Feature

posted 28 Nov 2008 in Volume 3 Issue 2

The strategic use of IT in law firms

The IT baseline: review of existing IT

In order to assess how an IT strategy could be delivered, it is necessary to review the current use of IT, so that any constraints, shortcomings and opportunities can be identified in relation either to management structure, personnel numbers and skills, and existing hardware, software and telecommunications. The baseline review should cover the following areas:

The process of IT management in the firm;
The IT staff;
Current IT systems;
IT spend; and,
The users.

Management of IT

The principles of IT management explained in the following section should be utilised here in order to ensure that the firm has an appropriate internal IT management structure which ensures that:

New developments are approved, prioritised and developed according to suitable criteria;
Operations performance and capacity planning is
being undertaken;
Projects are being properly controlled;
End-user computing is being controlled and supported in the right way; and,
IT costs are controlled and benefits measured.

IT staff

Prepare a high-level profile of IT personnel taking into consideration the roles, responsibilities and functions of each member of staff together with their training, skills and expertise. Other IT personnel issues that need to be considered periodically include career development and training, recruitment and selection, and remuneration. This will assist in the determination of any recruitment or retraining needs resulting from any change in strategic direction at the end of the planning process. A small firm may have no internal IT staff resources, but someone will have responsibility for technology.

Users

You should be in a position to determine the extent to which your users:

Are able to identify opportunities or specify requirements;
Can use the information generated by systems effectively;
Can be used to sponsor IT projects; and,
Can be used to manage aspects of technology development.

User questionnaires should be distributed to a representative selection of users, including partners and fee-earners, relating to their current use of IT and their involvement in the IT planning and development process.

IT costs

At this stage, it is very important to gather accurate information relating to historical spend on IT systems. This allows you to determine the value of current systems, and to assist in the determination of the most cost-effective migration strategy at a later stage. For the current year, the previous two or three years and the current budget you should record (where possible):

Expenditure by resource, for example, technology
and personnel;
Expenditure by activity, for example, development and maintenance; and,
Expenditure by application, for example, word processing and time recording.

This will involve time from the IT and financial management departments. Exactly how much time this is likely to take will depend upon whether the firm’s financial systems maintain the relevant detail. Many firms undertaking this analysis have been surprised by the results. You may find that the existing system is costing more in lease repayments and maintenance than a new system would.

It is useful to benchmark your IT spend against that of other similar law firms. The two key financial benchmarks that have emerged in the legal industry are:

IT spend as a percentage of turnover; and,
IT spend per fee-earner per annum.

Accurate figures are extremely difficult to get for either of these indicators, as each law firm has a slightly different view of what constitutes ‘IT spend’. Does it include telecommunications? How is capital expenditure and depreciation to be treated? And so on. In general, however, law firms in the Top 100 would seem to spend an average of four to six per cent of their annual turnover on IT, and about £10,500 per annum per fee-earner.

Current applications

The final part of this exercise deals with a review of the existing applications. This is achieved by assessing the extent to which the current set of IT systems is believed, by the users, to support their needs. The weaknesses in the current systems often assist the users to identify opportunities for improvement in IT support: these are a vital input for the firm’s future IT development. This means that you must consult the users, either by means of workshops or questionnaires, and elicit their views – not the views of the IT department.

Issues to consider include:

Are the systems provided meeting the users’ needs?
Are they efficient and easy to use?
Are they reliable?
Do they receive good training and support from the
IT department?
What opportunities can the users identify for additional
IT applications?

The other things you should look out for are ageing hardware and/or software systems which are so badly in need of replacement that continued reliance on them constitutes a risk for the practice.

The systems needed

The firm now has three sets of IT opportunities: one resulting from the baseline review, one from client interviews and another from an analysis of business imperatives. These will often represent a wide range of very different opportunities all of which the firm cannot hope to undertake. The remainder of the process is devoted to further setting of priorities in order to ensure that of all these opportunities, the firm devotes its money and energies into following up the most important.

