| Technology Economics - This article was originally
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Technology Economics
Hardware We need to start with decent computers: Pentium 266 or better with at least 64 MB of RAM and a 17” monitor. We also need to have a server. A designated server if less than five computers and a true server if greater than five. Of course, our server has a tape backup. We also need local printers and sheetfed scanners for each workstation. Add a network printer, a digital copier and a network scanner to the mix. We need a shared Internet connection for our network along with interoffice email and the ability to fax from each workstation. Software I’m not going to make any specific product suggestions because each firm is unique, just like our clients, and deserve more specific advice instead of broad generalizations. Let’s get down to some hard numbers for our hypothetical law firm. We will use a baseline of $100/hr. Please don’t get in an uproar. Even if you typically use flat rates or contingency fees you still have a general feel for what one hour of your time is worth. That is what this amount represents. It is also an easy number from which to adjust for your actual numbers. Now, at $100/hr, 2/10 of an hour is worth $20. A 48 week, or 240 day, year would provide about $4800 of additional revenue, per lawyer, if we can redirect a measly 12 minutes of time back into billable work. 0.2 hr = $4800/yr. We will pay our paralegal $25,000/year or about $12.50/hr. 0.2 hr = $600/year. For a five lawyer law firm, this amounts to almost $25,000 of revenue. Even if the firm spends $25,000 for equipment, software and TRAINING, this will only occur about once every three to six years depending on the firm. The revenue stream will continue each year providing a minimum of $75,000, or $50,000 in clear profit. Of course, it is very possible to redirect up to an hour of billable time per day in most law firms and sometimes even more. Let’s start with a case manager with timekeeping, document production and telephone system interaction capabilities. This option will save us time in a number of ways. It will streamline the administrative tracking requirements which will allow us to spend more time on billable work. It will also allow us to produce documents in a more efficient manner which will again save time which can be redirected to billable work. Last of all, the timekeeping feature will ensure that we actually get paid for all of the work we do and whether it’s time to raise our rates. I will predict a minimum of 0.2 hr/day in attorney time savings and 0.5 hr/day in staff time savings. The maximum is 1.0 hr/day/atty and 1.5 hr/day/staff. Using our hypo, this equates to a minimum savings of $6300/year and a maximum of $28,500/year for one attorney and one staff person. Our five lawyer/five staff member firm would save at least $31,500 and as much as $142,500 each and every year after implementation and training. A typical cost for a five lawyer/five staff member firm would run around $10,000. Now let’s add a true document assembly component to our case manager instead of cut and paste methods. A comprehensive setup will allow finished or semi-finished documents to be created in (conservatively) less than ½ of the time they previously required. A more realistic estimate is that it will take about ¼ of the time it took before. If this cuts a staff members document production time in ½, then assuming a staff member spends about four hours a day in this type of activity, then this cuts out about two hours a day per staff member. For a five lawyer firm with five staff members this amounts to an entire employee. At a pay level of $25,000/year (low for a decent paralegal) and counting all matching taxes, vacation, holiday, medical, etc., this would amount to a savings of over $30,000. The cost for this would be about $5000 for our five lawyer firm. Of course, your staff may not spend this much time producing documents but we haven’t even begun to quantify the amount of time saved by the implementation of case management. Suffice to say, even ½ of an employee is a substantial savings. This doesn’t mean you have to fire anyone, just that they can do other tasks that are more beneficial, and possibly billable, rather than administration or document production. Now we will add document management software. Finding relevant work product already available in closed client files now becomes a snap. This saves time and increases efficiency to an even greater degree. Let’s assume we save another 1/2 of 1/10 of an hour (on the average) for the lawyer and 2/10’s of an hour for the associated staff member. For the lawyer, this amounts to $1200/year and for the staff member about $600/year. If your firm seems to spend a lot of time looking for old documents then these numbers will increase significantly. A firm of five is looking at saving about $9000/year. It would cost about $5000 to implement and wouldn’t need upgrading for about three to five years. Minimum savings = $20,200, maximum savings = $37,000. Litigation support and presentation software is much more difficult to quantify since both depend on the size and type of litigation in which the firm participates. Presentation software is included in both of the major office suites in use today. There are also other software packages which extend the capabilities even further. Typical costs would run about $1000 for training and about $1000 for the software for our five lawyer firm. Several firms have recently used presentation software in both settlement and trial and feel strongly that it added to their recovery in a significant manner. Litigation support is a more expensive option. It typically costs from $795/user up to $2000/user. For a five lawyer firm it would run between $8000 and $20,000. Naturally, this software is best used for large litigation matters where its cost can be absorbed. Another approach is to estimate the number of litigation cases in which the software will be utilized over a three year period and then amortize its cost on a per case basis. However, the worth of this type of software is no longer speculative. Very little, if any, large scale litigation proceeds without litigation support software today. Legal research has steadily moved to a digital format. Paper based law libraries are gradually becoming mere decoration. It is true there are those who are actually