Technology practice areas have weathered the global financial crisis better than most, with a number of significant developments making up for potential losses of billable work as a result of cutbacks in clients' IT budgets.
While numerous other practice areas struggled as a result of the downturn, IT has remained more resilient. To demonstrate, the three firms Lawyers Weekly spoke to have either maintained or increased lawyer numbers in their technology practices over the past 12 months. Furthermore, leading IT lawyers are remarkably bullish about the coming calendar year and the fortunes it holds for their practice areas.
EXPERT VIEW “The nice-to-haves to improve efficiencies were put on the shelf. They will go ahead, but probably not this calendar year” MICHAEL PATTISON, ALLENS ARTHUR ROBINSON “In some extreme cases they want to take action against their vendors because of continued lack of performance” PHILIP “Now there’s a fairly rapid rush to get those projects up and running very quickly” PETER JONES, GILBERT + TOBIN
“The nice-to-haves to improve efficiencies were put on the shelf. They will go ahead, but probably not this calendar year”
MICHAEL PATTISON, ALLENS ARTHUR ROBINSON
“In some extreme cases they want to take action against their vendors because of continued lack of performance”
“Now there’s a fairly rapid rush to get those projects up and running very quickly”
PETER JONES, GILBERT + TOBIN
The economic downturn did not leave technology lawyers entirely unscathed, however, with it did cast a significant impact on bread and butter work over the past year. Michael Pattison, practice leader of Allens Arthur Robinson's communications, media and technology team, says a lot of IT projects were cancelled as a result of the GFC.
"I had one client that reduced their IT project spend by about 90 per cent, and this was a large ticket spend," he says.
Pattison, who has specialised in IT and telecommunications law both in Australia and overseas since 1991, says the only projects that went ahead were those that were unavoidable or that were going to lead to substantial cost savings, such as offshoring.
"The nice-to-haves to improve efficiencies were put on the shelf. They will go ahead, but probably not this calendar year."
Peter Jones, a partner in Gilbert + Tobin's corporate, communications and technology group, also notes many IT projects were postponed as organisations reduced costs in line with the GFC. However, the business demands and requirements that drove the projects in the first place are still there, so "now there's a fairly rapid rush to get those projects up and running very quickly", he says.
There have been some paradoxical positives that have come out of the GFC as a result of the drop in business for technology lawyers, according to Corrs Chambers Westgarth partner Philip Catania, who practises in the area of technology and intellectual property law and specialises in information technology, e-commerce, copyright and trademarks.
The downturn put pressure on commercial relationships, with many organisations scrutinising the level and quality of service received. "In some instances [clients], particularly large-scale users, have said they want to get out of their current arrangements or want to transition elsewhere. In some extreme cases they want to take action against their vendors because of continued lack of performance, which has led to work in the area of IT services dispute resolution," he says.
Pattison has also seen an increase in the number of disputes, as the GFC has potentially led to more accountability on the part of vendors.
A couple of years ago when there was lot of money washing around, he says, suppliers were prepared to accommodate customers on a relationship basis. With a very tight market for IT spend now, vendors are obviously keen to extract cash from what deals they do have on the table and Pattison says they are now more willing to take point - and more responsibility - on these deals.
The rise of offshoring and outsourcing
Catania, who represents some of Australia's leading organisations in their IT and IP matters - including ANZ, Foster's Group, GE Capital Australasia and L'Oreal - says the rise of Indian IT companies is having a big impact on the market. "I've probably had five major deals in the past 18 months with Indian IT companies that provide either offshore-based services or onshore services to Australian institutions," he says. "We are definitely seeing a growth in the supply of IT services from Indian firms, and this is having an impact on the Australian market."
Pattison, who has been involved in several large offshoring deals for Australian companies to Indian IT suppliers, says there is a recent trend towards multi-supplier offshoring. "A few years ago you would choose a particular supplier in India and put all your IT services through them," he says.
"There's a lot more sophistication in the private sector now and companies are choosing different firms based on the best price and value for specific services."
Technology is always improving, with new developments that IT lawyers need to stay on top of. The new kid on the block at present is cloud computing, and a growing number of organisations are seriously considering the cloud computing model for IT service delivery.
A range of entities are using the cloud model with decent returns on their investment, according to Gilbert + Tobin's Jones. "To say it's the new service delivery paradigm is probably a bit premature," he says, "but cloud solutions bring with them both opportunities and some risks for organisations. I think that will be an evolving issue over the coming 18 months in particular."
Pattison is also seeing a lot of clients looking seriously at cloud computing, "including some that you would be surprised at, such as large financial institutions", he says. "Whether they go down that path remains to be seen, but it does offer some pretty compelling advantages so it will be interesting to see how that pans out."
On the horizon
Technology lawyers are optimistic about the coming year. One of the main initiatives in the government's stimulus package is the National Broadband Network (NBN), and Catania says this is not just a telecommunications deal.
The NBN will also have a significant impact on technology and, subsequently, work for lawyers. "It will be a complex arrangement, with a lot of IT vendors seeking to be involved, and that will lead to a change in the way services are delivered. You are going to get IT vendors looking at how they deliver content through the NBN, so it's going to revolutionise technology," he says.
Outside of the NBN, Pattison predicts a resumption in project-based IT spending towards April 2010. "There will be pent up demand as a result of the hiatus that has occurred over the past 12 to 18 months.
I think that means the next calendar year overall should be quite a good one for deals in our practice," he says.