The next step is to group the opportunities together in an appropriate way in order to identify the various discrete information systems or packages which need procurement or further development. This process should also identify the inter-relationships and dependencies between the individual information systems.

A simple, but effective way to do this is to write down each opportunity on a ‘Post-It’ note and start to group them together in ways that make sense. You will have had an idea of the different kinds of IT systems the firm needs when beginning the planning exercise. You can write these as headings and then group the IT opportunities under them. You will soon see if you were right by whether they start to fit together in a logical way under these headings and by what opportunities are left, in which case they should be grouped under an appropriate new heading.

Usually you find that you end up with a manageable number of candidate systems, or projects, say less than a dozen. If there are more than this, no matter. The next step is further prioritisation, and some may drop out.

Here are some examples of ‘real’ projects that have been identified at this stage of some law firm IT strategies. In each case, a business problem or opportunity was addressed by the identification of a series of related initiatives:

Document production environment – this could include: an upgrade to Microsoft Word; the implementation of, or upgrade to, Document Management; the implementation of Microsystems D3 or DocXTools; the implementation of Workshare Professional; and so on;
Customer relationship management (CRM) procurement – the implementation of a CRM system, the development and adoption of various CRM protocols and working practices, the development and implementation of a related CRM change management program, and so on;
Re-implement CRM – this is often necessary when a CRM system has previously been implemented as a ‘software’ project without the necessary working practices and change management, and has consequently ‘failed’, in which case a re-implementation is usually the best way forward;
Infrastructure upgrade – this could be a small development, such as a cabling replacement, or could be a major infrastructure project involving a wide area network (WAN) implementation, network server upgrade, system resilience upgrade, migration to application servers, wholesale PC and Windows upgrade, and so on;
Exchange migration – many firms have ‘bitten the Microsoft bullet’, and felt obliged to migrate from Novell GroupWise to Microsoft Exchange and Outlook;
Knowledge management (KM) – this is often a major project. It will usually involve the implementation of some IT tools, but is often more concerned with related management initiatives such as KM structure, recruitment of professional support lawyers, institution of KM protocols, a change management program to inculcate a know-how ‘sharing’ culture, various related HR initiatives (such as redesigning the annual appraisals process), and so on;
User training – law firms hardly ever invest in sufficient training to allow their users (especially their fee-earners) to exploit their existing IT systems effectively; this project is usually a euphemism for remedial user training; and,
User re-engagement – another euphemism for those occasions where relations between the IT department and the users have reached a very low ebb. The former do not trust the latter and think they are incompetent, unhelpful and do not understand the client pressures they work under. The latter think the former are hypercritical and unreasonable and they have ‘circled the wagons’.

Other initiatives that might come out of such a review could include:

Readiness for external investment;
Cost control; and,
Reducing WIP ‘write-offs’.

For each potential information system, it is necessary to identify a senior user sponsor with whom a business case would be developed. The sponsor will not be the person responsible to the firm for the delivery of the working system – that is for the IT department. The sponsor is one of the key users, or prospective users, of the system who will provide user input for the course of the plan.

The business case for each project needs to take into account:

The scope of the system, by means of a general statement of the needs it meets;
The benefits expected;
A costs estimate;
The effect on the business;
Any business or technical risks;
The urgency of the application – in both business and technical terms; and,
Issues relating to the dependencies between the various projects, and between them and the firm’s existing systems.

The sponsor and IT department should come up with the scope of the system. The IT department will estimate the costs and supply the technical input, and the sponsor should determine the expected benefits and the other business issues.

It is important that the review of the project should include a realistic (if anything, pessimistic) estimate of all likely costs, and make sure to include all costs – both capital costs and cost of ownership over the life of the system, including hardware, software, implementation, training, consultancy, project management and change management. There should be no surprises for the business later.

