Key Trends in Law Firm Fintech
Financial technology is crucial to the smooth functioning of modern law firms. The interplay between finance and technology has always existed, but it has become more complex in recent years. Experience shows CFOs spend a fair proportion of their time strategizing on technology and systems as on traditional finance and accounting. As law firms become more business oriented, firm senior management faces increasing demands from clients and internal users, acceleration in technology, and growing complexity in the external environment. To respond, law firms need smart thinking and robust technology solutions to manage, flow and present data. Making the right selection of technology platform and vendor against a backdrop of rapid change is a mission-critical decision. While the fundamentals of law firm finances the income statement, balance sheet and cash flow have not largely changed, the depth of detail and velocity of delivery has exponentially been altered.
There are four key trends underlying financial technology in the legal industry:
Edge of Big Data: Data volume generated and stored in law firms has grown exponentially over the last decade. Perhaps this volume is not at big data levels, but it is certainly seems to be getting there. In the past, information used to be collected for clients and matters, but the advent of alternative fee arrangements has created the need to manage at a sub-matter level. Clients now review time increments at phases and tasks. This means that law firms have to create matter budgets, and then monitor actual performance against such budgets. All this leads to large increases in the amount of data that needs to be smartly managed. Further, law firms are seeking to combine qualitative matter descriptions and experience information with financial data. CFOs and CMOs have to deal with complexities of integrating such numeric and non-numeric data.
The challenge for law firms is to be extremely smart about financial technology
Near Real Time: In the past, law firm operations were reasonably stable, thus management reporting was required only on a monthly basis. Indeed, this periodicity was adequate. As law firms grew and uncertainty in the legal industry increased, this paradigm began to shift. Monthly reporting was no longer considered enough - senior management wanted to review business operations on a weekly basis. What came next was one-off requirements for daily reporting; and that trend spread. Daily reporting became the norm. In today’s modern law firm, the requirement is for near real-time information. Leadership has to make tactical decisions using current data, so up-to-date figures area necessity. One classic example are clients who wish to know the present status of their engagement, which means lawyers’ concurrent efforts have to be rapidly incorporated into reports.
Responsive Design: Prior to the mobility era, data needed to be presented only on one screen the desktop or laptop which was physically located in the office. The ubiquity of mobile devices means partners and management want to see data on tablets and cell phones. Online data presentation has to include responsive design so that user experiences across laptops, iPads and iPhones are similar and seamless. Designing such systems takes into account multiple formats, thinking through user interactions with data and security concerns with widespread data delivery. Mouse clicks, swipes, pushes and pinches have all now become critical and equal components of the design equation.
Cloud or Not: Law firms traditionally have stored their sensitive financial data on their own servers within their internal firewalls. As a precaution and in alignment with prudent IT practices, law firms began to replicate this data on known third-party servers in secure external locations. The increasing threat from cyber attacks has now created a difficult decision for law firm CIOs and CFOs. Should they host financial data on highly secure cloud servers or not? Understandably, there are serious pros and cons. Cloud servers offer high-quality security protocols and claim to be virtually impervious to hacker attacks. While attractive, there will be likely unfavorable reactions to hosting sensitive client and numerical data outside the confines of the law firm. At this point, there appears to be no clear answer. This debate will be resolved on a one-off basis by each law firm taking into account its particular circumstances.
In summary, the challenge for law firms is to be extremely smart about financial technology. They need to deeply understand requirements, square it with existing technology, as also anticipate trends against constraints of limited financial and resource commitments. Such a fluid situation requires alignment from competent law firm professionals, forward-looking leadership, and committed vendors so the right choices can be made.