Spurred by high demand and strong hiring practices, 2021 was a banner year for the legal market as mid-sized and large law firms enjoyed surging productivity and record profits. But for many law firms, these gains proved to be short-lived. In fact, according to the Thomson Reuters Institute Law Firm Financial Index (LFFI), productivity at law firms plunged 7% in Q4 of 2022 when compared against Q4 2021 productivity numbers.
For law firms, the significant dips in demand, productivity, and profits they experienced in 2022 provide painful, but important lessons. While it’s true that times of uncertainty are always difficult to manage and weather, such times also provide opportunities to make and embrace pivotal changes. For a growing number of law firm leaders, this means investing in a law firm productivity solution with modern cloud technology that can help drive operational efficiencies and insulate their business from volatility.
Current legal market challenges
After such a successful year, law firm leaders have been left scratching their heads as they are confronted with their current realities. When examined more closely, 2022 brought about a perfect storm of events, many of which were both difficult to predict and course correct from.
Economic and political instability within the U.S. and abroad caused businesses in numerous sectors to pull back and pump the brakes on spending. But even as demand for legal services dropped, law firms continued to invest heavily in retaining talent as well as hiring and training new attorneys, a move that directly corresponds to a notable dip in productivity. During 2022, many law firms also started implementing costly return-to-office plans at the same time as their overhead expenses began to sharply rise, fueled by rising inflation rates.
In the business world, uncertainty and fear tends to breed more uncertainty and fear — and continued shifts within a competitive legal market are driving many law firms to rethink their current business strategies. During these tumultuous times, risk-adverse leaders are often inclined to scale back spending and par down operations. But a strategy focused on contraction cannot pave a prosperous path forward.
Cloud technology as a strategic advantage
For a growing number of law firms, making the move to the cloud is no longer something they can afford to put off. To meet and overcome current economic and market challenges, law firms must invest in a modern productivity and cloud technology that capitalizes on innovation to drive productivity, growth, and profits.
So how does cloud technology benefit law firms during times of great volatility? Law firms that move to the cloud automatically adopt more innovative and efficient ways of working. That’s because cloud technology provides firms the flexibility needed to quickly scale operations up or down, allowing a firm to easily adjust for unexpected economic and market shifts.
In addition, affordable solutions for mid-sized law firms in particular are now available on the market. 3E Essentials, a simplified version of 3E, allows mid-sized firms to benefit from the same financial management insights and efficiencies previously available only to larger firms. And because 3E Essentials comes pre-configured and requires no customization, you can be up and running in as little as four months, saving your firm both time and money.
“Current economic challenges are making it imperative for law firms to improve their operational efficiencies. Law firms should look at either maintaining or expanding their investments in technology, putting themselves in stronger competitive positions to support clients win new business as they navigate the uncertain year ahead.” – Paul Fischer, president, Legal Professionals at Thomson Reuters
Cloud technology also enables law firm leaders to gain greater visibility into business operations, providing the strategic insights needed to drive business decisions and growth. At the same time, attorneys are provided ready access to information and data, such as financial analytics, time and forecasting tools, and comprehensive budgets – all needed to manage matters more efficiently to maximize productivity.
Utilizing cloud technology, attorneys also gain access to insights that allow them to anticipate clients’ needs and be more proactive. This means law firms are able to deliver more value to clients which leads to increased client satisfaction and a greater potential for enriching and growing existing client relationships. The capabilities of a cloud-based platform provide a clear competitive advantage: helping differentiate and set a firm apart in a crowded legal market.
Cloud technology for sustained productivity
As mid-sized and large law firms look forward to this year and beyond, the one thing that’s certain is that there will be more uncertainty. During times of upheaval and change, it’s imperative that law firms have the capacity to quickly gain perspective and insight into firm operations so they can seamlessly make strategic adjustments.
A modern cloud-based productivity solution like 3E Essentials can help reduce uncertainty while allowing firms to stay competitive and operate on par with larger law firms. Learn more by requesting a 3E demo today.