It’s not quite as simple as saying “you get what you pay for” – but it’s close. Establishing the brand of your law firm is hard – and it is every bit as hard for the software developers who want your business. The boxes all look the same, the people all have the right patter, there are horror stories and reference sites in equal measure. In UK legal practice, case and matter management software development there is a full range: some suppliers cater for early adopters, some avoid the bleeding edge, some integrate, some claim integration, some stay with best of breed. Some do hardware, some do clouds, some do document management; for some, document management is collaborative versioning across borders and jurisdictions, for others it is the size of your shredder. Some cover firms of all sizes, some only big firms, some only small and some only in-house teams. There is a bewildering choice of suppliers and competencies in legal software development – and these days that is actually a very “good thing”.
Ponder for a moment the alternative – a take it or leave it, one-size fits all, low service world? Yes it would be cheaper, but would it put your firm where you need to be when faced with top 100 US law firm competition, more GC fixed price packages, or Co-op Legal Services?
Comparisons with Accountancy Software:
Parallels are often drawn with the neighbouring profession of accountancy. They wear similar suits, send their kids to the same schools, and allegedly take to computerisation quicker and easier than lawyers. Maybe; but the shape of the accountancy professions’ software support market is radically different. The theory goes that if you can serve one profession well you know how to do others too. So what shape is the accountancy profession software support sector and why?
It is a bit of a caricature, but large accountancy firms basically have two choices: do it yourself or go see CCH; the mid-market firms largely have to either take it or leave it from IRIS’ old Transaction Technology platform, while smaller firms are at the mercy of assorted spreadsheet jockeys – always ingenious, but sometimes fragile.
The accountancy software market has played hard ball with suppliers for decades – it has been very prepared to run its own software development teams and squeeze price and external development investment accordingly. It has also had the luxury that many of its core processes are eminently automatable. The balance of power between buyers and suppliers is heavily weighted towards the buyers – so much so that the size of this market is around a third of the comparable legal one.
IRIS’ market leadership in mid-market accountancy solutions is well known and while the product has its detractors, it does what it says on the tin. They are good at what they do, and they know how to hold and defend a market leadership position.
There are a number of good entrepreneurial teams mounting rival challenges. To Thomson Reuter’s credit, they have both Digita and Abacus in harness now to build a credible alternative – arguably the Waitrose to IRIS’ Tesco style ubiquity. Smaller firms like Practice Engine, TCSL, APS and innovators like Liquid Accounts will change things in time and typically offer solutions and service that IRIS cannot match. This is a tricky market, however. Sage, for example, built a whole division here over a decade ago, and was unable to achieve many synergies given their brand. Lexis has given the accountancy and tax sector a wide birth, which is odd, considering that the Butterworth’s brand is as strong if not stronger than the CCH brand in tax.
The reasons for the apparent lack of choice in the tax and accountancy software sector are cultural as much as anything. Just as the accountancy professional information market is less than a quarter of the size of the legal one, their attitude towards software is fundamentally different. Having some experience of looking under the bonnet in enterprise systems used by their clients, accountants know that it is rarely rocket science, but they also assume the five most dangerous words in strategy: “how hard can it be?” It is a defining characteristic of the tax and accountancy software market that the larger firms have repeatedly developed solutions themselves, sold them and started them up again in a long term strategic display of major buyer power. Both of the major corporation tax specialists in the market, TSCL and Abacus started life inside KPMG and Andersen respectively. Thomson Reuters recently acquired the Abacus branded solutions from Deloitte and the cycle will no doubt go full circle again in due course.
What the accountancy market loses, precisely because of the power of its buyers, is a strong enough gene pool among independent software development firms willing to commit to excellent long term solutions. The end result is that only a few stalwarts are willing to play, and who can blame them? You can spend decades building intricate solutions for large firms with complex integration protocols and global competence only for the client to offer your core developers twice the salary and better kit to jump ship. You can get as cost effective as possible only for the client to move supplier after a long standing relationship or take the business inside capriciously, purely “because it is time”. Ironically the “we need to avoid complacency” or “we can’t afford to rely on one supplier” arguments end up delivering precisely that.
Economics in the UK Legal Software Market
So the theory goes that the legal software market will go the same way – it’s just a matter of time. It has even had some big players trying to force the pace in recent years such as multi-billion pound VCs who see the consolidation of the UK Legal IT market as a no brainer. In the noughties an impressive lady by the name of Vin Murriah did a sterling job rounding up MSS Alphalaw, AIM/Teamflow, Laserform, Opsis, Meridian Law, Mountain Group and Videss for CS Group. After the £500m take over by Hellman & Friedman, IRIS carried on picking up smaller targets in barrister’s chambers and other niches; so if that agglomeration be for you – who can be against you?
