Superficially at least, every law firm in the world insists on characterising itself as a client-focused organisation. The motivation is obvious: clients are a law firm's lifeblood and its dinner ticket. But despite the repeated avowals, in most countries the structure of the legal profession faces regular criticism from outsiders who see it as self-serving and protectionist.

The truth, of course, is somewhere in between. Law firms value their clients (or at least the larger and more profitable ones) and the service standards expected by clients are undoubtedly on the rise. But despite the readiness of the average firm to climb aboard the 'client-focused' bandwagon, the legal industry's experiences with customer (or client) relationship management systems – CRM systems for short – are by no means a universal success.

Some technologies tend to cause a major splash when they are first applied to the legal sector, but after the initial wave of interest and subsequent bonanza for the suppliers, they slide into the background as far as most practitioners are concerned. While these technologies may represent useful tools for the fee earner or the practice, they do not require any major change in the lawyers' working practices.

Others, such as knowledge management (KM) and CRM, which are not technologies per se, but largely owe their existence to dedicated IT platforms and solutions, tend to create alternating waves of positive and negative sentiment. For whatever reason, CRM has been tipped as the 'next big thing' many times and a substantial number of law firms have all but given up on the concept, only to bounce back into the field with a new strategic approach the following year.

Currently, the fortunes of CRM appear to be on the up. A major survey of IT directors' budgeting plans for 2003 reveals that 65% of the UK's major law firms are investing in this field. Twenty-four percent are planning to buy a new CRM system next year, while 41% have budgeted for an upgrade of their incumbent system (the survey, conducted independently by Legal IT, will be published in full next month).

The global legal market for CRM systems is currently dominated by Chicago-based Interface Software, a company credited by many practitioners with having created the market with its relationship management system InterAction.

"I have not seen any formal studies," says John Lipsey, the company's marketing director. "But in the UK, 28% of the top 100 law firms are InterAction customers. In the US, we have 66% of the AmLaw 100."

But other vendors have made some in-roads. Several firms in the UK are rolling out Elite's Apex system. Legaldocs has had some success with medium-sized and small firms in the UK. Winchester-based E1 Business has also won some contracts. Cole Valley Software is emerging as a strong prospect for mid-size US firms and has been in discussion with Kramer Lee Associates as a potential re-seller for the UK. Larger, 'mainstream' CRM vendors such as Siebel and JD Edwardes have yet to make their mark, but have been involved in joint tenders for contracts with magic circle firms.

In common with KM, lawyers' interest in CRM seems to have run in cycles ever since the concept was first taken seriously in the legal community. The accepted wisdom attributes this to the perceived requirement for sweeping changes to law firm culture and to lawyers' working practices if CRM – or indeed KM – is to be deployed with any measure of success. And at the end of the day, a highly profitable lawyer is not likely to accept the need for such changes until such time as they notice that competing firms seem to be deriving substantial competitive advantage from CRM. If you can fill every hour with tasks billable to clients, where is the motivation to spend time building and rebuilding databases, managing contacts and massaging relationships? But there are other factors at play here. In the minds of most practitioners who have heard of CRM, it is strongly associated with marketing. And let us not forget that marketing is a relatively new concept to law firms, at least in the UK. Less than two decades ago pro-active marketing was still forbidden by the Law Society – along with every other form of self-promotion – and the average firm was a secretive and publicity-shy animal. In the years since, many lawyers have had some difficulty in swallowing the concepts and the implications of marketing theory and practice.

As a relatively recent arrival and a potentially disruptive technology, law firms generally attach less importance to CRM than to some other elements of their IT function. In the words of one law firm IT director: "There are a number of IT systems which are seen as mission-critical for a law firm, such as billing, time recording, e-mail and document management. If there ever came a point when our firm was feeling the squeeze financially, I am sure that one of the first things we would cut from our IT budget would be the CRM system."

This is in sharp contrast with a number of other professional industries where CRM has taken root more easily. Compounding the issue, there is a widely held perception that more than with any other software, CRM applications are underused by lawyers where they have been installed and that the success rate for CRM-driven projects is among the poorest for any area of legal technology.

Many law firm IT directors will admit privately to the existence of several versions of paid-for but uninstalled CRM software lurking in a cardboard box at the back of the firm's server room. Others will admit their expensive CRM systems are at best merely repositories for contact information and fee earners do not use them for anything that could not be done in Microsoft Outlook.

