Rent vs. Buy – The SaaS Decision – part 2

By on March 13, 2011

Some people, me included, have always been “buy” type people, maybe it’s just old fashion. We buy, we just don’t like to rent or even borrow most things. Many businesses face the same decision as they review their options for implementing internal software. There are compelling reasons for both software models, in-house licensing and cloud based SaaS.

 In my previous blog posting I covered SaaS benefits; here are a few of my thoughts on traditional in-house software licensing.

 In-house traditional software.

  1. In most cases today, full enterprise level software, especially utilizing database management like financial management systems are best kept in-house. Primarily because there are not any viable SaaS options for mid-large size firms. In addition, firms need tight integrations among many other software systems that are already in-house.
  2.  There is a big difference in processor and memory requirements for enterprise financial management systems vs. other applications like document management. Hosting a DM system off-site is more about file storage sizing and access. In general, lower transactional processing applications not involving complex data structures are fine in a SaaS environment. The economies of SaaS disappear quickly when a large amount of computing power is needed for multiple users.
  3. I’m always concerned about the ease and control of data retrieval. In some SaaS applications it is quite easy to export out all of your data, in case, for example, you’d like to move to a different arrangement. However, with more complex applications where large amounts of data are stored in equally complex databases, extracting it from a “multi-tenant system is a real issue.
  4. The SaaS world is built, for the most part around a “multi-tenant” software model. Your data is actually mixed in with everyone else’s data and the application knows how to get it out. But you can’t. If you had an in-house financial management system and wanted to change vendors, you could conceivable extract the data yourself (or hire a consultant) and move to a new system without notifying your existing vendor until you thought it was proper. However, in a SaaS system, you don’t have a lot of choice. You are at the mercy of your SaaS provider. I’m always concerned about the uncertainty and costs of asking a SaaS provider for help converting to another system.
  5. I have a little bit of experience with the above issue of moving data from a SaaS vendor. In 2010 we decided to leave our long time, big name, on-line CRM system for an in-house Microsoft Dynamics CRM system. So we just called up the big name SaaS provider, explained our intentions and asked for help extracting millions of entries from the last 10 years or so from their system. It was amazing how little help they were and how crude their extraction tools were, if you wanted to leave their system. Of course, we had to licenses some SaaS type extraction tools just to do the all the work ourselves.
  6. Many times, the costs for SaaS only look attractive in the short-term. I recently saw some pricing for a legal market SaaS offering for a “practice management” system. On the surface it looked attractive, then I calculated the total cost of ownership over say, a 8-10 year lifecycle with 100 users and I was astounded. It no longer looked like a bargain at all. Some analysis indicates that SaaS pricing is based on a 28 – 36 month amortization of what an in-house enterprise software license would likely cost. If you keep it for 10 years you may end up paying 3-4 times as much money.
  7. The sales pitch for SaaS often includes the; you don’t need hardware, you don’t need to manage the system, and other similar claims to help justify the pricing model. The fact is that, most mid-large size law firms need to maintain a full IT infrastructure of networks, servers and desktops anyhow. The extra burden and costs of adding one or more virtual servers to this infrastructure may not be a big deal.

 At the end of the day there are all business decisions and for each decision the buyer needs to ask, am I a “renter or a buyer”?

Comments (0)
Categories: Best Practices, Financial Management, Law firm billing, Practice Management, Technology

Note to The Firms Liability Carrier – I Know We Did it Right(?)

By on September 1, 2010

Nothing keeps the managing partner up at night more than a professional liability claim by a disgruntled client. It’s never a win-win situation, even when you prevail, you lose. It can also be quite costly.

Some assertions of professional liability arise out of claims of conflicts of interest or the lack of ethical walls.

New associates and staff arrive every day, lateral partners bring in excellent books of business … the business of law can be very rewarding. There are times however, that firms may need rock solid proof that conflict searches were not only properly run but that the data available at the time of the search did not show any reason to decline or ask for a waiver.

 Here are some Best Practices for “Proof of Searches:”

  1. All conflict searches must be run through the firms best sources of information, at a minimum the time and billing and practice management systems.
  2. The results of all searches should be a “snapshot, point in time” type record and saved in the conflict system. No user should have the ability to modify the snapshot.
  3. The system must be capable of re-printing the exact details of all snapshots searches.
  4. The search reports should provide a time/date stamp of the search, the search operator, the requesting attorney, the search words with all Boolean search terms, and results from the database itself showing all the “hits” or no “hits.”
  5. The database should store all reviewing and approving attorneys or other staff along with all comments.
  6. The system should allow for a re-run of the exact same search(s) previously used based on newer database content to then determine at what point in time the potential conflict surfaced.

