Know the ROI on your IT

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Published on 12/1/08

In today's economy, new computers, software and database research services are significant overhead costs, and firms are looking hard whether they can afford the high up-front expense.

New solo practices may decide that substantial spending on new computer hardware and software is simply not possible. However, information technology is so essential for most firms and firm activities that IT spending cannot be avoided entirely.

The key at any point in the business cycle is to do it wisely.

It is a given that all technology investments must provide a return to the firm. A 10-percent return is usually considered too low to make the purchase (investment) unless there are other factors involved, such as new services it allows the firm to offer.

There is no one right or correct rate of return. The return selected or expected is a function of personal choice, available alternatives and financial resources.

Because there invariably is a number of technology expenditures competing for priority, using ROI is a great way to rank them in the order of financial preference. Then, depending on the budget and resources available, the most productive or profitable investment can be made first.

Don't automatically assume that a new computer or software will greatly increase lawyer or staff productivity, with a resulting increase in profitability. Projected ROI is often thwarted by human considerations: staff and lawyers can resist change, be afraid of the new technology and have no emotional investment in its use. The technology will then languish until it becomes obsolete, realizing little of the expected savings or profits.

Thinking through the purchase and getting as many people as possible committed to using the technology before it is bought is the best way to achieve the level of usage that produces the expected ROI.

Even with a necessary and accepted purchase, the firm still must ensure that the level of usage and type of application justifies the expenditure. Many technology applications that are increasingly common in law firms have definite ROI pitfalls.

For example, client relationship management (CRM) databases, when shared on computer desktops, can make available to all firm members the personal data and contact history of any client. The goal is to make marketing easier and more effective. The catch is that many lawyers balk at the time needed to get CRM systems running. They must go through their Rolodexes and PDAs and figure out which contacts to contribute to a central repository and what information to input — like the sort of work the firm does for the clients and what e-mail alerts they might want to receive.

Add the fact that some lawyers don't want to share any information about "their" clients, and the result is a big IT expenditure with a small or questionable ROI. No matter how sophisticated the database, CRM only works when all knowledge is shared and all lawyers take the time to build and use it.

Technology is a tremendous tool, but firms need to know its value as well as its cost. Achieving a sufficient ROI on IT demands a clear alignment between the technology and a firm's goals and culture. Otherwise, the expenditure is wasted.

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