Softening Market? Practice-Based Applications Are Taking a Hit
Posted Nov 1, 2011 1:19 AM CST
By Joe Dysart
Makers of law firm software are dealing with more than their fair share of negative trends of late, which are painting a less-than-rosy industry prognosis.
Makers of knowledge management software, for example, have to be cringing at a torrent of recent security breaches associated with their products. This has led to a string of indictments against users, who are accused of having purloined data from these programs to engage in insider trading.
Meanwhile, makers of customer relationship management software are suffering from an overall image problem among many law firm users, who are frustrated with reports of dismal returns on investment, as well as reports of attorneys who simply refuse to use the solutions.
And the ABA’s 2011 Legal Technology Survey Report has found that overall availability (and overall use) of law firm software solutions is down year over year.
Probably the most worrisome issues are the nagging security vulnerabilities evident in knowledge management software, which are smearing law firms’ reputations and resulting in numerous insider trading perp walks. Matthew Kluger, a mergers and acquisitions attorney arrested in April, is alleged to have leveraged positions at several high-profile law firms to illegally reveal details about upcoming deals. And Todd Leslie Treadway is alleged to have traded on data he mined while working as an associate at Dewey & LeBoeuf.
L. Keith Lipman, president of Prosperoware, a Bala Cynwyd, Pa.-based maker of law firm software, says the solution to the security vulnerabilities in knowledge management software is easy, at least from a technical standpoint: “Decentralize confidentiality processes by putting the responsible lawyer or someone on the matter team in charge of who has access to the matter.”
It’s a perfectly logical solution given that, from a software perspective, it’s relatively easy to distribute security rights, Lipman says, “but the will to change how we do things, including applying confidentiality standards, seems to be glacial.”
Meanwhile, customer relationship management software appears to have its own problems. At some law firms CRM has a reputation as a time and money drain, which ultimately results in outright rejection by attorneys and other staffers it’s supposed to help.
“Almost without fail, whenever I bring up the issue of client relationship management tools with others in the legal industry, the conversation ends up talking about what an overall failure the CRM resource ended up being,” says Greg Lambert, library and records manager at King & Spalding’s Houston office. “But because the firm invested so much time, money and people into the project, they aren’t willing to admit that they need to cut their losses and move on to something else.”
Syd Irfan, a CRM analyst at LegalTrack Case Management Software in Oakville, Ontario, admits the industry needs to do a better job of educating attorneys about the software’s value. “The main reason behind such failures,” he says, “is because the vendors servicing CRM products are so focused on the bells and whistles their products offer that they fail to acknowledge the ‘real issues’ the law firm users are having in their day-to-day operation.”
Meanwhile, data from the ABA’s 2011 technology report only add to concern over the industry’s apparent downward trend. Only 51 percent of survey respondents reported that their firms had case/practice management software, a 10 percent drop over the prior year. The availability of specialized practice software was also down 10 percent year over year, from 51 percent in 2010 results to 41 percent in 2011. And use of specialized practice software experienced an 8 percent drop, with only 20 percent of law firms reporting that they were actually using such software in any meaningful way.
Catherine Sanders Reach, director of the ABA’s Legal Technology Resource Center, indicates that what’s perhaps most troubling in the report is the decline of practice management software.
“Anecdotally, we hear that the software is overly complex and very expensive. In the last few years,” Reach says, “we’ve seen that the capital investment needed to purchase the product licensing plus support and maintenance, [as well as] to implement and to deploy practice management software, is quite steep in the face of a downward economy and shrinking client base.
“We also know that firms often stop updating their existing software until they are so far behind that the expense to update the software—and possibly associated hardware—is overwhelming,” Reach says. “Finally, firms often do not make the time commitment to adequately train attorneys and staff on these powerhouse tools, thus abandoning them as ‘shelf-ware.’ ”
Jack Newton, co-founder and president of Themis Solutions in Vancouver, British Columbia—makers of Clio—says there may be another factor at play: “At Clio we’ve seen triple-digit year-over-year growth every year since we’ve launched in 2008. I believe one reason the ABA’s ... report has observed a net year-over-year decrease ... is because we are in the midst of a massive shift from on-premise computing to cloud computing. This transition period has caused many firms to put the brakes on spending on traditional software while they evaluate cloud-based alternatives.”