Investing in Major Technological Upgrades
Law firms throughout the world are currently operating in unprecedented times due to COVID-19. In response, many firms have found ways to become innovative and flexible. One of the biggest adjustments for law firms has been learning to work remotely and support hybrid teams. Working remotely is not new, but many firms have had to figure out how to effectively transition their entire workforce to remote work. This transition has involved many challenges, but two challenges that might be appropriately addressed through technology are an upgrade of the document management system and a transition to a cloud environment for practice management. Acquiring the proper technology will drive innovation.
Law firm leaders need to identify cloud-based tools that work not only for the firm’s employees, but also for clients and in some cases for business partners. Leaders are now recognizing that these technological issues are not merely important, but also urgent. They must be addressed quickly, or their firms may dissolve or be acquired.
Today’s Technology has a Price Tag; Losing Future Business Does as Well. In order to properly operate in today’s new environment, law firm leaders must invest in technology. The following provides a good approach to such a transition. While these action steps were developed with midsize and large firms in mind, they can be easily adapted for small firms or even solo practitioners.
1. Prepare a Five-Year Plan. Law firm leaders need to think strategically, not tactically. Most law firms do not have a five-year plan though this is needed in order to practice law today. A five-year plan should include:
- Employment-Related Expenses (usually approximately 50% of law firm revenue). This will decrease as some positions are replaced with improved technology.
- Rent/Facility Expenses (currently firms are spending about 7% of revenue on facilities). This may decrease as well, due to a decrease of needed employees.
- Technology (currently firms are spending about 6% of revenue on technology). This will increase because remote work will become routine and updated software and cloud environments will be required.
- Marketing (current expenditures are about 5% of revenue). This will increase. More and more prospective clients are reviewing websites and LinkedIn profiles prior to contacting an attorney. This is no longer something that can be put off. Attorneys must now promote themselves and their firms.
The most important line item of any budget/forecast is revenue. Most of the expenses can be forecast within ½ of 1% of accuracy. Revenue, however, is difficult to predict.
2. Compile a Committee. This committee should include all disciplines: administration, accounting, marketing, and technology. The committee will prepare a questionnaire for all potential technology vendors to complete – similar to a RFP (Request For Proposal). A questionnaire to all employees, addressing their needs and concerns, would be wise as well. The more “buy in” a firm gets in the beginning, the easier the transition will be. The committee will then interview the short list of cloud providers.
Choose a committee leader who will be responsible for minutes and scheduling meetings. Ideally, the administrator of the firm would be the most suitable person to fill this role. The committee must stay on track. It is their job to motivate the workforce to embrace and implement this innovation.
When researching a cloud-based legal practice management platform and DMS provider, the committee should consider the following:
- Inquire about the technology vendor’s five-year plan and learn more about the leadership team and funding model. The legal technology industry is competitive and you don’t want to partner with an organization that may not have staying power.
- Ask for references and call them. Speak to colleagues as to what they are using. ILTA (International Legal Technology Association) is a great organization that addresses technology in the legal arena.
- Expect a migration fee to move all the firm data to the new system. This is a one-time-only cost that can be pricey. With today’s current interest rates, a firm can finance this cost. Better yet, ask the potential providers to reduce or eliminate the fee for an extended commitment. Some companies are offering discounts or waiving this fee altogether in light of recent events.
- The monthly fee should be consistent. Some monthly fees are calculated by the number of users and the amount of data stored. Negotiate for a 3-year to 5-year period, if possible, to reduce costs.
3. Do it! When making such a defining decision, leaders will require more and more information and begin to suffer “Paralysis by Analysis.” Once the homework is complete, it will be evident which provider is most appropriate for the firm. The committee will know after completing its research, so commit by choosing a date.
Choosing a date can be an overwhelming issue. If a firm’s fiscal year is a calendar year, it might make sense to implement such an acquisition in January, after annual distributions have been paid.
Once a firm decides on a new system, it takes about six to nine months for everyone in the firm to be comfortable with the transition.
The key to successful adoption is employee training: train, train, and train some more. This cannot be “set it and forget it.” Most end users use approximately 20% of a software application’s features. Shoot for using 80% of the features from your new cloud platform(s) and be satisfied with 60%. The more people know how to use the chosen product, the more efficient and cost-effective the firm will be, and the more time and energy the firm can spend on its clients.
Investing in major technological upgrades may seem like a risky undertaking considering the cost and change involved. But in these uncertain times, not upgrading technologically may present more of a risk to your business. Technological upgrades provide strategic advantages, the costs of which can be counteracted by a reduction in workforce and facility expenses. They can allow your firm to become more innovative and flexible and provide a competitive advantage in the midst of this new market.