Well, Thomson Reuters – a £30bn global conglomerate – with their Elite brand for one. Lexis, a paltry £10bn global conglomerate by comparison brings VisualFiles and Axxia to the party. The home grown smaller listed team of Tikit are well known and while IT managed services is their core, the old TfB/Avenue brand came out of the recession quite well. Wolters Kluwer UK sold their legal operations to Thomson some years ago and have stayed out so far while a US VC-backed Aderant is largely doing what they would have done. Wilmington have been pre-occupied with core issues in CLT and training through the recession, while Bloomberg are looking hard for ways into the UK legal scene. EMAP and Euromoney remain more focused on the know-who than the know-how markets in legal services for now, while neighbours such as Civica (3i backed since 2008), Achilles (backed by Hg, IRIS’ former backers) and Landmark (Daily Mail General Trust backed – a £2bn group) are taking targets of opportunity in niche legal services areas already. In short, at a headline level there are 3-4 other major and global groups active, at least 3-4 others are prowling, and 3-4 other major players nibbling actively. The same cannot be said of the tax and accountancy market.
So is this a good thing? Well what the above picture doesn’t tell you is the strength of entrepreneurial and innovative talent elsewhere in the market. IRIS, Lexis and Tikit did not buy everyone and many of the remaining independents are actively showing up their big group rivals. A raft of exciting and innovative firms are offering genuine alternatives to the “big blues”. Eclipse, Flosuite, IKEN, Practicce, Pilgrim, Linetime, FWBS and Quill to name but a few are doing some really quite exciting things, as are Bar Squared for the chambers market.
The Recession’s Impact
The CS Group (as was) merged with IRIS in mid-2007, and a little matter of the legal profession heading into a recession first instead of last interfered with their plans somewhat. In economics terms the recession for Legal IT was bigger than in ’02; different in both size and shape. A £12m reverse in 2001-2 equates to a £20m one in 2008-10, a sharper and more condensed hit than the last recession.
So where was the list of casualties from the smaller developers? Thankfully it is missing. There were no comparable casualties in accountancy either, but that’s what you expect from a consolidated market run by “big boys” – the point is, the diverse market in legal IT fared just as well if not better, consolidated or not.
Bear in mind also that pre-07 many of the development teams had already invested significantly in repositioning their platforms, in some cases rewriting whole swathes of core code from scratch on new platforms aiming to launch in 2009-10. All were stretched; many were caught by the double whammy of recession and investment cash flow exodus simultaneously. That they emerged in rude health is a very heartening sign, not just for them, but for the profession.
Consolidation versus Choice
Managing partners and their CIO’s can expect this range of choice to continue. For the very largest global players, there remains Elite, Aderant, FWBS, Flosuite, Norwel, internal teams and a few more attempts to squeeze SAP or Oracle into the box. For the public sector, GCs and in-house teams players like Eclipse, Flosuite, and IKEN offer good alternatives to established services from Civica (as well as reliable top firm pitches too). Private practice has a strong choice from Pilgrim, FWBS, Norwel, Linetime and SOS in addition to the usual suspects from Lexis, IRIS and Tikit. Smaller practices have some great solution from experienced teams like Pracctice, Peapod, DPS and Meridian Legal and even LPO options, from firms like Quill/Pinpoint. Niche specialists such as ICSA Software, Business Integrity, Class Legal and Bar Squared offer variety as well as depth.
81 brands have become 64 firms over the past decade - to see the market map in full go to http://bit.ly/hgXokh for RBP's pictorial version. The respective sizes of the boxes are good approximations of the turnover of each firm. All of these firms pictured have achieved critical mass and survived a tough recession so there will remain a healthy scramble to find the elusive nirvana of matter management and practice efficiency. Yes, the profession is paying more for its software pro rata than the accountants are, but it has a healthier talent pool to call on and more choice and creativity at all levels. The suppliers survived the hardest test of 07-09 well and there are even new entrants emerging such as Peppermint – well worth a look.
Good Enough versus Critical
If anything the economic lesson from the market data is to certainly ignore any nonsense about lawyers tailgating accountants. More importantly it is probably also to stop comparing “one stop” and “best of breed”. In a sense everyone wants best of breed – it’s just that for some (usually smaller firms) the best of breed is a time and fees based single box. The real vibrancy in the market seems to come from in-house counsel needing industrial strength matter management, whereas for them time and fees needs to be very project specific rather than department generic. For private practice, time and fees remains essential, whereas case management does not need industrial strength, but bespoke tailoring. The neighbouring market of CRM systems probably still suffers too much from GIGO – garbage in, garbage out – but at least for lawyers there are more and better brains tackling the issue than in other markets.
