Legal Week's analysis of digital dictation systems (DDS) a year ago revealed a market that was still to be fully convinced that this technology is an absolute 'must have' for law firms. Indeed, the research showed that almost 40% of the top 100 firms had not embraced DDS in any form. Crucially, that statistic included all five of the magic circle firms – a statistic that no longer stands after Linklaters introduced digital dictation firm-wide.

DDS vendors have a difficult sales pitch. Their products deliver a more effective way of working rather than an obviously tangible 'end product' in the accepted sense. It is a means to an end, rather than an end in its own right. In addition, the various DDS offerings do not do anything fundamentally different from each other. Their products are capable of delivering tremendous flexibility, efficiency and cost savings, but they are also capable of delivering the same functionality as the analogue solutions they replaced unless accompanied by an understanding of the need to change working practices – a change that can only really be brought about by individual lawyers changing the way they work.

This means vendors must be able to clearly demonstrate achievable and measurable efficiency gains in advance, in order to prove that change is worthwhile. Yet efficiency improvements can be a double-edged sword, being perceived as unwelcome changes to routine or even job threats, so that the change DDS represents may not always be welcomed among those who are expected to use it. Our research certainly shows that more than one firm has tried and rejected DDS on the basis of staff negativity towards it.

Clearly, the number of firms not currently using DDS represents a significant potential market in the UK, but worldwide there seems to be a larger market waiting to be tapped. In North America the surface appears to have been barely scratched, and there is massive apparent potential within the developing markets of Asia and Eastern Europe.

State of the market

Within the legal sector, market leader BigHand estimates the size of the UK market to be more than 100,000 solicitors and 50,000 secretaries. Its figures also show that only 55% of UK firms which dictate have switched to digital solutions, while no more than 20% of the one million lawyers in the US use DDS. Add to this the potential revenue from the existing client base for support, training and upgrades and the completely untapped markets in developing countries around the world, and it becomes obvious that the potential value of the DDS market is significant.

So which companies are competing for this prize? BigHand stands out as the leader within the UK legal sector, and claims more than 50% of the top 250 UK law firms as clients. Major competition comes from WinScribe, headquartered in New Zealand, with companies such as nFlow, DictaNet in Germany and Canadian entity Crescendo taking a smaller share of the international market. BigHand's core product, BigHand3, is in use at major firms such as Eversheds and Shoosmiths, and it has also recently made inroads into the magic circle, with a firm-wide rollout at Linklaters.

BigHand openly acknowledges WinScribe as its major legal sector competitor, citing the fact that the two companies are the only Microsoft Gold Partners in the current marketplace; they claim to be the only truly international vendors in the field. WinScribe's UK legal sector flagship client is Irwin Mitchell, with more than 700 users so far.

BigHand's involvement is based firmly in the legal arena, whereas WinScribe began life servicing the healthcare sector, where it remains the major player. BigHand argues that its history of focusing on the legal sector stands it in good stead among legal clients, offering as evidence the fact that its products are used by three of the top five law firms in Australia – WinScribe's back yard.

DDS technology

The move to digital recording of speech offers fertile ground for innovation. The traditional voice recording hardware manufacturers continue to develop new products, and major offerings include Philips' Digital Pocket Memo (DPM), the Olympus Pro-Line range and Grundig's Digta series. These companies are also now beginning to encroach on the traditional territory of the major DDS software vendors by developing turnkey DDS software solutions such as Philips' SpeechExec Pro, and they have picked up clients at the lower end of the legal market.

Their main power base remains the hardware market and Philips' DPM range, for example, offers real-time data encryption, a PC-independent docking station, improved battery performance and increased speech-recognition capability among others. However, many users from the 'analogue era' yearn for familiar functionality, so slider controls remain a must on digital voice recorders.

These days, the manufacturers of dedicated voice recorders no longer have things their own way. As more multi-functional devices such as personal digital assistants (PDAs) and smartphones appear on the scene, lawyers can carry BlackBerrys, Treos, iPhones and the like, offering the potential to lose their other bulky items of equipment. The development of speech recognition (SR) technology has also delivered the capability to dictate straight into these devices to generate useable written text.

