Am Law Tech Survey 2009: CIOs are trying to persuade their reluctant bosses to consider more cost-efficient, cutting-edge tools
law.com
By Alan Cohen
The American Lawyer
November 04, 2009
Like a bad Hollywood thriller, law firm technology has a villain that's all too easy to spot. The economic downturn has -- to no one's surprise -- taken a toll on the coffers of law firm IT departments: Fully one-third of the 110 Am Law 200 firms participating in our fourteenth annual survey of technology directors reported that their capital budgets were down more than 10 percent this year. Staffing levels and salaries have taken hits, and equipment purchases and software upgrades have been put off. None of it is happy news. (Access all the charts in our survey from the links below.)
"When I proposed a budget similar to last year, it was clearly communicated [by the firm's technology committee] that it went beyond what the firm wanted to spend on the capital side, by 30-40 percent," says a law firm technology director who asked not to be identified. "So we had to go back and ask ourselves what we could live without for another year. We might get better performance on [Microsoft] Exchange 2007, but we were going to stay on Exchange 2003. We weren't going to spend money on new BlackBerrys. We made conscious choices not to do certain things."
But the recession is also forcing firms to look at new technologies that are more nimble and cost-effective. Law firms have never been known for embracing cutting-edge gear or still-in-progress technologies. Indeed, if you want to find the world's last user of Windows 95, a law firm is a good place to start. But that's changing. Budget constraints and demands for efficiency are prodding firms to rethink how they do things.
"Probably the biggest trend I'm seeing is firms looking to control costs by leveraging IT spending," says Daniel Gasparro, chief information officer and executive director of firm operations at Howrey. "This is being accomplished by weeding out those things that are used by one or two people, or [dropping] a solution that provides the same functionality as something else." Howrey, he says, is also decreasing the number of vendors it uses. "Previously, we had several hundred. By moving to fewer, bigger vendors, I can get 20-30 percent savings." Indeed, Howrey has put so much emphasis on its paring-and-pairing strategy that in February 2008, it set up a global procurement group to manage, and optimize, vendor relationships, contract costs and payment schedules -- not just for IT but in areas including travel and research services. Savings in the first year amounted to $1.8 million, of which IT accounted for $1.1 million. "Most businesses outside law firms [have an office like] this," says Gasparro. "We [too] need to find more efficient ways to deliver IT."
However reluctantly, hesitantly, and unwillingly, many vendors are also retrenching on pricing. Of the firms responding to our survey, 74 percent said their wireless carriers were more flexible on rate negotiations. It's not just the carriers, either. Microsoft Corporation "said they'd defer our payment for a year, zero interest," says one CIO who asked not to be identified. "Other vendors have reduced their pricing," adds the CIO. "One vendor who normally bills us $30,000 a year said they'd invoice us at $20,000. You get enough of those, it adds up."
But cutting out what you don't need, and negotiating better rates on what you do, only gets a firm so far. More radical moves are needed. Some are more controversial than others. Videoconferencing is now widely used to reduce travel expenses, particularly for internal meetings (indeed, 60 percent of firms said their primary use of videoconferencing was communications with colleagues in U.S. offices, and 21 percent said it was for communicating with staff in branches abroad). "Our videoconferencing usage has been off the chart this year," says Michael Lucas, CTO at Hogan & Hartson. "I'd say we're doing four times the [amount] we did last year."
Virtualization is another winner, with a whopping 98 percent of respondents now implementing the technology (the other 2 percent plan to follow in the next year), and 98 percent of those reporting a positive experience. It's easy to understand the enthusiasm: The technology -- which lets IT departments take a server that used to run one application and run multiple applications on it -- reduces the equipment necessary to do business, which reduces complexity and cost. "If you had 100 servers and you can get that down to 20, it's much easier to manage," says Ken Kroeger, Kutak Rock's CIO. Virtualization also helps with disaster recovery. When a server goes down, you don't have to load up a new one with an operating system, application software, and all other sorts of code. "In a virtual environment you have a copy, or image, of each server sitting in storage," says Kroeger. "So instead of spending several hours rebuilding the server from scratch, you just take the copy of server 10 out of storage and move it to server 11. Your recovery time is much less."
