Why are law firms experiencing rising IT costs?
There are lots of IT related costs, whether this is: IT support, services, software or licences which operate on the “per user, per month” model. Many law firms need specific software such as case management, tools which aid compliance and items which help improve the productivity of higher volume case types.
The reality is that these costs grow and evolve as new options and solutions become available and appear attractive, or as the firm evolves to consider improved security or a cloud-based IT direction. At each stage there is a new proposal to review, which comes with an increase in operating costs. This can often lead to inefficiencies between the different systems and sometimes overlap. Ageing technology can also present slow or unreliable day to day experiences, which in turn require more investment to address them and the costs almost appear to layer on top of each other, climbing higher all the time.
The key thing to remember, and the main reason law firms experience rising IT costs, is that, for each new system, solution or service implemented, the cost realisation is 100%, whether the systems are used effectively, implemented correctly or even needed. The outcome financially is always the same. The cost hits the bottom line now, and in full.
Financial inefficiencies, where do they lie?
There are many, but some of the main and more obvious ones a law firm will recognise are:
- Software without adequate implementation or bespoke training, which leads to an ineffective deployment, which equals?inefficient spend. If your people are not using the system exactly how they need to and the benefits are not fully realised, then this is ineffective.
- Upgrades can become difficult to avoid, or at least they feel as though they are without specialist knowledge. How do you push back on a security or major infrastructure upgrade, recommended by your existing provider if you don’t really understand what is presented and what other options there may be outside of their recommendation.
- A lack of IT knowledge with a firm can present a risk as they cannot review the proposal and identify if a different approach should be taken. Providers and suppliers, although getting better with customer support and trying to find the right clients, are always looking at everything through a restrictive view as they are focussed on selling their solutions, and this presents proposals which may not actually be the best for the firm, which they cannot assess and feel forced to take the upgrade or face the risks raised, or continue with the downtime they experience.
- Overlap and “shiny” software are also a common problem. Remember, 100% of any new solutions costs are realised instantly so you’re paying for all this whilst the implementation is taking place and, if it is just rolled out with some kind of standard implementation from the supplier, this will likely be ineffective which means limited or low return on any costs realised.
- Renting software is also something to be considered these days and this is a growing opportunity. As a very basic example, if you have simple Document Management Requirements; Should you pay ￡60 per user, per month, to deploy someone else’s Document Management system (with an instant increase in monthly operating costs) or should you consider building your own in SharePoint with a shorter project cost, with very little change to the ongoing monthly operating costs, where you can obtain a return on the capital invested, by protecting your monthly operating cost and, by default, your bottom line.
How can these issues be resolved?
- When you are going to be reviewing any new software solutions, ensure there is no overlap with existing products. If there is, then consider reviewing that solution as well to ensure you do not end up with duplicate on product capability and costs.
- If you have a supplier looking to improve or upgrade your existing situation based on an issue, then consult with an independent third party to obtain some advice on this before proceeding.
- Bring a third party in early and have them involved in the discussions. You may find you can reduce the partner time required, to offset the cost of bringing someone in (if they could be progressing a client matter / recording billable time).
- Run every decision as an IT project. This means looking at why you will start this first, what is the ROI, understand the requirements and confirm these with the business (as well as desired outcomes) before you start looking in detail at any solution…never have a demonstration with partners involved until you know these items first.
- Again, if you don’t have experience of running IT projects, have a third party or specialist show you or provide some training.
- If you don’t have an internal team who can deliver an IT project, consider having someone temporary deliver this.
- If you don’t run a project in the right order, you run a very high risk of falling foul of all the issues outlined above.
- Perform a business review. Think about what you need and ask suppliers to talk specifically about how they can meet those needs, instead of selling you to adopt their solution and way of working. You need to stay in control of what you need, why and how it needs to operate to be able to work effectively in your firm.
Law firms do not have recurring revenue from their clients. They need to try and protect bringing in contracted monthly operating costs where possible and there are a growing number of options for this, which are constantly evolving.
Either way, you need to know what you are looking to achieve, why and how it needs to work before engaging with suppliers.
If you don’t know what you need or you are unsure about the advice being offered, then consult with an independent expert who can help you short term. Poor decisions, once implemented, are much harder to remove so protect change and increased costs.
Alex will be speaking at the upcoming Solicitors Conference on 13 September, which you can book below:
*The views expressed are the author’s and not ICAEW’s
Alex Hutchinson is a Freelance IT Director who specialises in helping Professional Practices. He brands himself as “the IT Director for law firms who do not want (or need) a full-time IT Director” and helps law firms understand what they need, identify the right direction, make the right decisions and ensure that any costs are in place for a reason.
You can view more about Alex Hutchinson at?www.freelanceITdirector.co.uk.