"CRM is a struggle between several opposing camps," says Andy Turner, IT director at Cobbetts. "Most 'marketing' systems were, and are, bolt-ons from practice management systems. They tend to be rich in volumetric data and taxonomy is key."

According to Turner, unfortunately most of the classifications tend to be as old as the client records themselves. "It is not unusual to come across the client type 'Apothecary', for example," he says, only half joking. "So they are not very useful and the databases therefore contain all sorts of stuff."

In summary, he says, these are marketing information systems useful only for unsophisticated marketing techniques such as mailshotting. CRM is more concerned with targeting individual clients and individual relationships within a particular client, with the purpose of retaining and expanding the fees received, increasing the client's reliance on your services, locking them in effectively.

In order to do this you need a completely different set of information, Turner says. You need to know who the decision makers are, what potential new work there might be with the firm and so on. But to get to this point you have to capture and maintain an exhaustive amount of information.

"And who are the people who have this information? Your fee earners. And there is the rub. These are busy people who often do not like computers at the best of times and are being regularly exhorted by their department heads to go out and earn more fees. Spending a week – and I mean a week – on a initial brain-dump of their contacts and information versus a week earning dosh, you know which one they are going to choose."

Turner, who has spent more than half of his career writing and selling IT systems with marketing modules, identifies a clear role for the legal technologist in kick-starting CRM. "We have to work on making this initial uplift less painful and more immediately productive, delivering benefits quickly," he says.

"This means measuring the benefits of marketing somehow and marketeers have been trying to do that for years."

But all this doom and gloom should not be taken as evidence that CRM is inherently unsuitable for the legal profession. CRM is deployed successfully in many US firms. At Foley & Lardner, chief information officer Doug Caddell and the then chief marketing officer Dick Upton have demonstrated a very solid return-on-investment from their integration of external web content focused on market intelligence.

And there are even a number of emerging success stories in the UK. Take, for example, Janet Day's development of a workable interface for InterAction on WAP phones at Berwin Leighton Paisner, or a similar 3G, laptop and PDA initiative at Wragge & Co.

One IT director, whose firm is piloting Elite's Apex system, says one of the major issues is the extent to which firms are genuinely re-engineering their client relationship processes.

He suggests that in many cases, CRM is just another name for a new marketing system, bolted on to the firm's existing processes.

"Another angle is the extent to which firms must re-engineer their processes to address data protection compliance issues through their marketing systems," he says, citing a November report by Gartner Group. "If you get this wrong, you run the risk of committing criminal offences which are now starting to appear in the courts."

Another key CRM issue, he says, is whether firms are setting out to achieve – or have already achieved – a culture of genuinely sharing business contacts for mutual benefit within the firm. "Do firms allow open access to update information by fee earners or is that centralised and managed by, say, the marketing department?" he says. "These are core issues when implementing CRM."

He has also identified a strong technology angle: are firms looking to empower users to create their own mailshots and e-mailshots? There is evidence that a substantial number of the UK's leading practices are indeed moving in this direction.

"If they are," he warns, "do they feel they are managing this properly? Again, if you get this wrong, the firm may be found guilty of 'spamming' its clients to death. Is this technology for technology's sake?"

Another thing to look out for in 2003 is a major shift in the nature of the so-called 'junk mail' that law firms send their clients to promote themselves. Australian firm Blake Dawson Waldron is already publishing a range of booklets and newsletters that focus on an in-house lawyer's job, rather than just providing commentary on the implications of recent changes in case law. At least one well-known UK firm is set to follow Blakes' lead in the near future.

This year has seen the likes of Linklaters, Baker & McKenzie, and most recently Allen & Overy, sign up to Vrisko's News Tracker service. Vrisko claims that an IT solution can take much of the pain out of the infrastructure required to push business intelligence data at fee earners, taking into account the way their needs change as work on a matter progresses. It will be interesting to see whether these firms gain any bottom-line advantage over the next 12 months.

But even as legal CRM projects expand in terms of scope and ambition, some firms are finding that last year's promising initiatives have fallen fairly flat. "We have search agents tracking client-related information on news websites," one firm's head of IT admits.

"Hummingbird's Fulcrum engine is surprisingly good in this regard, although we have found that it does not scale up particularly well," he says. "But the major problem is that each time that it finds something, it creates a substantial job for some poor person in business development."