The next step -- and one some firms have already started to take -- is to bring virtualization to the desktop. Instead of loading applications like Microsoft Word and Adobe Acrobat on every user's hard disk (and going around the firm maintaining and upgrading that software), firms can run the software on a server and deliver it (usually through a Web browser or some kind of streaming technology), on demand, to any user who needs it. "I think virtualization on the desktop, allowing you to operate [the latest apps], but be less dependent on PC hardware and operating systems, is the way to go," says Peter Lane, CIO at Goodwin Procter. His firm has begun to look into virtualization, and plans to use the technology to deploy a new version of Microsoft Office next year. "You're delivering your apps in a way that is a lot simpler, without having to touch every single machine," says Lane. And because it's the server doing all the heavy lifting, desktop PCs don't have to be the latest and greatest -- meaning that firms can refresh them less often, saving money.
But another complexity-cutting technology is proving to be a harder sell. Software as a service is about as big a buzzword as you'll find in technology circles these days. And little wonder: With application and data hosted on a vendor's equipment off-site (and accessed on demand by the firm), capital investments, maintenance grief and support demands are all reduced (users typically pay monthly fees based on the features they need and the number of users they have). Most firms -- 84 percent of survey respondents -- are now using SaaS in some capacity, typically for e-discovery or ancillary functions like human resources. But don't pop the cork for SaaS just yet. Among firms that have embraced it in some capacity, just 7 percent use it for document management, the bread and butter of law firm IT.
And there's the rub: No matter how efficient and attractive SaaS technology may be, many firms don't feel comfortable storing work-product outside their own four walls. Even among the firms using SaaS, 43 percent say they are concerned about having less control over their data, and 41 percent say they worry about security (of the firms that have not moved to SaaS, 61 percent cite security concerns). "We don't use SaaS all that much," says Charles McGuire, CIO, Andrews Kurth. "Law firms by their nature like their data close. We have highly confidential information, and clients need to feel good about [security]." Indeed, while Andrews Kurth has had documents for specific litigation cases hosted off-site, it has done so, says McGuire, only at client request.
Firms that have taken a more aggressive stance on SaaS say that the fears are overblown. They note that documents are encrypted as they travel between the firm and the hosting facility, and the facilities themselves follow federal guidelines for storing financial documents and often boast security measures far beyond the typical law firm's -- everything from multiple backup sites to the proverbial hardened bunker.
Indeed, no one at Kutak Rock, which uses NetDocuments, a leading SaaS provider for content management, is overly concerned. "[NetDocuments is] storing them a lot better than I could," says Kroeger. "If you're worried about security, worry about lawyers putting files on USB drives anyone could walk away with."
Then there are the dollars. "We did a rough analysis early on and estimated that SaaS was costing us about 40 percent of the traditional costs of document management," says Kroeger. And that, he adds, doesn't include some harder-to-quantify -- but significant -- savings, such as not having to patch everyone's PC with new software updates, or maintaining your own servers.
In the end, the fears may be moot, because SaaS may be inevitable -- particularly as electronic documents and e-mail continue to multiply, and clients demand that much of it be saved. At some point the systems needed to maintain all of that will be too burdensome to buy and maintain in-house, even for the largest law firms. "I have this general philosophy that it's silly for every law firm to build its own expertise in every individualized area," says Goodwin Procter's Lane, which uses SaaS for human resources and some e-discovery work, but not for document management. "We can afford to support our own documents, so that's the right model for us today. But I think things will evolve to where it makes no sense for organizations to become experts in everything, when they can just go out and use companies that already are experts."
Yet perhaps the most prophetic -- and ominous -- comment comes from the technology director who cautions about getting too excited about the new know-how: "We're all trying these technologies that are supposed to be the next great thing to take over IT. And they really do help. But none is a cure for spending money, which is what our leadership wants." |