Ken Nolan, UK sales manager at WinScribe, thinks SR will have a major impact on DDS products. Nolan says that "speech recognition has moved along as much as DDS in recent years and is becoming a more viable solution". He adds that WinScribe's 'background recognition' functionality allows secretarial staff to 'train' SR software to recognise a fee earner's voice, improving performance over time while freeing-up the fee earner's time. For WinScribe's latest release, Version 3.7, the company has developed full integration with the Nuance Dragon SR engine.

Voice capture is only one part of the digital dictation equation, and DDS software solutions are particularly centred on the need for workflow management and flexible dictation transcription. DDS are relatively simple in functional terms, essentially capturing speech in digital form and compressing it, using industry standard or proprietary file formats, before storing it on a database and processing it.

The simple conceptual change from analogue to digital storage of speech is at the heart of the issue. Digitally-recorded speech can be processed by computer, allowing it to be monitored, prioritised and routed – analogue tapes cannot. Quite simply, it is this addition to the 'dictation to transcription chain' that makes all the difference and facilitates a tremendous potential improvement in business efficiency and flexibility.

Modern business is dependent on being able to quantify its workload and resources, and moving to digital systems allows firms to predict the time and cost to complete work and manage quality performance. With analogue devices the workload is never really quantifiable at any given point in time, primarily because data is stored in such a distributed and un-indexed way.

As a result, DDS technology's importance lies in its capacity to facilitate organisational change. It is more important as a catalyst for business change than as a change in its own right and its implementation must be properly planned to identify and ensure realisation of benefits within a firm. Without correct planning it is possible to achieve no more benefits than would be possible with an analogue system, and anecdotal evidence suggests that this scenario occurs more frequently than might be wished.

The newcomers

Eversheds is a relative newcomer to the DDS scene, rolling it out in September last year. IT director Malcolm Simms ascribes the firm's decision to hold off an assessment of DDS until 2004 to a combination of factors. Chief among these was a desire to wait until the technology had matured. Simms says Eversheds' evaluation process was "a thorough one, involving considerable research and a focus group of stakeholders". Ultimately it selected BigHand because the workflow features of its solutions were deemed superior by the firm.

Eversheds has recently upgraded to BigHand 3.1 as it enables the firm's various locations to be linked together to use a single central database. Simms feels the support offered by BigHand has been excellent: "BigHand has provided all the training, and has managed and delivered effectively and efficiently, with engineers available whenever required."

He says that Eversheds is now reaping the benefits of the move to DDS, with particular gains in flexibility for those working remotely. The analogue systems "used to involve remotely-based fee earners posting in tapes and secretaries taking dictation over the phone. Secretaries also used to hang onto tapes until they were full, sometimes delaying document production significantly. Above all, secretaries were deployed at each location in sufficient numbers to meet potential demand".

DDS has had a major impact on working practices at Eversheds, with increased flexibility among support staff resulting in the firm employing fewer temporary personnel. Simms sees the major benefits coming from faster turnaround times for fee earners, with 95% of dictations cleared the same day. Secretarial benefits come from the fact that no individual need any longer be overloaded with work.

Nevertheless, these benefits were not obvious to all of Eversheds' users initially – a natural resistance to change. After implementation, he says users were amazed by the benefits. Secretarial objections to work-sharing, and their worries that their roles might be seen to be 'dumbed down' were alleviated by setting up the system so that secretaries retained their link with a nominated fee earner. As Simms says: "Flexibility is demonstrated at times when a secretary is on leave, absent, or has a large workload and the partner can switch the system to a central overflow that everyone can dip in and out of, or simply redirect to a specific alternative team."

Eversheds made its choice after pitches from both BigHand and WinScribe. Sue Shepherd, Eversheds' project manager said: "No other law firm had ever provided this technology to this many users so we were in completely new ground with the scale of the project. We worked closely with BigHand to plan and overcome the various barriers that arise when voice is transferred between 2,500 users – both their experience and the strength of our internal IT team were critical. As a result the rollout has been smooth and perceived as excellent across the firm."

Magic circle

A change since last year's digital dictation research has been the magic circle's interest in the technology. Freshfields Bruckhaus Deringer IT director David Hamilton dismissed the previous argument put forward for the magic circle firms not investing in DDS – that they were not so concerned about cost cutting. He highlights the fact that Freshfields' Duesseldorf office uses a digital dictation system supplied by German DDS specialist DictaNet. He says he is always looking to increase cost-effectiveness and flexibility within the firm, having carried out an assessment of the viability of DDS within the London office.

