11:53, February 21 500 0

2017-02-21 11:53:17
Chinese law firms are lagging behind their global peers in the AI tech race

In today’s cut-throat market, global law firms are investing significantly in technology to get ahead of the competition.

At the same time, Chinese business is on a mission to define itself as a centre for innovation and technology.

China’s latest five-year plan, which was approved in 2015, sets out the key focuses of the country’s social, political, and economic development through the second half of this decade. Among many things, innovation and entrepreneurship have been emphasised as the new engines of economic growth.

But has that translated to the strategies of the elite group of Chinese law firms, which have enjoyed stellar rates of revenue growth in the last decade?

The short answer is that Chinese firms are traditionally under invested in technologies, even the most basic tech such as business administration software and knowledge management.

But increasingly many firms have started spending more money on modernising IT systems and developing mobile apps, as they operate more like a corporate and reserve a portion of each year’s revenue as funds for future development.

The Lawyer’s China Top 30 2016 report provides some rare insight into where and how much Chinese firms are investing in technology products.

On average, the country’s top 30 largest firms are spending 1 per cent of their annual turnover on information technology. It means in 2015, the total budget was RMB2bn (£234m).

The firms’ buying lists included the latest business management software, knowledge management systems, mobile apps, online database programmes and even artificial intelligence to help refer work, search and share document templates and legal precedence or conduct legal research.

JunHe was the first Chinese firm to use Thomson Reuters’ Elite 3E global law firm business solutions to run all operational aspects of its nine offices (six in China and three overseas).The same software is used by many of the world’s largest firms. Since purchasing the software in 2013, JunHe has continued investing significantly each year to maintain and modify the software to best suit its practices and existing IT systems.

JunHe management committee member Warren Hua says IT costs account for 30 per cent of the firm’s total annual overheads, the third biggest expenditure after staff salaries and rents.

Hua adds that a good management software is critical to JunHe, especially after it overhauled its partner remuneration structure last year to be heavily based on 360-degree performance assessment.

In addition to management software, JunHe has also pioneered a lawyer referral app called Lvxie, an interactive database of lawyers across the whole country through which lawyers can refer work to each other and leave reviews. Hua says his firm is cautious about expansion but hopes Lvxie will provide a reliable way to source good lawyers outside of its own office network.

Similar to JunHe, a growing number of firms have come to realise the importance of data and reports as a tool for management and planning. “Big data” and “Internet era” are two buzzwords in the Chinese legal fraternity this past year and innovation is becoming a phenomenon among entrepreneurial firms.

JunHe’s closest rival KWM China has also invested in innovative apps, such as iShare, an internal knowledge-sharing platform
in the form of a comprehensive searchable database of the latest legislation, regulations and policies as well as an extensive archive of templates, legal documents and research papers from the firm.

KWM has also recently installed the Thomson Reuters 3E system for its China offices.

JT&N is another firm that has recently purchased the Thomson Reuters system, paying a premium of RMB6m 
(1.7 per cent of the firm’s 2015 revenue) for the purchase plus a RMB70,000 maintenance fee each year.

Dentons’ China offices are also in the process of rolling out a new multimillion-dollar national IT and office administration system. It is comparable to Dentons’ system in the US and will ensure better collaboration between the 45 Chinese offices and better connect the China region with Dentons’ global offices.

Perhaps this kind of development seems primitive when compared to the likes of Norton Rose Fulbright, which has forked out £75m to buy a global management system from SAP, and Clifford Chance, DLA Piper and Freshfields Bruckhaus Deringer which have all signed up “machine learning software” Kira Systems to undertake process-led contract review.

Chinese firms may be late starters in adopting and developing new technologies in the legal sector, but there have been a few pioneers emerging.

For example, Beijing-based litigation boutique Tiantong & Partners has launched a new artificial intelligence tool to help in-house counsel more effectively manage their litigation cases and find external counsel. The software, named Fa Xiao Tao, was hailed by local media as the first AI solution in China’s legal industry.

The firm is understood to be investing more than RMB10m annually after launching its own technology start-up Wusong Network Technology.

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