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Operational efficiency and pricing pressure remain the top challenges for law firms as they try to maintain a competitive edge in an increasingly crowded industry, according to Aderant’s 2019 Business of Law and Technology Survey.

One related finding was the shift in where firms see competition, said Chris Cartrett, executive vice president of Aderant, an Atlanta-based provider of legal business management software.

The percentage of law firms citing alternative legal service providers as their greatest competitive threat increased from 5% in 2017 to 15% this year, while those citing other law firms as their greatest competition decreased from 62% in 2017 to 53%. (The percentage of firms citing legal work moving in-house decreased from 29% to 22%.)

Firms that have implemented well-functioning business processes are more likely to be competing against alternative legal service providers for work that is higher volume and lower margin, Cartrett explained. “It’s good business—but you’ve got to have operational efficiencies to make money on that.” 

To Cartrett, the increase in firms seeing alternative service providers as a threat could indicate that these firms are going after the same kind of business. “To compete, you have to provide that same kind of value,” he said.  

This is the third year that Aderant has conducted the survey on how legal technology impacts firms’ business. 

The survey’s respondents are legal business professionals at law firms—not lawyers—including C-suite staff, financial and IT personnel, project managers and firm administrators. Most of the 147 respondents work at larger firms. Fully 85% were at firms with more than 25 lawyers and, of those, 54% were at firms with more than 100 lawyers. 

“There’s an underlying common thread in this survey about increasing operational efficiency,” Cartrett said. “The clients that our law firm clients are working with are becoming more complex. Serving them creates greater complexities for the firm, which strains current resources and ways of doing business.”

Making operations more efficient is a way to reduce those strains, he said.

For the survey’s respondents, 31% said operational efficiency was a top concern and 29% cited pricing pressure—outpacing increasing new business from existing clients (19%), winning new business (18%) and cybersecurity (17%).

One aspect of operational efficiency is timely invoicing of clients. Only about one-third of respondents (29%) said half or more of their firm’s invoices are processed through an e-billing or client spend-management system. But that’s up from 9% in 2018.

Fully 62% of firms said they publish client invoices in two weeks or less—38% in a week or less and 24% in one to two weeks. Another 20% said it takes two to three weeks, and 7% said it takes more than three weeks.

Delays in entering time, printing paper copies and lags in client adoption of e-billing technology were the friction points, according to the survey’s results.

One competitive advantage for law firms could be to provide clients a matter-management dashboard that allows real-time tracking of matters’ status and costs, Cartrett said. “It’s a way to provide greater value for your clients, so they have a stronger relationship with the firm.”

But such systems are still very rare, he said. “Some firms are still struggling to share documents.” 

Business Growth

More than 90% of the survey’s respondents said business this year is at least as good as last year. That said, 8% said things have gotten worse. 

Comments from respondents who said business was better said that they are growing by expanding into other markets or are seeing higher demand and utilization or are retaining more clients with more profitable cases. 

For firms saying business is worse, respondents’ comments attributed that to lower productivity and demand for their services or to changes in the insurance defense industry. 

Interestingly, respondents at firms with leadership supporting legal tech and business initiatives were more likely to say this year is better—and were more likely to say they get invoices out the door in a week or less.