioned above adds complexities for legal adopters. It may prove difficult for a corporate legal department intent on “buying local” to find a national or even regional ELM provider whose offerings deliver a competitive and – importantly – future-proofed level of flexibility, scalability, and ability to integrate with other products.
How to rise above the confusion of so many competing offerings and the somewhat fractured nature of the current EMEA business and legal tech marketplace?
- Be prepared to exercise a substantial amount of due diligence in evaluating both the software and the provider behind the product.
- Make certain the solution is “location-agnostic” in the sense it’s sufficiently customizable to meet a company’s needs within its own operating region, but can adapt readily to trans-national demands and unify a legal “ecosystem” even at global scale.
- Don’t be stubbornly attached to using a “local” ELM provider; it’s more important that a platform has proven customizable to your need, and can scale to work for corporate legal needs across multiple markets.
- Consult a good many users, both past and present, who have experience with any ELM platform you’re evaluating
- Ask for a trial implementation where you can stress-test the product at length.