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3 Trends in Legal Data Intelligence

By Mike Nappa on October 6, 2021 12:47:28 PM MDT

3 Trends in Legal Data Intelligence

Here are three key trends we're watching in the legal industry and the data optimization strategies law firms can employ in response:

Trend #1: Accounting Encroachment

When you want a hammer, you go to a hardware store. Hungry for a Big Mac™? McDonalds is the place. 

And when you need a lawyer, obviously you go to … an accountant? 

Surprisingly, in increasing numbers, the answer for many mid-market businesses is “Yes, we get our legal services from our accounting firm.”

Over the past two decades, the accounting industry has made steady progress toward product diversification and enhanced legal services. That’s effectively shifted the market toward client expectations of “a one-stop destination that provides all the services needed,” rather than having to seek out separate firms for each specialty. As a result, worldwide demand for legal services has expanded outside of that industry, with accounting firms actually drawing significant business away from the traditional law firm environment.

Looking at data from 2003 to 2018, Mordor Intelligence studied four of the largest accounting firms, KPMG, Deloitte, PricewaterhouseCoopers, and EY. They found that “The total number of legal service professionals hired by these firms grew by 50%.” For instance, in 2003, Deloitte employed roughly 1,000 legal attorneys. By 2018, that number had more than doubled, topping 2,500. Meanwhile, Deloitte still staffed fewer than any of the other three firms studied, with PricewaterhouseCoopers boasting over 3,000 legal attorneys on payroll and KPMG announcing, “its intentions to almost double its market in the next few years.” 

According to Mordor’s study, “The majority of law firms are struggling to cope with the increased competition from these accounting firms.” 

Data Optimization Strategy for Legal Firms

So how can you combat this trend? First, implement a system to proactively monitor your 80/20 income split. Use Power BI tools to identify how your revenues are generated according to individual clients. For instance, does Client A generate only 1% of your revenue, while Client H generates 13%? Once you know at a glance who your high-value and low-value clients are, you can start making ROI-based decisions about them. 

Business coach Karyn Greenstreet advises, “Find the 20% of your customers who bring you the least profit and either raise their rates or get rid of them. This may sound harsh, but you're in business to make a profit and you can't ‘carry’ an unprofitable customer just because you like them.” Is Greenwood’s tactic the right one for your firm? You won’t know until you’ve got the relevant data for decision-making, ready to view at a moment’s notice. 

Second, track client-centric ROI rates and aggregate those rates for promotional purposes. A data warehouse can collect and compare costs charged to a client versus costs saved or generated for that client because of your law firm’s work. Export that information into a data visualization dashboard with drill-down capability and you can let the numbers speak when trying to win, or retain, a client. 

“It comes down to win rate,” says Jon Thompson, Director of Consulting at data intelligence firm, Blue Margin Inc. “The amount the client has invested versus what they’ve won or preserved is how a law firm competes. One client in particular realized a 4x return of retained earnings from their investment into data intelligence.” When you can show a healthy ROI for a similar client, or for all your clients as an aggregate number, that kind of numbers-speak will keep people coming back.

Trend #2: Increased Obstacles to Alignment 

In November 2020, Gartner polled legal leaders to discover what they identified as the top problems facing them for the next year. Still in the shadow of a global pandemic, it’s no surprise that the number-one issue for roughly two-thirds (66%) of those attorneys was: “Our department fails to align constrained resources against the highest-impact business need.”

Additionally, three-fourths of those legal leaders (74%) expressed distrust that this problem would be solved any time soon. That pessimism is well founded considering that the pandemic-mandate of remote work caused “operational churn” in the alignment of objectives, costs, processes, and communication for just about every law firm. This includes 44% of respondents pointing to “disconnect” from business partners, and 39% saying that their firm’s “Current mix of talent and skills are out of step with new and emerging business needs.” 

Gartner’s conclusion was to issue this imperative for law firm executives: “Provide strategic insight and clarity as new or changing risks emerge … [and] Solidify the GC’s role in informing corporate strategy and improving decision making.”

Data Optimization Strategy for Legal Firms

Jon Thompson recommends that law firms use their existing data to get everyone working from the same playbook. He says: “The reason for poor alignment is that there’s not a clear set of metrics that folks can follow-up on. Implementing a common reporting framework, like Power BI, into that environment provides leverage for each functional department in a law firm to align on the metrics that matter most for their department—but also overlap with other functional areas of the firm. For example, good dashboards allow attorneys to easily follow up on the AR and work in progress in a timelier manner, and billings and collections can quickly get an accurate picture of booked income before the end of the year.”