His leadership led to Freshfields conducting two pilot evaluations of DDS but the feedback showed there was little interest among fee earners. Hamilton puts that down in part to "an increased keyboard-savviness among legal professionals and a consequent change in the way they work which, over time, may have made them less dependent on typing support and consequently negated some of the benefits claimed by DDS vendors".

By contrast, Linklaters has become the first magic circle firm to implement a large-scale adoption of DDS technology. Phase one has seen BigHand3 rolled out across the firm to a user base of more than 2,500. Phase two is still ongoing but should see user numbers rise to 3,200.

Head of information systems development at Linklaters, Dave Bennett, thinks that the firm has not been anti-digital dictation in the past but attributes delayed adoption to a culture of self-sufficiency among fee earners. Bennett says when IT departments propose DDS solutions "they need to get over the 'old technology' and 'I can do it myself' conversations" before being able to progress.

Linklaters upgraded from a mix of analogue systems which were sourced and maintained separately on an office-by-office basis. It had also used a Grundig standalone DDS in its German offices. Bennett says Linklaters wanted to find a digital solution to enable more flexible working, improve mobility arrangements for fee earners and business managers and improve the firm's ability to accommodate local language work.

Bennett describes the process of choosing a digital solution: "IT initiated the project with the support of a number of fee earners. We produced a business case that stood on its own two feet and then ran an in-depth 'request for information process' and a technical testing phase which involved a head-to-head comparison with the two leading contenders." Bennett adds that two key reasons the firm chose BigHand3 were "the high sound quality and the fact that it was optimised to work in a Citrix environment".

The firm began with version 3.0.4 but upgraded to 3.1 before the main rollout to take advantage of its remote synchronisation facilities over Citrix which were crucial for fee earners. Bennett says: "Implementation has been seamless with our Citrix environment and we are currently working with BigHand to explore integrating with Metastorm BPM to help our document production units work even more efficiently." Bennett says Linklaters has adopted Philips' digital voice recorders and has standardised the SpeechMike Classic for office use and the DPM9450 for remote working.

Among the business benefits realised, Bennett identifies changes in working practices to include centralised services, improved mobile and home working, increased productivity and turnaround, enhanced use of secretarial support, a 'single enterprise solution' enabling fee earners who travel between offices to work seamlessly and easy access to domestic language secretaries when fee earners are in foreign language locations.

The other magic circle firms are a little more coy, with Clifford Chance reporting only that it is "not doing much in the way of digital dictation systems" and Allen & Overy admitting that it does not use DDS "a huge amount".

Maximising DDS benefits

Many DDS adopters cite failing analogue systems as a reason for switching to digital dictation, and perhaps for this reason they primarily focus on the recording aspect of the technology. As a result they often achieve only an electronic replacement of their analogue functionality and fail to benefit fully from the workflow management capability, which is perhaps the most significant aspect of DDS solutions.

Jill Bazalgette, a consultant at Neil Cameron Consulting Group with four years' background in DDS consultancy, feels that the benefits of DDS are often negated because firms look for a "quick fix". She comments: "In order to get the best from DDS, firms must re-evaluate their business processes, and this usually involves the re-establishment of a 'typing pool' culture. Unfortunately though, typing pools tend to be seen as a retrograde step by support staff and lead to resistance as secretaries feel threatened by what they see as attempts to dumb down their jobs and potentially dispense with their services."

Bazalgette believes many firms do not realise all of the potential benefits of DDS technology because they choose to implement it around existing business processes with the idea that they will revisit the situation at a later date to look for efficiencies. She adds: "This is a mistake, since such revisits rarely take place. The result is that those firms end up with technology that fails to provide any dramatic improvements in flexibility or cost savings."

David Fryer, chief executive officer (CEO) at DDS market leader BigHand, agrees. His experience shows that such clients are in the majority. His company has attempted to counter this phenomenon by working with several of its oldest clients to develop best-practice guidelines for implementation, but he acknowledges there are a number of factors that hinder full realisation of DDS benefits. As well as the fears support staff have for their job security, he cites the desire many lawyers have to retain the 'status symbol' of a dedicated personal secretary, and feels some lawyers are reluctant to revert to sharing support resources in order to work more efficiently.

