Derek-southall

Microsoft 365 “The Great Leveller” – Managing Partners Take Note

At the risk of stating the obvious Microsoft 365 is gaining huge momentum. It now has in excess of 345 million users. The last reported turnover for Microsoft for the 12 months ending 31 December 2022 is $204.094 billion with $139.110 billion gross profit. As many are discovering it also has huge capability: the Power Platform, embedded AI, Yammer, Digital Dictation, Power BI but to mention a few. It can be applied to many uses within a business and has the potential to replace a lot of legacy software.

Despite this, many think this is just an area of concern for the IT department – when has the latest offering from Microsoft been the subject of discussion at Board tables? In this case though this could not be more wrong. Others think this can only be good news for firms as putting in place Microsoft 365 brings with it huge capabilities and benefits. It is not that simple though. This platform may or may not be good for Big Law. I will explain my thinking.

In short, Microsoft 365 completely levels the playing field in a way we have never seen before. This is important – please bear with me as I set out my logic

I moved into the area of LegalTech and innovation in the late 90s being one of the earliest people in this role. Just like now there were awards (albeit less of them) but these awards were always won by the biggest firms with the deepest pockets. Many of the projects which won were basically large infrastructure projects implemented at huge expense. I don’t doubt these firm were excelling at what they were doing but everyone who won had spent huge sums of money which was out of the reach of smaller firms. At the time I was part of a fast-growing challenger firm that were doing great things and I was lucky to work with a superb team. I remember the moment at Gleneagles where we were the first non-global firm to scoop the “Legal IT – Best Use of IT Award” through doing great things as opposed to just spending money. We were obviously delighted but the most shocking thing was the reaction of the room in that we literally got a standing ovation. We were the first non-global firm to have broken through this glass ceiling where ability trumped the size of wallet. And so why am I telling you this?

In short, the last 20 or so years has seen a similar dynamic. It has not been as extreme but a firm’s ability to invest in products such as AI and transaction platforms or enterprise no code platforms has been influenced by the amount of money they have to spend. Thankfully the PwC survey now has clear metrics for spend per desktop (in my view the only metric that makes sense) and it is completely clear from this that larger firms still spend more, as often their profit model allows it. In the past I compared firms who were spending the same % of turnover on IT (the historical metric which as used). In one case one firm was shown to be spending 3 times more per desktop but the same on a percentage of turnover metric. This is where Microsoft 365 is relevant however; this is the first technology I can ever remember where everyone has the same tools and capabilities and this really shifts the narrative. All of a sudden ability plays a much bigger role than spend and a firm’s size and ability to invest no longer brings the benefit that it previously did. In the last six weeks we have witnessed/been involved three projects, all of which have been jaw dropping and all of which have been fundamentally developed by one or two savvy developers, having listened to client problems and using the Microsoft 365 stack. In one case the solution focuses on a client problem which has traditionally been dominated by large law. A smaller firm is now actively winning material (meaning a high six figures of work) on the back of what they have developed in MS365. In the past this will not have been possible or at least would have been very hard.

The problem does not stop there. Law firms in the past have been much more advanced with their technology than clients and have invested in best of breed systems. Since clients didn’t have the same legacy to deal with this, many of them have been quicker to move to Microsoft 365 and in my experience many in-house lawyers are now much more aware of its capabilities. They are also doing very interesting things with the MS365 stack. For many this is their first material opportunity to leverage technology to improve operations and in doing this their efforts are completely aligned with the overall strategy and tech stack of their businesses. Compared with law firms they are really accelerating and are materially improving their operational tech stack.

Also, to compound this issue, Microsoft 365 creates some increasing challenges in how private practice and in-house lawyers interface. We work a lot for in-house legal teams and it’s fair to say their knowledge of Microsoft 365 is hugely increasing. This is a tool that is readily available to them (often at no additional cost) and when trying to tackle any issue they tend to favour Microsoft 365 and/or solutions which leverage or configure the stack. They are therefore very much in the “Microsoft 365 mindset”. This is however different to lawyers in private practice who typically do not have the same level of knowledge. A challenge which has been shown by research from Acritas is that one of the biggest strengths of lawyers (i.e. that they work hard and focus on clients) is also their biggest weakness in that they have very little time to focus on technology. Accordingly, their knowledge of technology and in particular MS365 is often much weaker. What this therefore means in practice is that there is an increasing gap where lawyers and clients will not be able to have meaningful conversations. Law firms will increasingly struggle to put solutions which resonate to clients as they won’t have the knowledge set. Already we have seen situations where clients wanting innovative solutions to be put to them on pitches have been frustrated in that virtually every firm has offered them a common file sharing platform. There is nothing wrong with this platform but clients now appreciate that so much more is possible and their expectations are higher. This issue is going to increase.