Trend #3: Automation Domination

Attorney Kristin Gaston is a partner at Cascade Legal Planning. Looking into the future of legal and compliance services, Gaston sees technology as the big driver. “I think we’ve been hearing for a while about automated services,” she says, “and the risk to attorneys of having a process completely automated without any attorney involved. But I think attorneys are hearing about that less as a risk and more of an opportunity to utilize the possibility of a streamlined—or different tiers of—service to incorporate into their practice.”

Leslie Ginzel of Beacon Law in Houston, Texas, agrees. Beacon champions justice for homeless and low-income clients, and Ginzel believes that the trend toward automation can increase access to legal services for these often-overlooked clients. She theorizes:

I think legal aid across the US has been really trying to look at ways to automate simple things because legal aid is so routinely underfunded, and we need to be looking for ways to make these things accessible. The vast majority of our clients need light support and forms, so let’s figure out a way to automate that and get them access as efficiently as possible. Save the heavier-duty resources for more impactful work.”

Automation in the legal industry isn’t localized to only North America either, as it has become the norm across Europe and in other continents as well. For example, Business Day of Nigeria, Africa, identified a recent, similar expansion of automation adoption in their legal industry, primarily due to the necessities of operating during the COVID-19 pandemic. Now ingrained in the systems and processes of African law firms, they predict its newfound familiarity will only increase its overall use. 

“It is now close to impossible to be in the legal business sphere without utilizing technology competently,” Business Day’s Legal Business division reports. They add, “Expect significant change in document automation … Legal sector stakeholders will utilize automated software solutions which take into account the basic elements of the document required as well as the peculiarities of each case. This can produce in minutes, a draft document for review, saving the hours it would have typically taken.”

In short: Robot lawyers are here to stay—and it looks like the worldwide legal services industry is going to put them to work.

Data Optimization Strategy for Legal Firms

Use a data warehouse to generate reports of revenue received according to form function. Is your law firm producing high volume in Intellectual Property contracts, and lower volume in small business startup paperwork? A data dashboard allocating income as it relates to form use will surface that information at a glance. Once you have an ongoing history of income reporting associated with forms, you can quickly begin to identify low-producing form functions and make plans to automate in those areas. 

For instance, if you discover that one of your lower-producing form functions is the filing of LLC Operating Agreements, your law firm can automate that form within a self-serve client portal on your website, charging a flat fee for processing. That tactic frees up billable attorney hours for higher-value functions, while still generating the lower-value income derived by your LLC Operating Agreement business. 

Law firms can differentiate themselves with a well-defined data strategy. If you'd like to discuss your firm's opportunities, we'd love to learn more about you and help point you in the right direction.    


Three Key Thoughts: 

“Worldwide demand for legal services has expanded outside of that industry, with accounting firms actually drawing significant business away from the traditional law firm environment.” 

“The number-one issue for roughly two-thirds (66%) of attorneys was: ‘Our department fails to align constrained resources against the highest-impact business need.’” 

“It is now close to impossible to be in the legal business sphere without utilizing technology competently.”

For Further Reading: 

Legal HQ™

The Hidden Bazinga of Dirty Data

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“Legal Services Market - Growth, Trends, And Forecast (2020 - 2025).” Mordor Intelligence. https://www.mordorintelligence.com/industry-reports/legal-services-market

Karyn Greenstreet, “Pricing Strategy: How to Raise Your Fees.” Business Know How. November 28, 2014. https://www.businessknowhow.com/money/raise-fees.htm

Jon Thompson, in an interview with the author, September 2021.

Gartner, “Top Priorities for Legal and Compliance in 2021.” Gartner presentation, 2020. https://www.gartner.com/en/legal-compliance/trends/top-priorities-legal 

Teresa Matich, “Top Legal Industry Trends to Follow in 2020.” Clio. https://www.clio.com/blog/top-legal-trends-2020/

“2021 Trends In The Legal Services Sector.” Business Day Legal Business (Nigeria). https://legal.businessday.ng/2021/01/07/2021-trends-in-the-legal-services-sector/


Article written by Mike Nappa with additional reporting by Chuck Green 

Mike Nappa

Written by Mike Nappa

Mike Nappa is the former publications director at Blue Margin Inc. He's also a bestselling and award-winning author with more than a million copies of his books sold worldwide.