TECHREPORT

TECHREPORT 2018: Budgeting and Planning

The Budgeting and Planning report is sponsored by Ruby Receptionists.

 

The annual ABA TECHREPORT combines data from the annual Legal Technology Survey Report with expert analysis, observations, and predictions from leaders in the legal technology field. For the first time, we are bringing TECHREPORT to Law Technology Today for you. Every Monday we’ll be posting a new report from one of our experts, so stay tuned!

Each year the American Bar Association’s Legal Technology Resource Center conducts a survey of ABA members to find out how lawyers are using technology in the practice nationwide. The ABA Legal Technology Survey Report is split into five volumes: “Technology Basics & Security,” “Law Office Technology,” “Online Research,” “Web & Communication Technology,” “Litigation Technology & E-discovery,” and “Mobile Lawyers. The published results represent one of the most comprehensive technology surveys of lawyers available. The survey is particularly adept at capturing responses from the solo and small firm demographics—the largest segment of the legal marketplace. In the “Technology Basics & Security” volume, which covers technology planning and budgeting, 32% of the respondents are in solo practice and 32% are in firms with 2-9 attorneys. In this overview of the results from law firm budgeting and planning, we will see where the solo and small firms differ from the average and where they don’t.

Is Your Firm Failing to Plan?

Respondents to the 2018 Survey were asked if their firms budget for technology. Overall the numbers look good, with 57% responding in the affirmative. Looking at responses from small firms, however, shows this is an area that needs to be addressed and improved. In 2018, 66% of solos responded that they did not budget for technology (up from 58% in 2017), 38% of firms with 2-9 attorneys did not budget for technology, and 9% didn’t know.

Cloud products (including the “as a service” products) from security to infrastructure, managed IT resources, and even installed software are charging a per user per month price. Budgeting for technology should be easier to accomplish than ever. A technology budget will help ensure a commitment to keeping hardware and software updated and maintained, which is essential not only for uninterrupted technology availability but also is a major component of best practices for security. Do not be tempted to have a single line in the firm budget for software and another for hardware/equipment. Break out the cost in line items for specific hardware and software/applications. You want to be able to measure the return on investment (ROI)  and first, you need to see what you are considering spending, what you are actually spending, and then re-adjust as necessary.

To Train or Not to Train?

While the 2018 Survey doesn’t explore what is specifically included in a technology budget, other indicators in the survey should guide firms on expanding their tech budget to include an investment in training on technology, not just budgeting for technology purchases. Over 62% of respondents indicated that they are required to stay abreast of the benefits and risks of technology under their rules of professional conduct. In a huge and alarming leap from 2017, 71% of solo respondents maintained that there was no technology training available at their firm, up from 49% percent in 2017, and 42%  of firms with 2-9 attorneys indicated no technology training available, up from 35% in 2017. This is not due to a lack of available options, but they need to be sought out and in some cases paid for.

New questions in 2018 may shed light on this perceived lack of training availability. When asked “Where do you first turn when you have a problem with your firm’s technology?” solos responded that they seek help from consultants (37%) followed by Google or another search engine (20%). Those solos, however, who asserted that they did have tech training (26%) still sought Google or another search engine more than any other resource (33%). Is it perhaps because they feel comfortable with their available technology? 56% of both solos and firms with 2-9 attorneys responded that they were “very comfortable” using their firm’s available technology and sometimes (43% and 49% respectively) or seldom (48% and 47% respectively) had technology-related problems that negatively impacted their productivity. Is it that firms don’t feel like a lack of training options is problematic? Further results reveal that is not necessarily the case, as 71% of solos and 85% firms with 2-9 attorneys assert it is “very” or “somewhat” important to receive training on their firm’s technology. Further, regarding emerging technology, 68% of solos and 72% of lawyers in firms with 2-9 attorneys report it is “very” or “somewhat” important to receive training and education on emerging technology like blockchain and artificial intelligence.

The basic technology toolsoperating systems, browsers, office suite, and PDF manipulation softwareare constantly being updated, upgraded, and enhanced. Lawyers and their teams should budget for and engage in training to make the most out of the technology they use every day. Training can reveal easier and more effective ways to use technology efficiently. Here are some resources:

General Tech Training

Legal Tips, Tricks, and Training

Plus check your state and local bar associations!

Conferences:

Billing and Perception

Solo respondents primarily bill an hourly fee (58%) followed by fixed fee billing (25%). Firms with 2-9 attorneys are more likely to bill by the hour (64%) with fewer fixed fee options (16%). There has been a focus on alternative and flat fee arrangements to help close the access to justice gap amongst the middle class in the United States for the past decade. But access to justice isn’t the only reason to rethink billing practices and get more familiar with legal technology. The 2018 Survey examines what clients are most likely to request be written down or off the bill. The top two reasons clients “always”, “almost always,” or “sometimes” request that their law firm write off expenseswhich are “time spent getting up to speed on a new practice area or unfamiliar area of the law” at 36%, “legal research service costs” at 30%are not surprising, as why would someone pay by the hour for an attorney to learn a new area of law or pass along the costs of doing business?

The third most common reason clients request a write-down may actually come as a shock; the 2018 Survey indicates that, as reported by the respondents, 20% of clients request a reduction on activities relating to “time spent drafting and revising briefs, pleadings, and motions, or post-trial motions and submissions.” When examined by firm size, though, it is rare that a client asks for a write-off or write-down of this activity from a solo or lawyer in a firm with 2-9 attorneys.