There is then a further challenge for more progressive law firms. One obvious point that needs to be addressed given the above is improving lawyers’ knowledge of Microsoft 365 and what it can do (i.e. from an internal operational benefit perspective as well as a client delivery perspective). There are platforms that can help with this such as The Professional Alternative but there is also a “be careful what you wish for issue” point here in that whilst law firms will want their lawyers knowledge to increase, what they won’t want them to do is run amok by randomly developing things in Microsoft 365. Even if they agree to go via the proper channels and speak to their IT functions, some IT functions themselves are going through a transition and may not have the skills to deliver what people want. Law firms have a need to educate people but will also need some degree of governance and process which is a hard balance to achieve.

As if the above alone was not challenging enough, there are also a few bigger looming challenges.

First, from projects we have been involved with, it is fair to say some clients are now really using MS365 to advance their own data strategies and are better understanding the profile of their legal work. They are getting real insights into how they work such as “what provisions of their standard agreements are an excessive drain on their time” and can they adopt a more realistic position. Some are gaining a much better sense of the peaks and troughs of demand. This more advanced strategic analysis this could give rise to a diminution in legal work or a revised focus about what they want to use law firms for.

Secondly, the whole world of ChatGPT/ChatGPT4 and Microsoft Co-Pilot is causing many in-house clients to really stop and think. How will these changes alter how they work and completely change how they produce contracts or advice? Will this change where they need third party support?. Also, in terms of leveraging these tools, law firms will typically have lower volumes of identical contracts compared with clients and will have barriers where they have to preserve the confidentiality of work product for particular clients. Clients by contrast will have greater volumes of work product in particular areas without having the same level of confidentiality concerns and so can move more quickly. Many clients already store their work in MS365 too. In short some of these recent changes could give rise to a real step-change in terms of the sort of help and support the clients will need. I am not saying this will cause a huge diminution in demand for law firms; what I am saying is the demand from clients will alter. Going forward it is unlikely to be the same shape or size and law firms will have to adapt.

Thirdly let’s be clear, Microsoft 365 has the potential to replace many technologies historically used by firms – workflow, case management, portals, intranets, AI and reporting tools but to mention a few and to a large extent firms are already paying for this. How can a Board themselves consider any business case or budget put before them without knowing what is possible with what they already have. Also what role do they need to play in the huge change management project that many firms will need to undertake? The Board don’t need to become technology experts, but they absolutely need to understand the core capabilities of Microsoft 365 in the context of their businesses and be cognisant of some of the enhancements appearing every month.

In summary Microsoft 365 is not just an IT department issue and any Managing Partner or Board thinking this may well get caught out. It requires Board level engagement and some serious thought as to the future skills needed for lawyers and partners. Firms need to be clear about what skills will be needed by their people and how they will help their lawyers acquire them.

Microsoft 365 is formidable. The capabilities it delivers to everyone are huge. To quote one very senior client, whose views I really value, “this is perhaps one of the most challenging platforms to operationalise that we have ever seen”. Also, it is hard to think of an example of anything similar we have had to deal with. This is a technology we all need to take seriously.

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For more information, please contact Dereksouthall@hyperscalegroup.com

 

Derek Southall

Hyperscale Group
Derek Southall, founder and CEO is a high profile and very well connected figure in the legal technology, innovation, knowledge management and digital marketplaces. Derek has spent nearly 25 years in a range of leading strategic roles for a top 50 global law firm, for most of this time as a Partner and Head of Strategic Development and subsequently as Head of Digital and Innovation. During this period Derek oversaw and helped drive growth from £27 mil TO to in excess of £425 mil TO as well as driving and supporting numerous mergers and international expansion to 18 offices in 10 countries. Derek was ranked by the FT as one of the top three most innovative lawyers in the UK in its first study into the legal market. Derek also led the firm’s technology team to become ranked as the most innovative in Europe and subsequently the firm to ranked as the second most innovative firm in Europe as well as picking up a range of other awards. Derek has been the relationship partner for a long list of major household name clients in a range of sectors including Automotive, FMCG, Financial Services, Food and Drink, Fashion and Construction and has a strong track record in sales and product delivery. Derek has been ranked three times in the last three years as an Acritas Star for outstanding client delivery (based on independent feedback). Derek chairs and was one of the founders of the Legal IT Innovators Group (www.litig.org) which has 80 or so of the top 100 firms as members and which plays a key role in driving ahead technological thinking and change for the good of the legal profession. In this role he has worked alongside the United Nations and a range of other large organisations. www.hyperscalegroup.com recently joined forces with two other leading advisory businesses in the fields of technology, operations and financial management to create the www.intuityalliance.com which has been referred to as the “Holy Trilogy” of Legal IT. Its purpose is to pool experience and intellectual knowhow to ensure we have a more holistic approach to how they give advice. Derek also serves on the advisory boards of several start-ups and has recently been appointed to the advisory board of the Global Institute of Innovation, which brings together around 400 academics to solve some of the world’s biggest problems.