Law firms are required to use best practices and reasonable efforts to identify and deal with potential conflicts. One thing is certain, Best Practices might be much better off than “reasonable efforts.”




Comments (0)
Categories: Best Practices, Practice Management, Technology

Legal Project Management – 3rd Big Disconnect

By on July 7, 2010

In my June 17th and June 28th postings I discussed the 1st and 2nd Big Disconnects that law firms have with Legal Project Management.

The 3rd Big Disconnect is – “who’s in charge of the project”.

Wikipedia defines Project Management as “ the discipline of planning, organizing, and managing resources to bring about the successful completion of specific project goals and objectives”.

OK, so the law firm has just taken on a major new litigation case and the client is looking for the firm to get staffed up and started immediately. If the firm is representing the defendant there may already be a complaint filed. If the firm represents the Plaintiff, the client is anxious to get the process started.  We have a “billing attorney” identified, probably a senior partner, and this partner will have a pick of key attorneys and paralegals from within the department to assign work to.

Sounds like we are in pretty good shape, how soon can we expect some “action”. But wait … we haven’t selected the Project Manager; we don’t have a Project Plan in place nor a Project “launch date”.

Will the Legal Project Manager really have any authority to “manage a project”? Might this just be an exercise in updating a project planning tool so that the client is pleased that the firm has “project management”. This is the real issue, is the Project Manager really in charge of anything? Well we don’t exactly know any of this yet because there is very little Legal Project Management taking place today.

Firm management should first define and get partner consensus on exactly what role a Legal Project Manager will take before going down this path. Are you looking for someone to track events and activities (a docket clerk?), someone to enter case notes ( a paralegal?) or someone to actually make decisions and manage a case?

Comments (0)
Categories: Best Practices, Practice Management, Productivity, The Legal Market

Survey on Law Firm Time Entry

By on July 7, 2010

The survey on law firm time entry caught my eye this morning.

The survey was sponsored by Adam Smith, Esq., and Smart WebParts.  Of the 155 respondents, 86 were partners, 72 were associates, and 51 were senior staff at firms with titles such as CFO, CIO, Executive Director, etc.

Here are some statistics cited:

  • The average “leakage,” that is, lawyers and other timekeepers failing to report all billable time, ranges from $20,000 to nearly $40,000 annually, per individual.
  • The “overhead” costs of keeping time are very heavy, with a mean 3.1 hours/month per individual devoted to filling out timesheets. The mean billing rate of respondents was $438/hour, indicating an imputed cost of $16,294 per person per year.
  • Clearly, significant efficiencies could be gained if streamlined time entry systems were available.

So how efficient are timekeepers in this survey, let’s see.

How long it takes to actually do TE’s at 3.1 Hours/mo. (186min/mo.):

Example #1   12 TE’s per day x 22 days/mo. = 42 seconds/TE

Example #2 (TE requiring task codes) 24 TE’s per day x 22 days/mo. = 21 sec/TE

Sure seems to me that this might be pretty efficient, especially for an attorney who has to try and remember in some level of detail what he or she did a few days or weeks ago .

So how can firms make attorneys even more efficient?

  1. Insist on daily time entries, it must be easier to recall details if you are entering your time as the work is performed.
  2. Provide attorneys with the proper tools and train them how to use the tools. For example, some vendors allow time entry right from within Outlook, where attorneys are spending a good bit of time already.
  3. Provide attorneys with short-hand codes unique to their practice. They just enter a code and the narrative explodes out into an entire description that they helped create.
  4. If you have a mobile attorney, let them try a Blackberry or iPhone time capture app, see if it will help improve productivity.
  5. Have the partnership set strict rules requiring attorneys to have their time in “on time” with some sore of penalty for non-compliance. Set an example at the partner level by adhering to the policy.

The better the time entry, the better chance the bill will go out sooner, the better the chance the client will pay it sooner.

Comments (0)
Categories: Best Practices, Financial Management, Practice Management, Productivity, Technology, The Legal Market

E-Billing Let’s Law Firms Develop a True Costing Model

By on July 7, 2010

The 3 Geeks posted an interesting atricle titled:

The ‘Fuzzy’ Difference Between Case Management & Legal Project Management

One of the points made by Bruce MacEwen was that e-Billing was a great case management tool due to the use of task codes. I’d like to take this a step further and say that e-Billing allows a firm to finally determine a “cost” for providing a unit of service which can then be used to intelligently price future work.

