Legal industry professionals say prospects for their future legal business look bright, but cite pricing pressures and cybersecurity as the biggest challenges their firms face, according to a new survey released Wednesday.
The second “Business of Law and Legal Technology” survey, by the legal software company Aderant, indicated that law firm professionals have a rosy view of their potential business. More than half of the survey’s respondents—some 57 percent—reported that business was “better” or “much better” at their law firms than it was over the prior year.
And that optimism grows along with law firm size. More than 70 percent of the respondents from firms with greater than 500 lawyers viewed their business prospects this year as better or much better than last year, Aderant said.
“The larger the firm, the more likely the respondent was to say business is better,” Aderant said in its report. “More to the point, there’s noticeable tick up in optimism among firms with 501 or more lawyers.”
The survey, conducted March 16 to April 16, was based on responses from 138 legal industry professionals worldwide, according to Aderant. The vast majority were not practicing lawyers, but were drawn from a group that includes executive staffers as well as finance, accounting, information technology and other law firm business professionals. Most came from larger firms, with more than 60 percent of respondents hailing from firms with 100 or more lawyers and a quarter coming from firms with at least 500 lawyers.
Beyond the survey’s findings about law firms’ business optimism, Aderant also asked respondents to name the most significant challenges facing their firms.
Challenges in six categories—pricing pressure, cybersecurity, operational efficiency, technology adoption, competition and growing business based on an existing client base—were identified as top concerns by more than 20 percent of those surveyed, according to Aderant. More than 35 percent of respondents named pricing pressure as a top challenge, while cybersecurity was named by more than 32 percent as a top concern.
Aderant drilled down further in the realm of law firm pricing and rate structures, asking respondents about the extent to which their firms have adopted alternative fee arrangements in place of the traditional billable hour pricing model that has prevailed in the industry. More than half—55.8 percent—said their firms use alternative fee structures for less than 20 percent of their matters, according to the survey.
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Aderant also found that the top barriers to adopting alternative fee arrangements are concerns about how to determine accurate or profitable pricing structures outside the billable hour, and concerns about estimating, up front, how much time and effort would be involved in a particular matter. Some 63 percent of survey respondents said determining accurate and profitable pricing was a barrier, while more than 60 percent pointed to concerns about estimating time and effort.
“In our assessment many law firms already have the data necessary for estimating time and pricing, the challenge has more to do with making that data accessible and gaining the expertise to use it,” Aderant wrote in its report.
The survey also included questions about innovation and new technology. While innovation is a hot topic in the legal industry, Aderant reported that more than 70 percent of respondents said their firm does not have anyone on staff specifically dedicated to innovation.
But that response changes as law firm size grows, according to the survey. Just shy of 56 percent of respondents from firms with more than 500 lawyers said their firm had a staff member focused on innovation and new technology issues.