Fryer believes the benefits of DDS are obvious once the technology is adopted. Nevertheless he accepts that instigating change is not always easy: "Historically certain legal specialist areas such as commercial law have tended not to use dictation as much as others such as litigation and property, and therefore feel that DDS is not a high priority for them."

Fryer nevertheless believes that the trend towards acknowledging the value of legal professionals will mean solutions such as DDS – which enable lawyers to work flexibly – will be increasingly in demand to assist in the retention of quality fee earning staff.

Those companies that do achieve efficiency gains tend to do so by retaining support staff and increasing numbers of fee earners, targeting the benchmark 3:1 ratio of fee earners to support staff. Bazalgette believes secretarial support staff frequently distrust DDS systems when they are first introduced, but respond well to the technology if they can be reassured that it does not threaten their future.

Outsourcing

Margaret Lang, chief executive at outsourcing firm Intelligent Office, believes law firms could get much more from DDS. She laments the fact that her company is often called in to help law firms turn around DDS projects rather than plan their implementation. She says: "Many law firms, particularly the small and medium-sized ones, try to operate as businesses rather than professional services partnerships, but do not adopt the principles that normal businesses would." She adds that it is rare for law firms to perform proper cost-benefit analysis, leaving them with no objective means to assess whether they have achieved a return on investment.

Because of the traditional partnership structure of law firms, senior fee earners often take upon themselves the task of performing 'business management' roles, with the result that leadership and management are fragmented and support staff are often not managed effectively. Lang is full of praise for the potential of the competing DDS solutions on the market, saying that all the major DDS vendors produce excellent software backed by excellent support. Nevertheless she says DDS is an enabler rather than a solution per se.

Lang says her company performs a number of services ranging from analysing and improving office practice to get the best from various systems, to providing secretarial support staff to cope with peaks in demand. Her experience tells her that law firms often spend considerable sums investing in DDS but do not address the human aspects of their operations. "Legal secretarial resources are the second-most expensive cost to a firm after their fee earners," she says, and yet it is often the case that little thought goes into managing them more effectively.

Lang argues that digital dictation systems provide excellent analytical reporting functionality which is typically underused and says it is the place to start when looking for cost savings and can identify peaks in demand, as well as productivity and quality issues.

"Organisational change is key to achieving flexibility and cost savings," Lang argues. "Some firms make savings by adjusting their levels of in-house secretarial support to meet their core level of demand, outsourcing peaks to specialists who fulfill the extra demand at a lower overall cost. Staff concerns about job threats tend to be alleviated if firms improve their fee earner-to-secretary ratio by increasing numbers of fee earners."

Intelligent Office appears to be in the majority of outsourcing specialists in terms of its use of UK-based secretarial staff. Lang says it always uses UK-based staff and rejects home-working as incompatible with its best-practice methods. Richard Bate, general manager at transcription outsourcing specialist Voicepath, concurs: "We will not consider using offshore typists or outsourcing a percentage of our work to a foreign company because of confidentiality and data protection issues, as well as security, quality and time factors. We believe it is only possible to provide a high quality service with fast turnaround times using UK typists."

Bate says that a pay-as-you-go service such as Voicepath's means that "a firm's fixed costs become variable costs reducing both the direct and indirect costs of transcription. Bate cites Midlands-based firm Nelsons, with a turnover of £13m and 35 partners, as a client which has made full use of outsourcing to cut costs and increase flexibility.

Nelsons' head of IT, Robin Easom, comments: "With DDS in place we were able to identify areas where we had surplus resource and gradually reduce it." Tim Hastings, chief executive at Hastings, adds: "This allowed us to think twice before replacing any secretaries leaving the firm; instead, sharing their organisational tasks among remaining staff. Realising this would create a situation where surplus work arose led to us initiating our relationship with Voicepath, which has seen it type a steadily increasing amount of work for the firm since 2005."

Along with helping Nelsons to restructure its support functions more effectively, Voicepath has also played a part in refining the role that certain support staff play in the business. Hastings says: "Typically, we look on outsourcing as a way of relieving secretaries of the more mundane aspects of transcription while keeping the more complex and specialised work for ourselves. It is a good way of 'upskilling' our support staff."