The US experience
The law firms that survive and thrive in the future will be those that are prepared to provide their clients with business insight in concert with their regular legal expertise, according to Dick Upton, president of US marketing consultancy Upton Group and formerly chief marketing officer at the 11th largest law firm in the US, Foley & Lardner.

Sweeping changes are taking place throughout the legal and professional services arena, with clients increasingly demanding proactive, comprehensive solutions to a full range of problems, he says. Acquiring the business intelligence-gathering technology necessary to assist in developing knowledge-based solutions is critical for growth, client retention and profitability.

"As law firms merge they remain a collection of disconnected attorneys, offices and practices," Upton says. "Their only path to future survival is for lawyers to shed the individualistic model and adopt a more traditional corporate model." He contends that disciplines once largely ignored by law firms – such as corporate-model business management, brand-strategy marketing and the use of technology in building client relationships – are emerging as key contributors to the profession's financial growth, stability and survivability.

"It has been stated that knowledge is that which, next to virtue, raises one person above another," Upton says. "But it can also be said that insight is that which, next to knowledge, raises one business above another."

Upton selected the Business Browser product from OneSource as the content provider, but was not content with the usual approach to integration, which feeds data from external providers into the firm's CRM system. "The simple fact is that CRM [systems] today do not yet have the necessary user friendliness for broad-based acceptance and full implementation," he says. "They remain too cumbersome and complex for universal application by lawyers."

The content was therefore integrated directly into the firm's intranet using the AppLink application program interface (API). Foley used the new market intelligence system to build customised spreadsheets for each client, prospect or industry inquiry.

"IT specialists simplified the process and ensured user friendliness," Upton says. "Marketing specialists created the vehicle: hot-linked spreadsheet content with automatically downloaded information, producing interactive, continually updated alert systems that gave attorneys real-time knowledge of clients, prospects and industry trends."

The marketing department is now able to create a spreadsheet encompassing all the businesses in a target city, populated with financial reports, employee statistics, product lines, executive biographies and so on. The spreadsheet becomes a folder on the partners' computer desktops and is posted on the firm's intranet. All information within the spreadsheet is current in real-time terms.

Upton is convinced that law firms must become providers of business insight. "Insight is the product of collaboration and knowledge," he says. "Knowledge is the product of current, living, interactive information, not just static and retrospective data. And business professionals, using collaborative corporate model management disciplines, will secure their role in directing the future of law firms by providing usable knowledge management tools shared by all."

He argues that this combination will create an advantage for firms courageous enough to embrace it and willing to hold themselves accountable for the results. "The successful firm of the future will measure the innovative bottom-line contributions of technology, marketing and lawyer cross-marketing collaboration," Upton says. "Knowing clients' industries, understanding their business needs and having the ability to provide business solutions insights are the essential ingredients for tomorrow's successful law practices – and will secure their leadership position in the new competitive frontier."

The Wragges experience
We have an imminent explosion in the internal use of CRM at Wragge & Co, which will really benefit our clients. There will be a complete sea change in the nature of e-mails and data as we step up a gear over the next few months. The software we have put in place enables us to dispatch fully trackable and reportable messages and targeted mailshots. These mailings will report and tie valuable information back into our databases.

InterAction does have built-in data reporting tools, but in relation to e-mailings specifically, the product does not have the ability to track and report on the effectiveness (eg click-thrus etc) of e-mail campaigns once they have been dispatched. Because this has become an important requirement, we are piloting new software to use in conjunction with it. We are currently testing the new system and will have a working environment in less than six months.

The legal profession will have no choice but to embark on a CRM revolution in the near future and we believe that we are ahead of the curve. Sending paper documents is all very well, but with technology you can ensure that clients get exactly the information they want. In turn, information about what your clients actually read can be sent back to repopulate the firm's databases. We have very carefully dealt with the data protection issues and have received all the necessary permissions; we are now in a position to finalise a strategy for 'push' marketing. This is a win-win situation. Clients will get only timely, accurate information on exactly what they want, when they want it.

As far as we know, only one other UK firm – Osborne Clarke – has a broad understanding of where it is going with CRM. But Osbornes' position is different from ours; we are focusing on different areas. Another firm, CMS Cameron McKenna, is doing good, innovative things with its website.

To be innovative with CRM you first have to do a lot of work increasing the efficiency of the processes and the quality of the data, materials and resources. At Wragges we take the philosophical approach that we have just one IT system. Everything has to integrate. For example, in the CRM system you can click a button to launch a mini-document assembly macro tool that ensures you are using all the correct citations. Basic steps like this can drive the quality of a CRM system, such as InterAction, a lot further.

