Big Law

Legal Technology Purchase Trends: Strategy or Tactic?


 

So Catch This…

Law firms are spending more on technology…

Says the 2014 Technology Purchasing Survey, a joint report from the International Legal Technology Association and InsideLegal, a legal technology blog run by Atlanta-based CEO JoAnna Forshee and Jobst Elster, head of content and legal market strategy.

There is clearly a massive time investment required to put together this quality study.  We applaud the efforts of ILTA and Inside Legal in developing the surveys, analyzing and publishing the results in an effort to develop benchmarks and insight into law firm technology spending patterns.  You can read the full report and methodology here.

Highlights from the report:

  1. Forshee and Elster sent a 31-question, web-based survey to 1,407 ILTA-member firms to gather information for the report, of which 281 firms responded, nearly a whopping 20% response.
  2. Fifty-four percent (up six percent from 2013) of all surveyed law firms spend between 2-4 percent of their total revenue on technology.
  3. Sixty-two percent of all respondents spend more than $8,000 per attorney on technology.
  4. Forty-nine percent of all respondents said that their technology budgets increased this year from 2013. The number of firms reporting an increase is up six percent from last year.
  5. The top three tech purchases included: laptops and notebooks at 64 percent; desktop hardware and PCs at 63 percent; and network upgrade and servers at 50 percent.
  6. There is a “cooling off” period of Microsoft Corp.’s applications, the report said, as 18 percent of all respondents upgraded their Microsoft Office suites within the past year, as opposed to 39 percent in 2012. SharePoint purchases are also down 14 percent from two years ago, the report noted.
  7. Mobile devices: A majority of firms are purchasing Apple Inc.’s iPhones (63 percent), followed by Android (39 percent) and BlackBerry devices (28 percent).
  8. Tablets: Nearly half (44 percent) of respondents picked iPads, followed by Microsoft Surface (17 percent) and Android devices (10 percent).

Our Take…  Numbers never lie

For the last nine years, the whole concept of this annual report was and is very strategic.  IT departments have benefitted immensely from the data.  Unfortunately, the results are in and, as we expected, firm IT departments are clearly constrained when trying to be strategic in how they spend their partners $$$.

We touched on this in a recent post.  The first thing most law firms do in a down economy with profits flat is look to cut staff costs and capital spending.  IT spending typically gets the first hard look.  Here is our quick analysis of the report highlights:

Item 1) Almost 20% responded to the survey…  C’mon ILTA members, it is your duty to help in this strategic collection of comparative spending analysis.  It may help you in the future to defend your budget.

Items 2 – 4) Really strong data points/results, until you “run” the numbers to extrapolate the actual dollars being spent on technology.  The real story… clearly firms are in “maintenance mode”.

Item 5) Maintenance Mode Validated…

Item 6) “Cooling off” is an interesting turn of the phrase.  My translation is a complete lack of strategic technology investment.  My definition of “strategic” is related directly to technology investments that have some form of ROI.

Items 7 – 8) Yawn…

So what can IT leadership do when their firms are running around like “chicken little” related to profits, potential partner defections, et al, ad nauseum???

Here a few pointers from my time in the trenches…

In my prior life inside AM100 law firms, I was either loved, or hated, sometimes both by the same partners on the management committees because I would rail against cutting staff and IT spending when they were trying to give partners raises in income.  My key hot-button responses:

  • Non-productive partners: “sure let me cut ten $30K staff, so he/she can stay with the firm”
  • Investing in non-performing practice areas: “ExCom members have you even looked at the practice area analysis which shows how much the firm is subsidizing to have the benefit of that fill in the blank practice area?”
  • Disparity in leverage: “Why do we continue to enable the codependent dysfunction of how work is allocated to associates…  Oh yeah the comp plan at work…”

I could go on and on regarding asking tough questions, reviewing the analysis and presentations made to ExCom’s about productivity, timekeeping,  write-off’s, intake, lack of team selling discipline, unfocused BD spending, but the point of a couple of these examples is why I was loved or hated…  I pushed them to look at the hard questions when running their businesses.

So did this help me win the day???  Rarely, or absolutely not in most discussions, but in some cases the lights went on, and then an interminably slow process started to address to issues and build consensus (I used to hate that word…)

So back to my original comment, “What can IT Leadership do?”

In my experience, IT leadership is looked upon by their peer department leaders as “true leaders.”  When it comes to budget season (which you are likely smack in the middle of), implore your peers to take a zero budget mentality across their areas of responsibility, with the following focus on ROI.

  • If a line item investment does not have a direct correlation to increasing revenue… Move on to the next item!
  • Educate, Educate, Educate… ExCom’s love to know what other firms are doing.  When presented correctly, what an advantage this can provide in getting what you want approved! (too bad your peers didn’t respond to the survey… ouch)
  • Document financial rationale: Obviously every line item in a budget can have some level of maintenance necessity and cannot be arbitrarily cut, but if you create your budget to identify strategic investments and fully document your rationale related to how this investment can impact the bottom line (not just this year…)
    • You may actually be able to make a strategic investment, or two…

Yes… I am a CRM guy, but also a former CFO and leader of Technology and Marketing Departments in Large Law, and yes… will always put an investment in CRM Technology, Staffing and Process, as more strategic than almost any investment firms can make.

However, I have also proven that the ROI can be backed up and can change the nature of a firm’s profitability/financial foundation if done right, and addressing the “pink elephant” issues on a concurrent path, can be a massive bonus.

Have fun this budget season!

Catch ya later…


 

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