Brexit and IT for Law Firms - What lies ahead?

Brexit is having an impact on myriad areas of society and business already – and we’re not even sure if it’s happening yet! From an IT perspective, Brexit raises questions over the two most fundamental aspects of any IT strategy – budgeting and infrastructure.

The new £10 note

The first real big impact on IT were the huge price rises across almost all the major vendors, as prices were adjusted as a result of the weakness of sterling against the dollar and/or Euro. HP, Dell, Apple (notice how the new iPhone costs 10% more than the last one?), Microsoft, Amazon, to name a few, have all increased prices in one way or another since the vote. Microsoft’s pricing went up between 13 and 22% overnight at the start of November.

This has a very real impact on IT planning, only a lucky few can simply ask for 10/15/20% more money to go into their budget, the rest of us have to adjust plans, and budgets, accordingly.
Donald Trump’s recent victory in the US Presidential election could be yet another twist in this tale, as the effects of his victory on the economy become clear over the coming months, might we see an adjustment back the other way?

UK firms’ data in Europe
The second, more interesting impact of Brexit is around data processing. As a member of the EU, the SRA regulations are reasonably open to storage and processing of UK firms’ data in EU member countries. Despite the issues with storing data in the US (the snooping available through Patriot Act, etc.), this has kept prices competitive, by providing a big pool of potential providers.

Outside of the EU, will we be limited to keeping data in the UK?

As it stands, most IT managers in the legal sector I speak to either operate a private or hosted cloud, so the vast majority of their data is based in the UK, with some ancillary services are provided through Microsoft Azure, which has sites all across Europe. That begs the question – What do they need to move? And when?

European client data in the UK
The EU’s data regulations may also present a problem for UK law firms servicing European clients. The regulations currently allow for countries who have passed adequacy decisions to process the data of EU member states, once the UK leaves, we’ll need to make sure we’re up to scratch in order to receive this.

That may sound like a formality, but the GDPR raises the stakes of data protection, and as we’ve seen with the US, concerns over ‘snooping’ powers may cause issues along the road, should the UK government pass any laws which are seen to compromise data security.

Public Cloud pricing
The people in a potentially more difficult position are those using Public Cloud services, such as Microsoft Azure, or Amazon Web Services for more of their infrastructure. They face the challenges both of price rises, and of data processing, much more acutely than those of us with only a toe in the Public Cloud, and also the potential issue of having to keep data in different regions, for different clients.

Microsoft acted quickly after the Brexit vote to open 2 UK sites for Azure, but these have limited service offerings (https://azure.microsoft.com/en-gb/regions/services/) and, presumably, limited space. Perhaps the speed with which these were set up, and the dramatic expansion which is no doubt planned, explains why the Azure services’ pricing rose 22%, whilst Microsoft’s on premise ‘only’ went up 13%.

The dramatic price increase illustrates a danger inherent in hosting your infrastructure on any outsourced service. If you buy servers, HP, Dell and Microsoft are unlikely to track you down 3 years after you bought your kit and ask for another 22% on top, but if you’re paying monthly, they can, they will, and they have put the prices up as they see fit.

Amazon’s prices have risen steadily, rather than the big bang of Microsoft’s pricing alignment, but they’ve still got no Public Cloud presence in the UK. They did announce in 2015 that they’d have a region by the end of 2016 or early 2017, so perhaps we’ll see a premium added to their UK based services when these come online.

The battle between Microsoft Azure and Amazon Web Services could become one to watch, as Microsoft match prices to the Euro, and Amazon to the Dollar. Between Brexit and Donald Trump, the previously similar prices could find themselves drifting apart. Now that the conversation has moved from “Cloud or on-premise?” to “What kind of Cloud?”, small margins could make a big difference.

Don’t Panic
Common sense would suggest that UK Data Protection laws will be kept pretty similar to those of the EU to avoid just the issues discussed, but nothing has yet been decided. We’re 2 years off, at least, from a full Brexit, and have no indication from the SRA yet as to how their regulations might change.

Pricing is also an ephemeral thing, currency fluctuations are not the only factor, and we may see some benefit in the competition between the vendors, particularly with the traditional hardware vendors under threat from hyper convergence, and increasing Public Cloud adoption, etc.

There’s no immediate cause for lost sleep, but its certainly worth keeping an eye on, whatever your IT provision.

Written by Dan Heaton - Head of IT and Senior Associate