One of the biggest tasks is tightly integrating our CRM and practice management systems to ensure that users get the full benefit of historic information from the finance system. We have not completely cracked this yet, but we have made very significant in-roads and we think the key is using a portal to drill down through layers of information. Our objective is to deliver a genuinely client-centric view.

A very important CRM issue has been staring law firms in the face for a long time, but nobody has embraced it. The idea originally came from Desktop Lawyer [Epoch Software's legal e-commerce service for consumers]. If a law firm wrote a set of, say, employment contracts two years ago, it is likely that the law has moved on since then in areas such as restrictive covenants. What we are developing is a facility to send out automatic notifications to clients when key clauses have changed and the contracts need updating. The client can then redraft the documents themselves or buy new ones.

In non-contentious areas of work such as commercial agreements and the aforementioned restrictive covenants, there is completely untapped potential. Admittedly, doing this requires a lot of data mining technology and a high level of organisation. But from a professional indemnity perspective, law firms are arguably exposing themselves to a level of risk by not doing it. But indemnity issues aside, it is an example of yet another area where technology can really assist firms in improving client care. This is one of the areas of CRM in which we are starting to move away from the pack.

We are also considering linking our precedents and knowhow with CRM to log which precedents are being used on which matters. We could send internal notifications around to people using a particular precedent when a new version is produced. Admittedly, this sort of development might be of more help in a real e-business service line whereas we know legal e-business has not taken off hugely. This is because the number of customers is limited – assuming a business-to-business model – and because of the high initial development costs; otherwise it could have exploded despite the economic climate.

We are also investing in mobile working technology to enhance our use of CRM. The IT department is working on a GPRS look-up function for 'phones, PDAs and laptops which enables users to tap into our core services – including CRM and mapping services on the web. The trouble is that the hardware is not yet up to the task: it works but it is not reliable and the interface is poor. WAP is definitely the wrong mobile platform to use.

The choice of technology is difficult because what works for one law firm will not necessarily work for another. There is, however, a definite gap in the market for a good sales initiative system. We use InterAction, which we think of as the BMW of CRM systems. It is not the cheapest package and some of the others are much better on the sales side, but it is very reliable and can do nine out of every 10 things that you want it to do. When you add the web side, it becomes even more expensive, but we expect that when we move to version five, which has a browser interface, the flexibility will really justify the price. The minute that we hook it up to the finance system we will begin to see results.

At the bottom end of the market, there is a very good CRM supplier, Legaldocs, which is run from a converted chicken coop in Shropshire and could solve problems for many firms. But at the top end of the market, Interface Software is laughing all the way to the bank because there is no credible competition. None of the other suppliers are anywhere near as good at aligning themselves with law firms and their infrastructures. But at the end of the day, the legal market is a lot smaller than most people think and perhaps there is not enough room for a serious competitor.

CRM is basically a blank sheet when you buy the software. With a lot of effort, care and attention you can craft a beautiful picture, but most people just end up creating a horrible mess! This technology will never completely transform our business or triple the size of the firm, but it would be foolish to ignore the potential for cross-selling.

Derek Southall is head of strategic development and Richard Harris is marketing database administrator at Wragge & Co.

The Irwin Mitchell experience
Irwin Mitchell, which employs 1,500 staff in four main offices, is one of a number of firms whose recent expansion has prompted a decision to invest in CRM software to improve the flow of essential client information. With four sites, it was becoming increasingly difficult to pull together the relevant client information and keep all the firm's employees up to date.

Business growth had left the firm with disparate and incomplete systems for client management and marketing. This meant that fee earners were unaware of information clients were being sent by marketing, so they did not know what their clients had been offered and what communication they had responded to.

The marketing department was unable to effectively segment and target, which was having a negative impact on the success rates of its campaigns. They were also unable to see which campaigns clients were responding to, so they were missing out on cross-marketing and cross-selling opportunities.

Fee earners, partners and marketing staff were unable to share information across departments and, of course, sites. This lack of a centralised data source meant that time was being lost to administration, which had a negative impact on productivity.

Irwin Mitchell recognised the need to modernise its communications infrastructure. The firm decided to roll out the SalesLogix system from E1 Business as a platform to help the marketing department nurture client relationships and to deliver personalised mail shots to existing and potential clients.

