With significant funds at their disposal, large law firms have the means to invest in technological innovations that can accelerate operations and give them a competitive advantage. The new wave of generative artificial intelligence (genAI) has seen Big Law set aside budgets to test and develop their own AI technologies. But what does this mean for smaller law firms that have limited resources? Will they be able to compete and survive?
SMEs’ size could work in their favour, allowing them to adopt changes and deploy new technologies at a faster pace than Big Law — often requiring a multitude of approvals and lengthy processes — and potentially, for a fraction of the cost.
Tracy Lacey-Smith, joint managing partner at SA Law, acknowledges that large law firms will have an advantage as they can invest significant funds into AI and sophisticated document management systems, but small firms can level the playing field as much as possible with quick wins.
Thanks to their agility and ability to adopt new technologies quickly, SME firms can collaborate with their suppliers to customise features and improve efficiency.
In 2023, SA Law deployed a hybrid client relationship management (CRM) and data management system, which enables the firm to create reports to identify employee-client relationships and access contact details contained within emails. “It’s really cost-effective compared to a high-end CRM system, and we were able to adopt it and implement it really quickly,” says Smith. “We’ve given the solution provider a lot of feedback, and they’ve made changes to suit our needs.”
Another tool SA Law recently adopted streamlines the debt recovery process, allowing the firm to maintain healthy cash flow and remain competitive. It worked with the vendor to tailor different setups for various client profiles.
When it comes to tech used for day-to-day operations, however, Smith believes smaller law firms are on par with their larger counterparts. “We have access to all the same accounting, document and case management systems, which are priced according to your size,” she says.
Smaller firms are also now as equipped for hybrid work as larger ones, which was not the case before Covid. Large law firms were more likely to have technology and processes in place for hybrid work as many had employees working from home some of the time before the pandemic, and according to Smith, it was a steep learning curve for SME law firms to adapt to remote working.
However, she highlights that smaller firms will probably find it challenging to keep up with Big Law in terms of using AI as they don’t have the means to create their own versions to trial. Instead, they will need to rely on solutions from tech providers.
“Smaller practices hope that large providers like LexisNexis will release products to the market, giving them access to the same resources as Big Law. It certainly wouldn’t be AI tech that we will be producing ourselves.”
Stephen Grant, corporate partner at Scotland-based Wright, Johnston & Mackenzie (WJM) and director of the Scottish Society for Computers and Law (SSCL), believes SMEs will benefit from the AI investments made by big law firms. According to Grant, larger firms will be able to test these products first and smaller practices can later purchase a more mature version of the technology. While big law firms may need to commit to the technology that they have developed in-house, SMEs will have the advantage of testing different products and purchasing the one that works best for their specific needs and budgets.
Experiencing both sides
In September 2023, Irwin Mitchell (IM) invested in WJM, emphasising their shared values and they collaborate to provide a full suite of legal and financial services in Scotland. This has also given WJM access to IM’s AI technology, which Grant and the tech team were able to test out.
He says: “I’ve been part of a mid-sized Scottish law firm and now I’m part of a much bigger firm, so it’s interesting to see the contrast. Large firms have the resources to hire teams dedicated to AI and invest in the technology, which will give them an initial boost in efficiencies and productivity.
“The advantage that smaller entities have is that it takes just two or three people who have an interest to push it, and you don’t need to spend thousands of pounds on it.”
Solicitors Regulation Authority (SRA) figures show that at the end of March 2023, there were 9,318 firms — 2% fewer than the year before and 10% down on five years ago. This is partly due to increased mergers — which were up 23% from 99 in 2021 to 122 in 2022, according to an article published The Law Society Gazette on January 5th, 2024 titled “Why law firm mergers are on the rise”. Is it possible that advancements in AI technology will further drive consolidation in the market, or will SME firms leverage their advantages to gain a competitive edge over larger firms?
It seems SME firms are cognisant that they need to stay up to date with their technology to improve their positions in the market. In LPM Frontiers 2024, 64% of the firms surveyed said they planned to increase their technology spending.
Which tech?
Choosing the right tech involves assessing which areas of the firm it will have the greatest impact on, and where it’s essential, such as investing in cybersecurity tools. SA Law considers itself a progressive firm with an internal innovation forum and managing partners keen to stay informed about the latest technology. The firm invests in technologies that have the potential to make employees’ lives easier and allow them to work more efficiently, but it prioritises cybersecurity, says Smith.
SA Law has a cybersecurity partner and is in the process of migrating to the cloud to mitigate cyberattacks, as large providers have the best security and backup systems, she explains. They can get firms back up and running quickly in the event of a cyberattack: “Migrating to the cloud is costing us a lot, but it gives us that added element of protection and safety.
“I don’t think cyber threats used to be on our radar as much as they are now. I think small firms were just of the view that if they had a firewall and the IT consultant said everything looks fine, they’re safe, because we’re not that interesting. But over the last few years, it’s become obvious that cyberattacks are a real threat. It’s gone from something that’s on the list to being at the top of the list,” explains Smith.
In the coming years, Grant thinks SME firms will also work towards automating their workflows — investing in various technology solutions, including AI-related tools, to streamline their operations. However, this shift towards automation will need new work practices to be established, which can help people to work more seamlessly. While Grant doesn’t see automation as a threat to lawyers’ jobs, he believes it may impact roles that primarily involve administrative tasks.
He predicts that the practices and technologies adopted for flexible working during the pandemic will continue to be integrated into the workplace. He also foresees the convergence of Microsoft Teams and other video technologies, possibly in the form of virtual reality (VR) — in the case of the latter, if the adoption cost significantly decreases.
It’s not all doom and gloom for SME law firms in the face of Big Law’s hefty technology investments. In fact, these projects can benefit smaller law firms in the long term — allowing them to purchase products created as a result of Big Law’s trials, perhaps with the added freedom of not having to commit to one solution. SME firms have the added advantage of deploying technologies quickly due to their leaner structures, unlike large law firms that can need a lot more stakeholder engagement and adoption management to make a success of new innovations.