Legal Tech at a Crossroads of Growth and Margins

Every emerging industry reaches a crossroads that determine future direction. Legal tech, now a few years old, has reached its first crossroads. Industry players are facing the tough choice of having to choose between growth and margins. It is not an easy choice. Chasing margins is a safer way to move a business forward. Chasing growth is riskier, but it offers more long-term reward.

The problem is that pursuing both simultaneously is difficult to pull off. Growth strategies require a financial investment which, ultimately, eats into margins. Maintaining good margins ensures profitability but hampers the ability to invest in growth. The conundrum is especially difficult for legal tech because there is still so much about the industry’s future that we just don’t know yet.

Laying Off Attorneys

The atrium is an example of a legal tech company that has chosen to go the margin route. According to Tech Crunch contributor Josh Constine, the company kicked off the year by laying off most of its in-house attorneys in a desire to reduce the number of legal services it offers. The company will invest more in the development of its software technology instead.

Constine says Atrium does not want to stop offering on-demand legal services to its clients, especially since some of those clients pay pretty hefty subscription fees. Bundling their software with on-demand legal services is what gave the company its legs. Yet company officials are not willing to continue pursuing growth based on the same strategy. They want to protect their margins and thus maintain profitability.

Their solution is to offload legal services to independent attorneys willing to be part of their network. Atrium has apparently offered those lawyers they laid off an opportunity to be listed as preferred network providers should they start their own firms or join a firm that is already part of the network.

Constine reports that a big part of Atrium’s decision to lay off lawyers is the fact that certain aspects of their software have made automation a reality. The company does not need as many in-house attorneys at this point because the software is capable of doing so much.

Building Better Software

While Atrium is laying off lawyers and restructuring to protect their margins, Sales Technologies is a technology company first established in 2011. Their NuLaw case management and legal software package are one of their latest offerings. It is built on the popular Salesforce CRM platform.

Silas sees legal tech as a growth opportunity. As such, they have put a tremendous amount of time and effort into developing NuLaw as a cutting-edge software product for law firms and corporate legal departments. NuLaw is intended to be an all-in-one case management application package that combines automation, secure communications, and a number of other tools into a single, cloud-based platform.

Growth of this kind doesn’t come cheaply. Companies invest millions in developing their products and expanding their markets. Yes, there is risk in doing so. Yet the potential long-term reward makes the risk worth it. A tech company capable of coming up with a solid solution can penetrate new markets and drive new revenues. Every new market successfully penetrated opens the door to another.

Atrium and Sales Technologies have come to the crossroads and made their choices. Neither choice is better or worse than the other. Where margins are pursued, profits are protected and risk is diminished. Where growth is the main goal, long-term reward offsets short term risk. Both strategies can succeed or fail depending on how they are implemented. That is just where the legal tech industry finds itself today.

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