Where next for DDS?

The DDS market appears to present a number of contradictions. Many firms have become keen converts, while many more seem to consider the technology irrelevant. Market potential appears to be huge and yet the size and number of competing vendors is currently comparatively small.

Clearly the market will not sit still. The likes of BigHand and WinScribe are not household names outside the DDS arena, and there are increasing forays into the market by bigger named players such as Philips, Olympus and Grundig, which have already made a name for themselves in the hardware sector of the market. With products like Philips' SpeechExec Pro providing turnkey digital dictation solutions for the non-industry specific user, it remains to be seen whether such traditional hardware vendors will begin to develop software solutions which might be considered suitable for use by the larger legal firms.

DDS functionality is comparatively simple, and that means new vendors can enter the market fairly easily. The situation is compounded by the apparent inability of the existing vendor base to explain to users what it is that sets their solutions apart. This is highlighted by anecdotal evidence from consultants and even vendor executives who express frustration at clients who fail to properly understand the significance of workflow functionality.

One of the most revealing statistics is the tiny proportion of legal sector adopters who are able to represent the positive effect of DDS on their firms in financial terms. All seem convinced that they have made savings and become more efficient, but this is almost always expressed in terms of a 'reduction in the use of temporary staff'. Even when firms do put a figure on savings made (Westminster firm Campbell Hooper claims £400,000 in three years for instance), they tend to be based on the amount saved on temporary support staff and do not identify any other areas of efficiency.

So what does the future hold? BigHand CEO Fryer says its next major release is currently some distance in the future and the company is working on point upgrades for the foreseeable future. These include improved integration with document management systems and voice-over internet protocol, as well as improved interfaces with wireless devices and direct-to-network dictation.

WinScribe Europe CEO Philip Vian says his company has focused on integrating speech recognition into its digital dictation solution and feels WinScribe holds a distinct advantage over the competition in this regard. He comments: "The benefits of incorporating speech recognition will evolve those afforded by digital dictation and will further enhance document turnaround times, allocation of resource and therefore money and, perhaps more importantly, enable firms to respond to clients extremely quickly and so improve client service and relationships."

Vian also dismisses some of the other DDS software solutions on the market saying: "Some hardware manufacturers try to bundle workflow software with their products, sometimes at a cheaper price but not with the many useful features and true benefits that can be achieved using WinScribe."

The market leaders have conspicuous success stories to tell, but they have not yet managed to get close to saturating the UK market, let alone the world market. This seems to be very much down to the fact that, in spite of overwhelming evidence of the effectiveness of their products, they have yet to convince a large number of potential clients, including some major firms, that DDS does significantly more than analogue dictation systems.

There is a natural driver for change in the form of ageing analogue systems being gradually replaced, but many of these users may look towards the traditional suppliers of dictation hardware for replacement unless they are made aware of the benefits that DDS systems with their workflow management functionality can bring.

Companies such as Philips and Grundig already market DDS solutions with workflow management functionality and, while their current client base is made up of firms at the lower end of the market, these companies have the potential to be able to offer a complete 'package' of hardware and software DDS solutions. They also have the financial clout to invest in significant development and provide serious competition to the likes of BigHand and WinScribe. Jessica Chaplin, market development manager at Philips, promises that "several innovations will be released within the next two to three months, which none of the major DDS vendors will be able to offer".

Ironically, at a time when the hardware market leaders are starting to attack the software market, their position of strength in the hardware sector is being eroded as the traditional dedicated voice recorder comes under fire from PDAs and smartphones. The market-leading DDS software vendors have been actively developing their products to free them of dependence on traditional-style voice recorders, and that may prove more appealing to mobile fee earners who would prefer to carry around a single multi-functional device instead of a dedicated voice recorder.

It is likely that the specialised nature of solutions used by major law firms will continue to provide an increasing client base for many of the current players in both the software and hardware sectors, and some important clients have been won in recent times. Nevertheless there is a huge worldwide and low-end market waiting to be tapped, and it is quite conceivable that a major player such as Apple may enter the market, linking iPhone, speech recognition and digital dictation technology to deliver a more affordable solution to a much bigger client base.