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At A Glance
Increase in Operational Efficiency
Increase in Productivity
Reduction in Cybersecurity Incidents
Are you struggling to maximize the ROI of your legal tech investments? You’re not alone. We understand the challenges and are here to help. We’ve been closely following the recent shifts in the legal tech landscape, as highlighted in the insightful article “Experimentation Period Over: Law Firms Want Practical Tech That Solves Real Problems” on LegalTech News.
Navigating Economic Pressures: The ROI-Centric Approach to Legal Tech
Law firms are becoming more discerning in their tech choices due to economic pressures and the need for proven ROI. This shift is leading to a focus on essential upgrades and tools that solve core business problems.
User Experience (UX): A Game-Changer in Tech Adoption
The user experience of legal tech tools is becoming a critical factor in purchasing decisions. Law firms are seeking tools that are easy to use and offer a seamless user experience to aid in adoption.
In-House Expertise: The Rising Need for Internal Tech Roles
The article suggests that law firms may need to rethink their staffing, with a focus on building internal teams of technology, change management, and data talent to ensure successful deployment and enterprise adoption of tech tools.
While we agree with the author’s and industry experts’ feedback regarding the need to focus on ROI, we believe a critical and often overlooked measure is the total cost of ownership (TCO). With a threefold increase in legal technology budgets expected by 2025 according to business insights firm, Gartner, investments made based on ROI alone have proven to have costly consequences for law firms.
As law firms ramp up their technology spending, it's crucial to remember that successful outcomes hinge on a multifaceted approach. Objective research and careful selection of solutions that align with the firm's short and long-term needs are paramount.
Equally important is a comprehensive understanding of the total cost of ownership, which encapsulates all costs associated with a solution over its anticipated use life at the firm. Guiding this process should be informed, knowledgeable expertise that is free from personal financial incentives. In other words, the path to successful technology investment isn’t through resellers, whose advice might be clouded by their own financial interests. Instead, it lies in unbiased, expert guidance that prioritizes the firm’s unique needs and circumstances.
When law firms evaluate technology solutions such as major enterprise applications, cybersecurity, unified communications, and other major infrastructure technologies, there is often so much focus on either cost reduction or ROI that firms forget to ensure they have an accurate and thorough understanding of the totality of costs to own a solution.
Total Cost of Ownership (TCO) is a comprehensive assessment of information technology costs across enterprise boundaries over time. It’s not just about the sticker price of the technology. It’s about the iceberg underneath — the vast array of hidden costs that, when unaccounted for, can sink your budget.
- Acquisition Costs: The tip of the iceberg is the upfront costs of purchasing the technology or system, including licensing fees.
- Implementation Costs: The costs of integrating the new system into your existing infrastructure, a process that can often reveal unexpected challenges.
- Operational and Maintenance Costs: The ongoing costs that keep the system running are often underestimated and can balloon over time.
- Training Costs: The investment in human capital, ensuring your team can effectively use the new technology.
- Downtime Costs: The silent killer are the costs associated with system failures or disruptions, leading to lost productivity.
- Upgrade Costs: Future-proofing your technology, the costs of keeping the system current and effective.
- Disposal Costs: The final farewell, the costs of decommissioning and responsibly disposing of the system at the end of its life.
Missteps in judging TCO are remarkably common. We’ve encountered organizations that have adopted software-as-a-service subscriptions instead of on-premises solutions, only to discover that despite the lower upfront costs, it’s substantially more expensive over time.
Litigation teams have chosen eDiscovery solutions based upon “headline” pricing per volume of material storage but omitted consideration of significant ancillary fees. Desktops and laptops that seem less expensive may face accelerated end of life due to insufficient specifications or, even worse, hamper attorney productivity with poor performance.
By considering the TCO, law firms can make informed decisions, ensuring effective long-term decisions versus one based on often short-sighted and deceptive factors like price or ease of implementation.
In addition to the need to determine and understand the total cost of ownership associated with a solution, another key factor that merits focus is the increasing reliance of law firms on resellers and value-added resellers to guide their technology acquisitions and implementations. This reliance, however, can lead to a host of challenges and potential pitfalls.
In the context of the law firm technology industry, a reseller, often referred to as a Value-Added Reseller (VAR), is a company that purchases technology products or services from manufacturers or distributors and then adds value to these products or services before reselling them to law firms.
The added value can come in the form of additional features, integration with existing systems, customization to meet specific needs, or accompanying services such as installation, training, and support.
For example, a reseller might be authorized to sell legal document management software from a manufacturer (i.e., iManage, Net Documents, etc.) and have the people trained and experienced on that software to customize it to meet the specific needs of a law firm, and then sell the customized solution to the law firm.
The reseller might also provide installation, training, and ongoing support services to ensure the law firm can effectively use the software.
Another common example are network infrastructure services companies who have personnel with expertise in network infrastructure hardware and software solutions from a mix of manufacturers. They can resell the hardware and software to law firms, earn commissions and premiums on the resale of those goods, and also provide professional services to configure, implement, and manage the products they sold.
There are many technology resellers serving the technology needs of law firms and most are regionalized.
- The interests of VARs may not always align with those of the law firm. For instance, a VAR might recommend a particular technology solution not because it’s the best fit for the firm’s needs, but because the VAR has a vested economic interest in selling that solution.
- VARs can create a dependency that may limit a law firm’s flexibility and control over its own technology infrastructure. This dependency can also lead to increased costs, as VARs typically sell their enhanced products at a premium.
- Since they are often small in scale, VARs may lack stability, have technical blind spots, or transact insufficient volume to obtain favorable pricing.
The P&C Global Approach
To illustrate this approach, let’s consider the circumstances and situational needs facing a few of our clients in recently completed engagements:
A leading global law firm with annual revenues of $1.2 billion had recently deployed a major technology solution recommended by a value-added reseller. The solution failed to deliver on the anticipated capabilities and user adoption, creating further complexity throughout the organization. P&C Global was engaged to address these issues. We conducted a thorough analysis of the firm’s needs and recommended a more suitable solution. The successful implementation resulted in a 30% increase in operational efficiency.
The Strategic Approach to Legal Tech ROI
In conclusion, when it comes to technology acquisition and implementation, law firms need to adopt a strategic, long-term perspective. They need to focus on total cost of ownership, seek objective advice, and be aware of the potential conflicts of interest that can arise when working with VARs.
By doing so, they can ensure that they choose and implement legal technology solutions that truly meet their needs and deliver the expected benefits.
Don’t let your legal tech investments go to waste. Contact P&C Global today and let us help you unlock the true ROI of your technology.