Following implementation of the system, the firm rolled out a web client for fee earners and administrators with reduced functionality. This project aims to ensure that staff share information cost effectively and enables them to answer client queries at a mouse-click.

The firm is now also using an events management module bolted on to the CRM system to reduce the administration processes associated with holding corporate events. The marketing department is able to track the results and reports an improvement in response rates and in the quality of personalised client communications.

To calculate the return on its investment, Irwin Mitchell is measuring the number of users that regularly use the system, the accuracy of information on the system and the effectiveness of marketing campaigns based on information from the CRM system. However, to effectively measure the real value of the system, the firm is also taking into account the software's ability to deliver cross-selling opportunities, enhance client information databases and create more sales.

With all these intangible variables, the true value of the system is hard to measure, as with any CRM solution. But the firm does acknowledge that all its original goals have been met. In the long term, the success of the implementation will be evaluated against the objectives of planned phases, with the understanding that as the firm grows and changes so must its CRM system.

Data change management – a critical step
Critical to the success of any CRM implementation is the issue of data quality. Contact data erodes at a rate of 33% per year and without proper attention could cause data to become incorrect, unusable and ultimately untrustworthy. Indeed, in its groundbreaking 2001 report, the Gartner Group cited poor data quality as the single greatest inhibitor to successful CRM implementation.

Missed opportunities top the list of costs resulting from poor CRM data quality. Outdated relationship intelligence means lawyers may not discover critical relationships necessary to win a new client or cross-sell services to an existing client. The firm's image also suffers when communications are disseminated with incorrect contact information – or when some clients receive duplicate copies and others are inadvertently omitted from distribution altogether. Poor data quality also exacts high costs in labour and waste as firms execute marketing and other business development initiatives with bad data. Finally, if lawyers and other users do not trust the data in the CRM system, they will not use it, placing the entire CRM implementation at risk.

Until recently, most CRM software providers have lobbed the responsibility for data quality issues squarely in the court of the user. According to a recent report issued by Giga Information Group, CRM vendors' lack of ownership of data quality has contributed to user frustration and the failure of some CRM projects. In response to these data quality concerns, some legal CRM providers have started building data change management functionality into their products to address data quality issues head on.

One impediment to successful CRM implementation is the lawyer's fear that others with access to the system might change client information incorrectly. As a result they may keep their information private, which leads to duplicates, inconsistent data and ultimately, failure of the system.

To ensure lawyers' confidence in the system, a firm's CRM package should allow for user variances in the degree of sharing and control. For instance, individual lawyers should be allowed to control whether firm updates to contact information are reflected in their version of the contact. Or if they prefer a more flexible approach, lawyers should have the ability to review changes made to their contacts in the centralised system and decide which ones they would like to apply to their own contacts.

A centralised CRM system allows all users to contribute to the database. However, not all contacts should be blindly updated; and not all users are careful about their changes. Your CRM package's data change management facility should allow 'data stewards' (users tasked with maintaining data quality) to establish controls to ensure that changes made to the firm's collection of contacts are appropriate and accurate. It should also provide workflow processes allowing data stewards to efficiently prioritise, evaluate and act on contact changes.

Moreover, the system should provide a facility for establishing submission rules on how to process changes that are made to firm contacts. These rules might allow the data steward to accept a change, accept it but flag the change for review, or reject the change until corrections are made. Based on assignments by the type of contact, changes should then be directed to the data steward's change management in-box for evaluation and processing. The in-box provides a workflow for the data stewards to process these 'tickets' in an orderly fashion.

Not all changes will or should be submitted to a data steward for processing. Depending on the importance of a contact and the type of change, it is perfectly acceptable to allow certain changes to be completed and perform the data quality review later and en masse.

For instance, changes made to contacts at a firm's top clients have much greater impact on the organisation than changes to contacts of non-client firm vendors. Your CRM package's data change management tools should allow you to categorise contacts to make it easier for data stewards to prioritise their attention on the most important changes first. Poor data quality can be one of the most significant inhibitors to a successful CRM implementation. To protect your initiative, make sure you have the right processes and people in place.

To support your internal processes, it is also critical that your CRM solution provides the necessary data quality and data change management functionality. Data quality functionality helps streamline the process of keeping your data clean and it substantially lowers the overall cost of ownership of the CRM system. Moreover, by substantially increasing the accuracy and reliability of your firm's relationship intelligence, data quality and data change management functionality will help garner fee earner acceptance and use of the system.

Rick Klau is the vice president of vertical markets at Interface Software.