Financing your next big push on tech spending

Tech has a role to play in talent attraction, agility and security – Iceberg’s managing director Mike Stevenson explores how your firm could finance higher IT investment.

If there was one opportunity the recent pandemic presented to us all, it was the chance to reflect, to reconsider and to change. From our personal to professional lives, it made us stop, think and focus on what we could do better, how we could be more efficient and how we could bring more balance to our lives.

The recent annual survey by Smith & Williamson, ‘Accelerating Change’, highlighted how some in the legal sector felt that the pandemic had propelled change in their business. Nealy half of respondents said that Covid-19 had accelerated change for their firm by between two and three years.

One of the greatest drivers of change in any business is technology and that is no different in the legal world. The Smith & Williamson report confirmed technology was central to legal firm leaders’ thinking and was one of the top four concerns for businesses as they adapt over the coming years.

Many law firm partners must be looking at their IT infrastructure and technology investment and considering whether it is up to scratch on two fronts.

One, does your technology enable you to be as efficient and agile as you can be, making you a better operation, able to work differently and bringing benefits to your business and clients? The war for talent in the legal sector means that firms are having to adapt and offer greater levels of flexibility to employees. How can firms ensure they have the right technology to facilitate hybrid working on a permanent basis, for example?

And two, is your IT infrastructure robust and secure enough to withstand attacks from rogue actors seeking to steal valuable client data.  The invasion of Ukraine by Russia has brought the threat of cyber warfare to the fore and the warning that UK companies could be subject to a deluge of cyberattacks from that region.

A separate, earlier study by HSBC UK found that half of law firm leaders are increasing their technology spend to adapt to not only the new normal, but to make their operations smoother, securer and to improve performance. According to HSBC’s research, on average, law firms spend 5.2% of their annual revenue on technology and IT.

Counter to that, HSBC also found that 19% of firms were cutting technology investment, which could present challenges to those businesses going forward.

The difficulty for many law firms, however, is where to prioritise technology spend and how to embed change programmes within an organisation.

The HSBC study found that 77% of law firms were investing in technology to drive remote working practices and more agile ways of working in the new environment, while just under six in 10 companies were seeking to invest in better management information and process automation.

On the protection side, half of firms said they were investing to bolster their cybersecurity. However, the exhaustive list also included areas such as client collaboration, document automation, improved billing process and project management, to name but a few.

Another important consideration for firms is how to finance technology investment. Separate survey data shows that just under a quarter of all firms have already used borrowing as a method of financing investment in technology.

A further 16% are actively considering using borrowing to finance their IT spend, with another 25% of firms being open to the idea. Only 18% of firms said they would not consider borrowing as a method of financing technology spend. Breaking out responses from the top 50 law firms painted a broadly similar picture with 21% saying they had already borrowed to fund technology investment, with a further 53% either considering or being open to the idea of borrowing.

We have seen a material increase in the number of firms who are willing to explore financing options for technology investments. As businesses emerge from the pandemic and look for the future opportunities, those that view technology investment a key strategic advantage and differentiator – rather than as a necessary evil – will no doubt thrive.