The Budgeting & Planning report is sponsored by LawPay.
Introduction
Each year the American Bar Association’s Legal Technology Resource Center conducts the ABA Legal Technology Survey Report with ABA members to find out how lawyers are using technology in the practice nationwide. It’s published in five volumes: “Online Research,” “Technology Basics & Security,” “Law Office Technology,” “Marketing & Communication Technology,” and “Litigation Technology & E-Discovery.” 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 demographic, the largest segment of the legal marketplace. In the “Technology Basics & Security” volume, which covers technology planning and budgeting,26% of the respondents are in solo practice and 30% 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.
Budgeting is Essential
Respondents to the 2020 Survey were asked if their firms budget for technology. There was no statistically significant change in the numbers from 2019, but overall the numbers look good, with 62% responding in the affirmative (up from 60% in 2019). Looking at responses from small firms shows that this is an area that can still see improvement. In 2020, 59% of solos responded that they did not budget for technology and 41% of firms with 2-9 attorneys did not budget for technology (and 12% 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. Results in the “Law Office Technology” volume of the 2020 Survey suggest that 13% of solos and 12% of firms with 2-9 attorneys are replacing traditional software with cloud-based products in the next year. 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. 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. The COVID-19 pandemic makes the need to budget especially important so that the firm can track expenses and revenues and proactively take steps to correct spending as necessary.
Get Your ROI with Training
While the 2020 Survey doesn’t explore what is specifically included in a technology budget, other indicators should guide firms on expanding their tech budget to include an investment in training on technology, not just budgeting for technology purchases. Over 67% of respondents indicated that they are required to stay abreast of the benefits and risks of technology under their rules of professional conduct. In 2020, 72% of solo respondents maintained that there was no technology training available at their firm and 46% (down from 50% in 2019) of firms with 2-9 respondents indicated no technology training available, though 4% said they didn’t know. This is not due to a lack of available options, but they need to be sought out and, in some cases, paid for.
When asked “Where do you first turn when you need or want to learn about legal/work-related technology?” solos responded that they seek help from Google or another non-legal web source (36%) followed by their bar association (15%). Firms with 2-9 attorneys also sought resources from Google (26%) followed by their peers (25%). Further, regarding emerging technology, 65% of solos and 60% of lawyers in firms with 2-9 attorneys report it is either very or somewhat important to receive training and education on emerging technology like blockchain and artificial intelligence (the same as 2019 2019).
The basic technology tools—operating systems, browsers, office suite, and PDF manipulation software—are 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
(A Few) Legal Tips, Tricks, and Training:
Conferences:
Purchasing Decisions
In solo practices, unsurprisingly, the sole practitioner generally approves technology purchasing decisions, at 97%. In firms with 2-9 attorneys “all partners” are most likely to approve purchasing decisions (42%), although 34% 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 (21%) and C-level Executives (26%) in on the approval process. Firms with 500+ attorneys equally charged an executive committee (25%) or C-level Executives (25%) 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. One way is to ask the attorneys what they want. A new question asked this year was “Do you have any input in the types of technologies you use?” In firms with 2-9 attorneys, 91% had input into what technology they used. When asked, “For which of the following hardware are you allowed to select your own brand/model/type?” In firms with 2-9 attorneys, 81% choose what smartphone they use and 69% choose their laptop. By including the lawyer in the decision making on what device they use, they may be more inclined to be engaged in the process and be more comfortable using the technology or device.
Under the Influence
There is little difference among firm sizes for what influences technology purchasing decisions. The top five resources that are very influential on law firm technology purchasing decisions are: staff feedback, peers, consultants, expert reviews, and free trials. At the bottom of the list were print and online ads.
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 either spend less than $500 a year (32%), $1,000-$2,999 (27%), or $500-999 (22%)—roughly the same as in 2019. In 2020, however, firms with 2-9 attorneys have increased their spending. Firms with 2-9 attorneys were most likely to spend $1000-$2999 (23%), while in 2019 these firms spent $500-$1000 (29%), although 23% 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 $500-999 on hardware (27%). 22% of respondents from firms with 2-9 attorneys reported spending $1000-$2999 on hardware.
Since hardware costs tend to be cyclical, the higher expenditure on hardware than software 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/month expense for time and billing SaaS would spend $600. It will be interesting to see what lawyers are buying in the “Law Office Technology” volume of the 2020 Survey.
Get Your Priorities Straight
When asked “What is your firm’s top technology spending priority over the next 12 months?” solo respondents and firms with 2-9 attorneys prioritized the same: hardware (35% and 31%); mobile technology (22% and 17%); marketing (15% and 17%), and security (10% and 14%).
Security was a lower priority than marketing technology. Solo practitioners and smaller firms represent clients with sensitive information and should be prioritizing security—possibly 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 & Security” volume of the 2020 Survey, firms that are budgeting for technology are either holding steady or slightly increasing spending. Solos are more likely to maintain the same budget as the previous year (47%) while firms with 2-9 attorneys are more likely to increase their budget (48%). Firms should consider budgeting for technology training as an investment in the firm, its 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 working—and what isn’t—over 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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