E-Billing has been the overall driving force behind the use of task codes (including phase and activity codes) to quantify a discrete measure of legal service. The codes allow both a firm and client to finally dissect services down to tasks and sub-tasks levels with actual costs involved. The roll-up of thousands of tasks from many firms has allowed large corporate clients to model their exposure to risks and potential legal costs to resolve their issues. Unfortunately law firms for the most part have not seen the benefit of doing the same roll-up and modeling internally.

Law firms need to know their costs beyond grossed-up utilization and realization calculations. Most of the calculations done today at firms are merely compensation or firm profitability related. Knowing than an attorney has an “effective rate” of $320/hr. which is $50 less than his “standard rate” or that this attorney has a 95% utilization and 92% realization does nothing to determine the cost and later the profit of doing an actual task of work.

The development of a “cost” model will help a firm offer any type of Alternative Fee arrangement or bid new work. With enough data the firm will have a perspective on what tasks really cost them and how the roll-up of tasks can build a potential engagement model to price a competitive bid. The model will also help determine which attorneys are most cost effective at each task.

Here is a model that will help firms get started on first understanding the “cost” of doing work:

  1. Use task codes on every line of business within the firm, not just e-billed matters. Most systems let you build your own custom task codes sets that can match any area of law, try and get as granular as possible for each task or sub-task.
  2. Make the use of a task code mandatory for every billable time entry, most systems can easily do this. The specific task code set can be assigned to any client/matter for ease of use by the timekeeper.
  3. Let your system roll-up these, area of law specific task codes into a general set of standard tasks, so that you get a firm wide consolidation of common activities.
  4. Now you can start modeling the average and mean length of time for, say a deposition across the entire firm.  Let your system tell you that for 1,000 depositions the average billable time was 1.5 hours, the utilization (ability to get it billed) was 97%, and the realization (ability to get it paid) was 99%.
  5. Your system can then also further analyze the internal cost for each of these depo’s since we know how the attorney was for each time entry and we know the burdened or unburden cost for an hour of that attorney’s time.
  6. The average cost of a deposition is therefore; attorney true cost/hr . x the # hours required for the deposition.

Here are questions that can be answered:

  • Which attorneys are the most cost effective at certain tasks?
  • Which tasks are tough to make money on or are under-valued by clients?
  • Which types of cases (matters) are we the best at getting high utilization, realization AND are most profitable ?

The assumption is that you have a business intelligence database that will do most if not all of the heavy lifting here and that you gather enough data to make it statistically relevant to the costing model. This same process is what corporate e-billing clients have done on their end to model their cost of services.

Law firms that want to be relevant and competitive in the next decade must have a costing model to generate business as much as a profitability model.

For related information on costing models check out my blog post on June 2, 2010 “What Law Firms Should Learn from Manufacturing Companies”

Comments (0)
Categories: Best Practices, Financial Management, Productivity, Technology, The Legal Market

e-Learning, Changing the Training Paradigm – Part 3 of 3 Customer Response

By on July 7, 2010

Today there are more than 750 e-learning courses on our portal. We’ll never be done; we’ll always be updating old courses and adding new ones.

Here is what we’ve found from our customers:

  • They have been able to substantially lower the cost of implementation and training, especially smaller (20-40) lawyers firms. Some of these firms just could not afford our previous method. Our “blended” training now includes web and on-site training along with e-Learning.
  • They are able to “try-out” new modules and get an in-depth understanding of them before they either purchase or begin using them.
  • They use e-learning as the first source for training, even if they get consulting from us. Therefore, the questions we get and help we provide are much more focused to meet their specific needs.
  • It makes it much easier for them to train new users in their firm, even new attorneys doing time entry, or adding case management information.
  • e-Learning is much less intimidating than classroom training; it allows the user to train at their own pace, even in the privacy of their cube or home. When in doubt, just pause, “rewind” or play it over again.
  • Many times it’s much faster to use e-learning than to call the hotline.
  • They know much more about how to use the features of our products and have increased their productivity.

What did e-learning do for RainMaker and me? It allowed me to meet a commitment, and provides the company with much happier and more productive customers.

Comments (0)
Categories: Uncategorized
Gallery
ist2_11425109-business-woman-with-colleagues-at-the-back ist2_5516813-business-people-joining-their-hands ist2_7730216-library-tables
Follow RainMaker