Using Technology to Build Sane Law Firm Business Models

Using Technology to Build Sane Law Firm Business Models

Using Technology to Build Sane Law Firm Business Models 150 150 Jason Krause

Reading the legal press, you’d believe that growth in the industry is dead forever, that big firms are doomed, and that catastrophic structural change is inevitable. And some of that may be true. But it certainly does not mean the practice of law is doomed, or that individual practices cannot thrive.

Law Firm Business Models

The Adam Smith Esq blog has done a good job tracking the collapse in many firm’s pricing models, in particular the suicidal race to the bottom in billing rates. Similarly, Carolyn Elyfant at Myshingle has been looking into “suicide pricing,” as it’s regularly called, including whether a $99 per hour billable rate is viable.

The problem facing law firms is that their structural liabilities are difficult to reengineer because costs are mostly tied up in people – salaries, deferred compensation, and real estate. If not handled properly, any attempt to change compensation leads to staff departures, sending a firm’s intellectual capital and clients out the door.

For many firms, fixing those structural liabilities means partners will have to accept lower compensation and firms will have to hire more temporary or contract staff and make more use of non-equity partner positions.
Smart and aggressive firms will look to completely reengineer the billable hour, changing compensation structure, and taking business from firms that are slow to change. Rather than stubbornly defending old business models with unsustainable pricing schemes, firms need to embrace the New Normal.

Making the New Business Model Possible

No one knows exactly what the next generation law firm will look like. But for firms to embrace flexible new business models, they will need flexible technology to support them.
Thanks to cloud-based, on-demand solutions, law firms never need to pay for clunky, locally installed software, hire IT support staff, or pay for services they aren’t using. Instead, firms only pay for services they need, when they need them, which means they can spend their time focused on pursuing new clients and and new businesses without worrying if they have the technology or expertise to support them.
Of course, Nextpoint’s litigation services are all cloud-based, but there is a cloud solution for all areas of the legal practice.
That includes time and billing like Clio or Rocketmatter, practice management software such as LexisNexis Firm Manager, and of course, hosted eDiscovery solutions. And that flexibility extends to all types of software, not just legal applications. Google Apps for Business includes web-based email that interoperates with Outlook if necessary, as well as a full suite of productivity applications.

The Competitive Advantage

But moving away from traditional, expensive on-site technology infrastructure isn’t just a cost savings. It’s also a competitive advantage.
Imagine taking a case to court against a large law firm that’s struggling to maintain the same IT support model that it’s had since the 1980’s. If there is a sudden turn in the case, that law firm is likely going to ask for a continuation so it can get its army of paralegals and litigation support staff into motion.
Meanwhile, your trial database is accessible on your iPad, where you can do document treatments, callouts, and edits to any document or video deposition at the court.
The changes in the legal industry are painful and wrenching, but it will also allow lawyers to consider taking their practice into new and previously unprofitable directions. In considering whether the $100 an hour is sustainable, Carolyn Elyfant notes that it “isn’t bad for honest work that doesn’t jeopardize your health, where you’re the boss and, most of all, you now have an opportunity to do challenging work that every so often makes a difference.”

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