TechReport 2021: Budgeting & Planning

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The Budgeting & Planning report is sponsored by LawPay.
The ABA TechReport combines data from the annual ABA Legal Technology Survey Report with expert analysis, observations, and predictions from leaders in the legal technology field. Every Wednesday, we’ll be posting a new report from one of our experts, so stay tuned!

Each year the American Bar Association’s Legal Technology Resource Center surveys ABA members to discover how lawyers are using technology in the practice nationwide. The ABA Legal Technology Survey Report is published in five volumes: “Online Research,” “Technology Basics & Security,” “Law Office Technology, Marketing & Communication Technology,” and “Life & Practice.” The published results represent one of the most comprehensive technology surveys of lawyers available. The survey is 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, 24% of the respondents are in solo practice (down from 26% in 2020) and 20% are in firms with 2-9 attorneys (down from 30% in 2020). 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 when they don’t.

Budgeting and Planning for Technology Is Essential

Respondents to the 2021 Survey were asked about their firms’ budget for technology. Overall, the numbers keep increasing every year with 65% of firms responding in the affirmative (up from 62% in 2020 and 60% in 2019). Solos and small firms continue to lag behind the larger firms, with only 43% of solo and 50% of small firms responding that they budget for technology. The good news is 62% of solo firms increased their technology budget for 2021. With software, solo respondents spent less than $3,000 annually. Interestingly, or possibly due to COVID-19, results in the “Law Office Technology” volume of the 2021 Survey suggest a 9% increase by solo firms’ availability of case/practice management software (33% in 2020 up to 42% in 2021). The availability of practice management software and the continued growth in this area should make it easier for solo and small firms to invest a portion of their budget into one of these products. Most of these products are cloud-based, offer enhanced time and billing, document management, and more recently, client portals. These tools greatly reduce repetitive tasks and streamline processes within the law office. Solo and small firms can find more information about these products from their local and state bar associations. They should plan this yearly fixed cost into their budget as a line item to better evaluate their ROI (return on investment).

Training and Technological Competence

Training on technology is an important factor for many lawyers. Overall, 68% of the respondents agree that lawyers must stay up with the benefits and risks of technology as part of their basic competence requirement under their rules of professional conduct. Although the 2021 Survey doesn’t include the cost of training, it is an item that should be included in a solo or small firm’s budget. For instance, when asked “Where do you turn first when you have a problem with your firm’s technology?” solo (37.6%) and small firms (42.8%) responded that they use a consultant the most. Consultants can be an expensive item within their budget. Solo and small firms need a plan in place that includes these types of expenses.

In terms of training on technology, in 2021, 61.5% of solo firms responded that they had no technology training available to them, which is an improvement over the 72% in 2020. 39% of small firms with 2-9 lawyers responded they had no technology training. There is a small indication that solo firms have moved away from Google or other non-legal specific online resources when they need to learn legal related technology, with only 20% compared to 36% in 2020. Small firms with 2-9 attorneys responded that they seek information from Google 22% in 2021 (26% in 2020). Only 21% of solo and 10% of small firms turn to their bar association. 17% of small firms with 2-9 attorneys responded that they use consultants for legal technology training. Budgeting and planning for training can be an elusive cost for solo and small firms. The costs can vary from free (Google) to expensive (consultants), but solo and small firms should include these costs in their yearly budget. Technology is constantly changing and with new innovative legal products lawyers can increase efficiency while decreasing costs. Training on these products is essential to get the most out of them. A couple of good resources are your local bar association and the ABA TECHSHOW.

And as the data below suggests, the security of client information and the financial wellbeing of a solo and small firm practitioner relies heavily on their knowledge of the technology they use every day.

Budgeting for Security a Must

Budgeting for security and training is more important today than ever. Ransomware and phishing attacks have increased over the years at an exponential rate. According to Jeff Bell in a Forbes magazine article dated September 13, 2021, “Tips for Protecting Yourself Against Rising Cybercrime:”

“In 2020, the FBI received a record number of cybercrime complaints in the U.S.: 791,790. That figure marks a 69% increase from 2019, resulting in total reported losses of $4.2 billion. The top three reported crimes were phishing scams, non-payment/non-delivery scams and extortion.”

But solo and small firm respondents to the 2021 Survey plan to spend little of their technology budget towards security over the next 12 months. Most of their budget will be on hardware (35% for solos, 29% for small firms), for solo firms another 25% will be spent on mobile technology, and for small firms with 2-9 attorneys 32% on marketing technology. Solo and small firms plan to spend only 10-11% of their technology budget on security compared to 20-36% of the larger firms with 100+ attorneys. The problem with this is that solo and small firms responded that the primary person(s) responsible for the firm’s data security is the respondent (solo 81%) and for small firms the assigned attorneys (25%) and the respondent (22%). If attorneys are going to be responsible for their data security, they need to invest more of their budget into training and security tools.

When asked whether their firm ever experienced a security breach, overall, 25% of all respondents indicated that they had experienced a security breach, with only 17% of solo and small firms reporting a security breach. It’s a different picture when you look at virus/spyware/malware. Overall, 29% of respondents reported being infected with these products. Firms of 10-49 attorneys most often responded to being infected with a virus, spyware, or malware at 37%. 30% of solo firms experienced some form of virus, spyware, or malware infection. There was a significant drop from the small firm attorneys (2-9) from 2020 which was 45% down to 31% in 2021. 54% of solo and 64% of small firms with 2-9 attorneys reported that there was no significant business disruption or loss. But they did report downtime and loss of billable hours (23% of solos and 41% of small firms 2-9).

A majority of solo and small firms indicated that they had spam filters, firewall software, and anti-spyware. However, a smaller percentage of solo and small firms responded that they had other security products such as encryption of files (solo 30%, small firms of 2-9 40%), two-factor authentication (solos 37%, small firms of 2-9 33%). Solo and small firms could reduce the potential virus/malware/spyware infections with proper training, encryption, and two-factor authentication.

Conclusion

According to the budgeting and planning results from the “Technology Basics and Security” volume of the 2021 ABA Legal Technology Survey Report, solo and small firms increased their budgets for technology in 2021. Solo practitioners had the largest increase in their budget for technology at 62%. There was a good indication that more solo and small firms are using or have access to practice management software. This is good news, but solo and small firms need to focus more of their budget, or at the very least planning, on training and security to protect confidential client information.

About the Author

Julie A. Bays is the practice management advisor of the Oklahoma Bar Association. She works with the OBA Management Assistance Program to provide assistance to attorneys in using technology and other tools to efficiently manage their offices and teaches a variety of CLE classes. Bays is also involved with the Access to Justice initiatives of the OBA such as Oklahoma Free Legal Answers.

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