better with the paper based research systems than anyone is with the newer digital search techniques. The only flaw with these arguments is that the digital format provides both techniques. The same indexes and key systems are available on CD/Internet that are on the paper. In fact, they are exact duplicates. Consequently, not only is the digital format less expensive, it takes up considerably less space and provides more options for legal research. Clearly, this is a Win-Win that all but the most stubborn lawyer can hardly deny. Specialty information services on CD’s are a burgeoning area that will continue to grow in the future. With so much information now available, it is less expensive and more efficient to provide it digitally rather than on paper. Less expensive because it costs less to send you several hundred thousand pages on a CD than it would be to send you a 10 page newsletter in the mail. More efficient because you have search engines which allow you to sift through all of the additional information in an efficient and timely manner. If your practice is focused in a specialty area you should investigate the availability of information services in a CD format. Additional items to round out the perfect law firm include fax server software so that employees don’t need to stand around in front of the fax machine waiting for the technology to allow them to return to work. Fax servers work like printer queues so that everyone can send faxes directly from the computer and if the line is being used it simply adds it to the queue until the line clears. A network scanner allows closed files to be scanned into a digital format to provide a number of benefits. It allows the paper in the file to be indexed into the document management software for future retrieval. It makes the file available to the network so that the paper file becomes redundant. It is quicker to access the file contents at the computer than it is to walk around trying to find out who has the file now. Once scanned most of the file can be discarded reducing file storage requirements and costs. It also makes the file content more secure since the tape backup or CD’s can be recorded and kept off-site. Try making photocopies of all your files and finding a place to store the copies or add it to your tape backup routine. There are lots of reasons to consider digitizing your paper files. Expanded use of the Internet and email should be considered as well. Although there are still skeptics, email is sent when you want to send it and read when you are ready to read it. Convenience for sender and receiver is the main reason you need to urge clients to use it to communicate with you. You are likely tired of hearing about the benefits of the Internet and WWW so I won’t punish with them again. Specialty software for specific practice areas is also on the rise but most lawyers are unwilling to adopt them. I am fairly neutral on most of these products because they demean the practice of law by producing ‘canned’ documents. Clients recognize the lack of customization and feel cheated. Nevertheless, there are several products on the market which allow customization while still providing substantial efficiency gains. The value of specific products is beyond the scope of this article. Staffing If the above hasn’t convinced you of the need to automate then there is another compelling reason which may change your mind. The lack of a skilled legal staff pool is well known by lawyers across North Carolina. However, the worst is yet to come. The shortage of experienced, skilled legal staff in the 20-45 year old age group is generally explained by the explosion of employment opportunities for females since the early 1970’s. The “Della Street” of the 1990’s is a lawyer herself. Even those who graduate from paralegal schools first look to opportunities outside the traditional law firm setting. The pay is generally higher, the pressure is less, and the hours are better. This trend is expected to continue. The worst part is the mature, experienced legal staff base will gradually retire over the next fifteen years leaving a much smaller percentage of qualified legal staff members than there are today. Consequently, law firms must begin to leverage technology in order to buffer the lost skills the senior staff members currently provide. To put it bluntly, skill positions must be fully exploited and other positions ‘dumbed down’ or eliminated via automation. While the crisis point is still some years down the road, the legal staffing shortage will only continue to grow. Now is the time to begin the process of converting to automated methods of delivery so that as positions are vacated they may be eliminated. Each position eliminated saves the law firm many times the cost of the associated technology as delineated in the earlier sections. For those who still wish to procrastinate, perhaps it is time to wave the Y2K flag again. It will cost over a TRILLION dollars to rectify something which only occurred because the decision makers chose to procrastinate. Try not to let the same thing happen to your law firm in the years to come. Summary I hope this provided a more quantifiable basis for making technology purchasing decisions in the future. Law firms must still pay attention to the bottom line and it is rare to see firms engage in any cost-benefit analysis when making these decisions. The final point I would like to make is no amount of hardware or software will ever become the “Magic Button” that reads your mind and does your bidding. Software must be properly setup and configured and employees must be trained. In addition, the lawyers must be willing to make small but significant changes in their daily work methods. If we applied the most common excuse I hear, “If it’s not broke, don’t fix it”, then we would still be wearing animal skins and Westlaw would be delivered on stone tablets. Lee D. Cumbie is the founder of Cumbie Law Office Automation Consulting, one of the Technology Assistance Program consultants for the N.C. Bar Assn. He is also an Adjunct Professor of Law at Campbell University where he teaches the Law Firm Computer Lab course. Lee is a member of Tyson & Cumbie, PLLC in Fayetteville, N.C. Lee earned his B.S. degree from Regents College after military service in the U.S. Navy. He earned his J.D. from Campbell University, cum laude, in 1997.
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