Investing in Major Technological Upgrades

Technology Purchases

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. Working remotely is not new, but many firms 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 the cloud environment. Acquiring the proper technology will drive innovation.

Because of the current events, law firm leaders now want to investigate working in the cloud and with a flexible document management system that works for not only 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 the transition.

Prepare a Five-Year Plan. Law firm leaders need to think strategically, not tactically. Most law firms do not have a five-year plan. This is needed in order to practice law today. A five-year plan will include:

  • Employment Related Expenses (usually approximately 50% of law firm revenue). This will decrease as some positions will be replaced with better use of 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.) 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.

Compile a Committee. This committee should include all disciplines: administration, accounting, marketing, and technology. The committee will prepare a questionnaire for all potential cloud providers 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.

  • This process will be repeated with DMS (Document Management System) providers.
  • When considering a cloud and DMS provider, be sure to ask for their five-year plan, their current income statement, and their balance sheet. You don’t want to partner with an organization that is too heavily in debt.
  • 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 transfer 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. Some companies are offering discounts or waiving this fee altogether.
  • 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 three-year to five-year period. If a firm has part time employees, it makes sense to only pay a fraction of what full-time employees cost.
  • 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.

Do it! When making such a defining decision, leaders will require more and more information and begin to suffer with “Paralysis by Analysis.” Once the homework is complete, it will be evident which provider is 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.
  •  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 this new DMS product 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.

Published by zolasuite.com

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