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April 2000

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London Report

U.K. Faces Similar Dilemmas

By Charles Christian

WE ALL KNOW the old saw about the U.K. and the U.S.A. being two nations divided by the same language. It is the same when it comes to the two countries' respective legal technology markets.

There are many similarities between the two: Elite, CMS, Carpe Diem, RightFax and InterAction are all big sellers in the U.K. as they are in the U.S.A. We even have an iManage versus DOCS battle in the document management sector. But, there are also big differences.

For example, the U.S. concept of case management software has little in common with the U.K. version. We don't use Legalex Rules and you don't have "Woolf" procedural timetables.

Similarly, in the U.K. there is a very strong emphasis on professional accounts rules compliance (to prevent crooked lawyers running off with client money) to the point that some legal accounts software may balance books but give the firm virtually no business management information.We also have to deal with something called VAT (value added tax) and LAFQAS (the legal aid franchise quality assurance standard), something you don't want to know about and something most U.K. lawyers wish they had never heard about.

Top Trends

Over the last couple of months I have been involved with two surveys -- one with Grant Thornton (who in the U.K. are the market leader for legal IT consultancy services) and the other with Benchmarker. Both surveys addressed the IT issues facing both law firms and in-house legal departments.

One of the key findings to come out of Grant Thornton's Legal IT Inter-firm Comparison report is that while law firms may be spending money widely on technology, they are not spending it wisely, particularly when it comes to training fee earners to abandon dictation systems for PCs. The report, which is based on a survey of 300 of the larger firms in the U.K., split the market into three sectors: small firms (up to 10 partners); medium firms (11 to 25 partners); and large firms (26-plus partners).

In small firms, the average investment in IT per partner (including capital & revenue) in 1999 was (translated in to U.S. dollars) $22,000, the average investment per seat was $5,000 and investment, expressed as a percentage of fee income was 3.8 percent. The corresponding figures for mid-sized firms was $24,300, $4,300 and 5.4 percent, while for larger firms it was $37,000, $4,650 and 5.5 percent.

This is a lot of money, particularly for larger firms that tend to invest more in front office/fee earner systems than back office accounts and word processing. Yet while more than half of secretarial staffs received between three and six days of IT training last year, nearly 15 percent of fee earners received no training and more than half had just one or two days training.

This difference in training may explain why, for example, the average ratio of fee earners to secretaries in large firms is 1 to 0.6, whereas in those firms that have invested in what Grant Thornton calls "advanced office automation facilities" (including document management systems, faxing from the desktop and with at least 60 percent of fee earners having their own PCs), the ratio falls to 1 to 0.25.

Translated into monetary terms (and assuming London legal secretary salary rates of around $40,000), a firm with 120 fee earners will employ approximately 72 secretaries, generating a total annual wages bill of around $2.9 million. But, if that firm were to use more advanced office automation systems, the same number of fee earners could be supported by just 30 secretaries, which would cut the annual secretarial wages bill by over $1.6 million.

In-house Issues

The second survey, by Benchmarker, looked at the IT trends and issues facing in-house legal departments within major U.K. companies. Inevitably one of the key areas of interest was "direct access" and related forms of electronic interaction between inhouse lawyers and the IT systems of the external law firms that supply them with legal services.

The survey found that just 32 percent of documents were exchanged electronically. Perhaps it is fortunate this figure is so low, as the survey also found that in only 63 percent of cases were the exchanged files in formats fully compatible with each other! (WordPerfect versus Word and, of course, the inevitable problems with various versions of Word formats.)

Just 16 percent of commercial clients are offered any form of direct access to their law firms' systems, but this does not appear to be something in-house lawyers are prepared to tolerate for very much longer. For example, while 36 percent said the willingness and ability of law firms to offer their clients direct access had already become a key issue when it came to selecting law firms, a massive 58 percent of inhouse lawyers said that although direct access was not relevant today, it would be relevant in the future. In-house lawyers might not want direct access now but they want it soon.

They also want computer literate legal advisors. The vast majority (84 percent) of in-house legal departments expect external lawyers to be personally computer literate, in context of being able to edit documents on a laptop, use e-mail and remotely access files.

By coincidence, this view was echoed by Ray Franks, the head of finance and systems at Post Office Legal Services, who was a speaker at a recent conference in London. He said one of his department's concerns was not what a law firm could do today, but what it could deliver tomorrow. Legal information was important, but financial and management information (including the electronic transmission of detailed billing support data) was imperative. "It is taken as read that the firms we instruct can all provide quality legal services, but in the future the differential will be how those services are delivered," Franks said.

Finally, what about word processing? There appears to be a lot of interest in WordPerfect in the U.S., but in the U.K. it is virtually dead. Grant Thornton found that 86 percent of law firms now use Word and 26 percent run WordPerfect. But the latter figure includes 16 percent of firms currently running both systems, and with more than a quarter of these planning to migrate to Word this year, the consultants predict that by early 2001 more than 90 percent of the U.K. legal profession will be using Word. So, if you are a U.S. vendor coming to the U.K., make sure your software is Word-compatible.

Norfolk-based Charles Christian is the publisher and editor of Legal Technology Insider.

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