In over two decades, we’ve yet to come across a law firm that finds joy in putting together their IT budgets. It’s an arduous process, but a necessary evil if you want to keep a solid handle on your finances.
While some may assume that a profitable industry like law has little to worry about when it comes to funds, our work with firms in the DC area has made it glaringly clear that even the most lucrative practice must take pains to map their financial future if they don’t want to be caught unawares--especially given the ever-increasing demand for fixed-cost projects versus the traditional hourly billing.
So, when all is said and done, what does a successful IT budget actually look like for law firms? Below we’ll walk through both the characteristics of a successful IT budget, as well as what technical elements need to be accounted for in your plan.
Characteristics of a Successful IT Budget
- It gets done. This may seem silly, but it needs to be said: if you set out to create an IT budget, take the time to create it fully. In an industry where uptime (and, thus, technology) is so very critical, slowing down to plan your tech investments from start to finish is well worth the effort.
- It gets done properly. When you get to the end of your firm’s fiscal year, will you have something to measure against to see where you misjudged, where you allotted too much, and where you need to focus your attention the next year?
- It’s realistic. This goes both ways—make sure you budget enough to fully care for your information systems, but not too much that you’re biting off more than you can actually chew over the next 12 months. For most firms, you should plan on spending between 2-3% of your top-line revenue on IT. If you’re growing rapidly, think closer to 4-5%.
Basically, our point here is that IT budgets cannot be simple, ballpark estimations—technology is a complex animal, and in order to be successful, your budget must be too.
Capital Expenses to Consider for your Law Firm
What one-time capital investments do you need to account for when creating your budget?
1. Software. Do you use a Document Management System to keep your immense amount of data organized? Is this software due for an upgrade? What about your time and billing system? Plain old Microsoft Office licenses? Anti-virus?
2. Hardware. How old are your servers? The laptops your attorneys are carting to and fro? What about ancillary (but still costly) devices like your firewall and copiers? If you’re growing, what additional devices are you going to need to accommodate the increase in people and data? Are there any expiring warranties that you’ll need to extend? Do you have any specific hardware used for Backup and Disaster Recovery that must be replaced or maintained?
3. Labor. Generally speaking, you’ll need to engage an outside provider in order to fully implement these upgrades. Whether a consultant will work with you to evaluate different DMS solutions, or whether network engineers will build your servers and swap them out with your aging hardware, be sure you account for their time as well.
Operating Expenses to Consider for your Law Firm
On top of those one-time costs, what will you be putting into your technology on a regular ongoing basis?
1. Internal IT Staff. Do you have a full IT team in-house? What are their salaries? What sort of training might they need to complete over the next year?
2. Managed Services. Do you pay an outsourced team to take care of hardware monitoring and maintenance? Helpdesk? Room in their datacenter for data backup? Do you outsource anything and everything up to CIO-level consulting? Will your provider’s current rates stay the same?
3. Hosted Services. Do you have a hosted website? Hosted email? Have you foregone on-site servers in favor of a hosted desktop solution? Will you need to account for fluctuations in your monthly pricing as your off-site data shrinks or grows?
It’s a lot to consider, and does require a deep understanding of your firm’s technologies and how they function. This is why it’s important to work with the people who will actually be performing all of this work so that you’re sure all is accounted for, and that your cost projections are as accurate as they can be.
Keep in mind: Even if you think you’ve taken the most miniscule details into consideration, you should always build flexibility into your budget; while you may have budgeted for 20 new computers, what would happen if your primary server were to fail unexpectedly?
As painful as the process may be, the confidence you gain from a truly well-planned budget is hard to match; persevere, and your firm will be on the right track to a smooth and prosperous year.