The Hidden Costs of Internal IT May be Impeding Firm Growth

Internal IT
Internal IT

Technology today advances at breakneck speed. Traditionally, law firms have been slow to adopt and adapt to changing technology. These conflicting trends often lead to situations where law firms spend more than they realize on technology that is not optimized to meet the firm’s needs. As mid-size firms try to maintain technological equilibrium in a fast-moving, competitive market, they often overlook the hidden costs of their internal IT infrastructure that have become a drag on their firm’s bottom line. If not addressed head-on, these hidden IT costs can thwart the growth of the firm; frustrate attorney, staff, and clients; and take an ever-increasing bite out of the firm’s profits.

M&A Effect

Many mid-size firms were once small firms that grew either through a merger or by bolting on independent practice groups to the core firm. In many cases, these disparate groups bring elements of their own technology with which they are familiar to the marriage. The result can be a hodgepodge of software and service contracts that exist within the same firm, some of which provide essentially the same services but at a considerable premium on price as opposed to a single solution.

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Redundant Services

A particularly common occurrence in mid-size firms is the duplication of technology services from decision makers who operate in silos. Accounting, litigation, and bankruptcy may all be operating under the same firm banner but may be unnecessarily inflating the firm’s IT budget because their technology decisions are not made in concert with other departments or practice groups. This can result in multiple vendors and contracts in place for the same core services.

Vendor Management Failure

As legal technology continues to grow and change the way law firms conduct business, firm administrators struggle with managing a widening circle of vendors providing an expanding array of services. Vendor relationships need to be based not only on the needs of the firm today but also on where the firm sees itself in the next 3-5 years. Lack of foresight when negotiating technology vendor contracts can lead to an over-prescription of services today or very expensive upgrade measures when the firm hits a growth spurt in the future.

IT Staff Costs

IT staffing for a law firm today looks very different than it did even five years ago. Outsourcing much of the IT function within the firm has become much more cost efficient and practical, particularly for mid-size firms. However, some firms resist the idea of giving up control of legacy in-house IT departments. These firms may overlook the fully burdened costs of maintaining a relevant internal IT department. In addition to the salary and benefits of these employees on the firm’s P&L, there are costs for overhead, training, retention, and recruitment of IT talent.

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Outdated Tools

One of the biggest burdens that impacts the operational efficiency of a firm as well as the morale of its staff is the use of technology solutions that have long passed their “expiration date.” You will not find this “expiration date” written anywhere in the documentation for these software solutions. The date occurs when the software ceases to be the most efficient solution to the firm’s needs. Sometimes, the expiration date is the function of a software vendor no longer making meaningful updates to the software. More often, the expiration date for a software solution is mandated by changes in the firm that make the solution a poor fit going forward. Continuing to use these expired tools will ultimately cost the firm more than making new investments on tools that will support its growth.

For law firms to function efficiently, attract new business and keep client information secure, up-to-date technology is critical. However, the hidden costs of keeping IT in-house may significantly hinder mid-size law firms from doing their most effective and efficient work. If your team is spending too much time dealing with IT issues, consider whether an outsourced IT partner can provide the solutions your firms needs.

The best IT support will help your firm avoid losing time, uncover hidden costs, and protect your firm as you grow. As technology continues to rapidly evolve, make sure your mid-size firm is well positioned to evolve with it. The less time spent on things outside of practicing law, the better.

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