As far as possible, the sponsor should be pressed to ascribe financial benefits. For example, the sponsor for a litigation support system may be of the view that one of the benefits of such a system will be that it can be used as a practice development tool to attract more litigation business. Very well: how much more business? The sponsor will find it difficult to answer such a question, and may refuse to put a value on it. If this is because the extra business will be small, that is acceptable. If it is because it is impossible to estimate, then that is not good enough. It is impossible to put a value on the loss of a man’s leg – but the judge has to do it. Similarly, if it is thought that a real benefit will accrue, then it should be estimated, even though it may be accepted that the estimate will be wrong. An inaccurate estimation is more useful to the business in making a business judgment as to whether to invest in a new project than no estimate at all.

In determining the relative effect on the business, you will need to go back to the critical success factors identified earlier on. They were prioritised as high, medium and low. You can now review the different proposed systems and score them on the basis of the extent to which they support each critical success factor, and the relative priority of the critical success factor. A simple scoring system will suffice; the prioritisation already provides the weightings.

Taking all these factors together with the risks and the urgency of each application – such as the replacement of an obsolescent system – it is possible to prioritise the various projects. At this stage, it is also important to bear in mind any dependencies between the different projects. For example, it may be the case that the highest priority is for a practice development (marketing) database, but it is recognised that this will have to come after the client and matter management system, which will provide most of the base data for such a system.

You now have the relative priorities of the different systems, as well as an understanding of the order in which they need to be implemented.

Next, you must consider how the existing and new applications are best delivered. This could mean a choice between a centralised and distributed system over a WAN, or between standard server configuration and application servers. There may be a number of possible ways of providing the infrastructure and configuration of systems to support your high priority applications. Evaluate each option against your set of evaluation criteria, such as:

Cost;
Flexibility – how easily and cost-effectively can it be expanded or have new facilities added;
Speed of user response – is it sufficiently responsive to impatient professional users?; and,
Ease of support and maintenance.

The benefits of this step are to establish those applications which are both cost-effective and support the business objectives, and consideration of a wide range of technical options for the provision of information systems to the firm.

You will then need to produce a first draft timetable of the phased projects which takes into account the urgency and inter-dependence of the various projects. This may mean, for example, seeking to implement seven projects in Year 1, three projects in Year 2 and two projects in Year 3.

When added to current and committed IT spend, this will give you an idea of the financial impact of the strategy over three years, and whether the firm can contemplate that level of expenditure. If not, then the phasing needs to produce a level of spend that the firm feels comfortable with, bearing in mind cash-flow and funding requirements.

Formulate the plan

You now know where you are in IT terms, and where you want to get to. The plan is your step-by-step approach for getting from one to the other. Two plans will need to be developed: a high level strategic plan covering the firm’s normal business planning horizon outlining the proposed strategy, architecture and project phasing, and a more detailed one year plan. The short-term plan will cover:

The applications you need to enhance or buy together with their phasing;
The people you need to make it happen, whether they are permanent or contracted staff;
The technology infrastructure you need to support your applications;
The management controls you need to put in place to allow senior management to monitor the implementation of the plan; and,
A monthly action plan detailing who is responsible for doing what, with specific target dates.

The benefits of this step are a clear understanding of why the preferred option was chosen and a plan for developing the IT function in a form that senior management can monitor effectively.

Next steps

This is just one way of developing a viable and controllable IT strategy. The trick is not so much in the fancy phrases – the trick is getting it done. Then the hard work begins – implementing it. The key here is to remember that the IT strategy should be the basis for all IT initiatives. The firm should therefore:

Implement it;
Share it;
Communicate it;
Plan on it;
Act on it;
Use it to review planned costs and benefits; and,
Review and amend it as necessary, to take into account changing business exigencies.

You should bear in mind that the purpose of this entire exercise has been to determine the nature of future IT development within the firm, how you are going to get there and how much it is going to cost. It does not define what brand of software application or applications you are going to use to do it. That all comes next, and is largely tactical – the strategy is complete.

Neil Cameron is the principal of Neil Cameron Consulting Group www.neilcameronconsulting.com. He can be contacted at neil@neilcameronconsulting.com