On 11 March 2019, DWF Group became the first law firm to IPO on the main market of the London Stock Exchange with a market cap of £366 million. The 300-page prospectus includes some interesting information on the intersection of technology and the UK legal services market, and the size and shape of the global legal market. According to the prospectus the global legal services market is growing at 4% per year, and was worth £653 billion in 2017, with the United States (£218 billion or 33% of the market) and the UK (£33.3 billion or 5%) holding the top two spots.
Recent research by The Lawyer found that the top 200 UK law firms generated total revenues of £25.68 billion in 2017, while the Law Society’s Annual Statistics Report 2017 found that the ratio of in-house to private practice solicitors had increased from 1:10 in 2007 to around 1:5 (18,766 to 93,155) in 2017.
In-house legal teams don’t generally bill their organisation, so it’s impossible to gauge accurate revenues in the same way as for law firms but, on a like-for-like basis, it’s reasonable to think of UK in-house teams’ aggregate Gross Value Added at around £5-6 billion or 20% of the total.
Separating the hype from the reality
In-house legal departments are increasingly focusing on legal operations and efficiency improvements, and are consequently catching-up on IT with their private practice peers. The LawTech market has been getting frothier for a while, and at this stage of the cycle it’s challenging to separate hype from reality, but when DWF say they’ll be investing up to £10 million from the IPO in new IT systems, it indicates how powerful these technology drivers in law are becoming. As the DWF prospectus notes (at page eight):
“The legal services sector is becoming increasingly complex as traditional law firms, alternative legal service providers and technology firms increasingly compete and collaborate. Technology is increasingly viewed as a strategic enabler to proactively offer client-centric solutions. This ongoing evolution is a response to client-led demand and the increasing disaggregation of service delivery.”
The majority of law firm investment is currently going into:
- Practice management systems (PMS).
- Matter management systems (MMS).
- Document management systems (DMS).
The DMS market is hotting up as several older applications are being retired by their developers and firms scramble to implement their new system from a finite pool of busy providers. In-house legal teams, generally free from the yoke of time recording, have less need for PMS, but MMS, DMS and other management systems routinely figure towards the top of GCs’ shopping lists.
Key issues to consider when implementing LawTech
Providers generally divide their standard form contracts into three parts:
- Software (covering the platform).
- Services (covering the implementation).
- Statement of work (SOW) (covering the detail).
Providers’ standard form agreements tend to be long on customer duties and provider rights, and short on customer rights and provider duties. The provider will have any number of contracts in the field and will see each as a probability theory and a risk reduction tool. However, the customer will only have one of these systems (which it will be dependent on) and will therefore be looking for granular, specific, measurable commitments on what the provider will do during implementation and how the system will work after go-live.
The contracts and SOW are where these two different views of the world are mediated, risk assessed and balanced. We have created a checklist that captures our 3 x 10 points for the software agreement, services agreement and SOW, highlighting where the customer can seek more meaningful contractual commitments than the provider may initially offer. The checklist does not focus on technical legal issues (such as confidentiality, intellectual property, warranty, indemnity, liability and termination) and these should be appropriately addressed elsewhere.
Increasing complexity
LawTech is developing quickly, with the systems on offer becoming increasingly complex, and procurement and implementations are now on many organisations’ radar. The DWF IPO confirms that law firms are looking to build up war chests for technology acquisitions in what they regard as a key area of strategic and competitive advantage. Equally, contracting for new software systems is becoming more important for in-house legal departments as they look to invest in technology to achieve operational efficiencies. Paying attention to the detail of the software and services agreements, and the SOW, and reducing the gap between the provider’s standard documents and your objectives will have a significant influence on the success of a LawTech implementation.