When will smaller firm clients become intolerant of what sounds a little like churn? For firms to reduce the risk of billing write-offs and write-downs they should focus on value-based billing, billing transparency, and predictable fees. One way to begin rethinking the billable hour is to have a very well documented budget that includes legal technology spend so that the fees adequately cover the technology a firm can effectively use to reduce overhead, be more efficient, and more proficient.

Purchasing Decisions

In solo practices, unsurprisingly, the sole practitioner generally approves technology purchasing decisions at 98%. In firms with 2-9 attorneys, “all partners” are most likely to approve purchasing decisions (38%), although 33% of the respondents asserted that the “managing partner” approved purchasing decisions. These decision makers carried through for most firm sizes, though firms with 100-499 attorneys also had technology committees (23%) and C-level Executives (14%) in on the approval process. Firms with 500+attorneys equally charged an executive committee (32%) or C-level Executives (27%) with purchasing decisions.

The question may not be who makes the decision to approve a technology purchase, but rather how that decision is arrived upon. In firms from small to large, new technology is purchased but the process often does not engender adoption or usage by the firm. There are steps to take to help ensure that firms make smart choices and bring in new technology in a way that sees maximum potential use and adoption.

Under the Influence

There is little difference among firm sizes for what influences technology purchasing decisions. Like their larger firm counterparts, solos and firms with 2-9 attorneys chose the following resources as “very influential” to their purchasing decisions: consultants (33% and 42%), peers (31% and 38%), staff feedback (30% and 43%), and expert reviews (30% and 25%). A note that while CLE/educational conferences (24% and 21%) ranked a close fifth as one of the most influential factors on technology purchasing decisions, “trade shows” were “not at all influential” for solos and firms with 2-9 attorneys (28% and 20%), followed by print ads (35% and 30%) and online ads (33% and 30%).

Spending Habits

Respondents were asked to identify a monetary range of how much the firm spends on software to manage the practice (e.g., practice management, document management, time and billing, etc.). Solo practitioners were most likely to spend less than $500 a year (33%) or $1,000-$2,999 (29%) or $500-999 (23%). Firms with 2-9 attorneys were most likely to spend $500-$1,000 (29%), although 20% chose “don’t know.” The larger the firm, the more likely the respondent marked the answer “don’t know.”

Respondents were asked to identify a range of annual expenditures for hardware (computers, tablets, printers, etc.). Solo practitioners were most likely to spend less than $500 on hardware at 30%. 50% of respondents from firms with 2-9 attorneys reported spending $500-$999 on hardware.

The spending reporting here flips what was reported in 2017, where more money was reported spent on hardware than software. This could be because 1) hardware costs tend to be cyclical, so unless a firm has grown, the hardware is usually more of an every other or every three-year purchase and 2) because software tends to need more regular updating. The expenditure on practice management is a bit confounding. Much of the practice management technology is charged at a per user, per month basis, so even a solo with a $50 per month expense for time and billing software as a service (SaaS) would spend $600. It will be interesting to see what lawyers are buying in the “Law Office Technology” volume of the 2018 Survey.

Get Your Priorities Straight

When asked, “What is your firm’s top technology spending priority over the next 12 months?” the difference between the wish list of solos varied greatly from other firms. Overall, “software to manage the practice” and “hardware for the office” were the top two priorities at 22% and 30% respectively. When looking at the firm size demographics, however, solo practitioners are prioritizing mobile technology higher than the average (11% versus 7%). Solos also prioritized hardware much higher than their large firm counterparts (35% versus 18%).

In a shift from 2017, security made it to the top three priorities but was a lower priority on par with marketing technology. In solo practices prioritization of marketing technology nearly doubled that of security. Solo practitioners and smaller firms represent clients with sensitive information and should be prioritizing securitypossibly not so much the spending as the investment in awareness, keeping hardware and software patched and updated, and deploying best practices such as password managers and two-factor authentication.

Conclusion

According to the budgeting and planning results from the “Technology Basics and Security” volume of the 2018 Legal Technology Survey Report, firms that are budging for technology are either holding steady or slightly increasing spending. Solos are more likely to maintain the same budget as the previous year, at54%, while firms with 2-9 attorneys also hold steady at 49%. Firms should consider budgeting for technology training as an investment in the firm, it’s people, and client service. Budgeting for technology will help them know where to spend their money wisely if they can also measure usage and track what is workingand what isn’tover time. Plan well, spend wisely, and prioritize accordingly; technology is and will remain an essential part of running a law firm.

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About Catherine Sanders Reach

Catherine Sanders Reach
Catherine Sanders Reach is Director for the Center for Practice Management at the North Carolina Bar Association, providing practice technology and management assistance to lawyers and legal professionals. Formerly she was Director of Law Practice Management and Technology for the Chicago Bar Association and the Director at the American Bar Association's Legal Technology Resource Center. In 2011 she was selected to be one of the inaugural Fastcase 50, celebrating 50 innovators, techies, visionaries, and leaders in the field of law and in 2013 became a Fellow of the College of Law Practice Management. She served on the ABA TECHSHOW Board from 2007-2009, 2014-2016 and is co-vice chair in 2019.

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