Another level the evolution of it by dave cunningham sep 2004


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Another level the evolution of it by dave cunningham sep 2004

  1. 1. Another Level September 2004Another levelAs the users of legal IT become ever more demanding, pressure is mounting on law firms tochange the way they handle their technology requirements. Dave Cunningham looks at how thesector is developing and how managers stay ahead of the gameThe evolution of legal IT has followed a path similar to that of law firms themselves - both areincreasingly adopting the business practices of mature companies. The implications for legal ITare important.Growing customer sophistication is a sign of this maturity. The increasing exposure of issues likeelectronic records management, cross-office client teams and profitability measurements arepushing law firms to consider more complex solutions like identity management, Chinese walls bydefault, matter-oriented storage and business intelligence systems. Mobility, enterprise searches,client relationship programmes and other projects meant to put useful information into the handsof lawyers require IT to be adaptable and executive minded. Ironically, lawyers want simple ITthat delivers against highly complex requirements.Supplier consolidation and technology maturity are also symptoms of legal ITs stage ofdevelopment. For example, legal document and records management suppliers have beenacquired by corporate enterprise content suppliers. Some of the legal financial system suppliershave also been acquired by companies with broader ambitions. The corporate, financial, HR,client relationship management and portal providers are now competing with the legal specialtysystems. These horizontally broad suppliers realise that they increase their profits by leveragingthe 80:20 rule, in which one solution fits as many industries as possible.As a result, IT processes and systems in law firms have become increasingly similar to thoseemployed in other industries. This is also evident in leaders themselves - many law firm IT andfinancial directors were hired for their broad company experience rather than their knowledge oflaw firms. Some fear that this apparent commoditisation of legal IT diminishes its value. However,lessons from other industries reflect that this is a time when technology can have the highestimpact on the business. The focus shifts from what you are providing to how you provide value forthe investment - how cost-efficiently you can provide IT services, and how well you can apply ITto the shifting and often imprecisely-defined business needs.At a recent conference, managing partners agreed when they included the leveraging oftechnology among their top issues in leading firms - other issues included increasing efficiencywithout losing key assets, multi-office planning, the effects of a consolidating market, alliances,understanding outsourcing of legal or back-office services and other challenges that also affecttechnology.The diminishing uniqueness of some aspects of legal IT, combined with the growing complexity ofIT requirements, means that law firms will consider external service providers to help the ITdepartment be as effective and focused as possible.Law firms rely on vendors for many services today, although just a few firms have prepared tomake changes in favour of long-term vendor services. Understanding the approach, terms andbenchmarks related to outsourcing allows IT to make informed decisions, reflect its own valueand even defend itself against outsourcing pressures if necessary. 1
  2. 2. Another Level September 2004The potential values of outsourcing are well documented. Few law firms have the scale to warrantthe specialist skills, training and investment in methodologies that an outsourcer can provide.Outsourcers provide top end tools for monitoring, managing and changing networks from remotelocations without capital investments by the firm. Outsourcers can host systems in shared Tier 3facilities and charge for their actual use dynamically. In about half of all cases, companies reportthat they save money by moving to an outsourced arrangement.In other cases, firms are willing to pay a premium for the mitigation of risk, service guaranteesand known payment schedules that the vendor provides. Even in these cases, most outsourcerswill smooth payments so that the initial outsourced costs are lower than current costs and providepayments for assets that it acquires from the firm. Unsurprisingly, suppliers have taken the cueand are positioning themselves to provide outsourcing services for legal IT.Despite these positive concepts, many people believe that the reality of outsourcing is not sorosy. IT concerns include the risk of a big change to an outsourcer, the actual level of service forthe quoted costs, and the effect on IT staff. Outsourcers are seeing that fewer firms are movingdirectly to a significant contract with a new supplier because of the first two concerns. In thesecases, a company uses the selected supplier on smaller scale work and increases their trust andcompatibility with them over time. These try-before-youbuy-longer-term situations help to ensurecommon expectations post-contract, although their shorter term and more limited scope lowersthe potential benefits.IT staff can be affected by outsourcing in many ways. Despite popular corporate headlines, lawfirms will not be sending significant IT work to India. It would be most common for outsourcers toprovide a service in addition to the firms IT staff, take responsibility for training and managing ITstaff or take on IT staff as their own - in that order. When IT staff do transfer from a company toan outsourcer, they often continue to work at the same location, at the same pay but withadditional product-specific or procedural training.You can start to evaluate outsourcing by working through some basic analysis. First, objectivelyevaluate ITs strengths in the context of its changing responsibilities. Most law firm ITdepartments are being stretched into new areas - business needs analysis, executivecommunications, lawyer working practices, merger integration and real-time disasterpreparedness, for example.It is likely that the strengths and priorities of the department have changed while the expertise ofthe department is still adapting. It is not unusual for more than 80% of ITs responsibilities to befocused on maintaining core systems - installing, supporting, upgrading and rolling out versions ofhardware and software. For some firms, these are its areas of greatest value because it has thebest knowledge of how the systems are used in-house. In other situations, the dayto-day work ofmaintaining systems slows the pace of important new projects.You should also perform an outsourcing assessment even if you do not plan to outsource. Mostoutsourcing suppliers use a combination of ITIL, ISO and their own practices to establishprocesses for supporting IT. You do not necessarily need to learn each of these areas of ITquality standards, but addressing a few key questions will help identify gaps:. How do I define, measure and monitor service levels? 2
  3. 3. Another Level September 2004. Where do I have risks that are not cost or time-effective to resolve (lack of appropriate disasterrecovery and no back-up for key skills are common)?. Where am I about to make large capital purchases where a vendor might provide services on anasneeded basis for greater value (storage management, proactive network management and newdata centres are big budget items where vendors already have excess capacity)?. What IT activities constrain the pace of my key projects?. Am I able to provide services equally to all offices?. Where are procedures too ad hoc, but too time-consuming to create in-house?. Where do I have trouble attracting the right skills and providing the right training?. Do IT areas require so much time and effort that other high priority IT work is delayed orignored?. Are my best IT staff frustrated due to a lack of progress or resources?These questions are really about effectiveness and not just outsourcing. However, they help tofocus on the option of third party services. These questions are relevant for all IT staff to ask, notjust IT management.You should also gain experience with an outsourcing approach. At the Society for Computer &Laws Advanced Outsourcing Symposium, the IT lawyers advice was never to let a supplierdictate a service level agreement. This means that you should not expect a supplier to sort outpoor processes under contract, and that you should be familiar with defining the scope and termsof SLAs.While IT lawyers have a solid understanding of relevant law, many do not have much experiencewith technology itself, so IT should be prepared to play a qualified role in contracting withvendors. If you do not expect to outsource for the next few years, it would be most beneficial tobegin using SLAs internally, to understand outsourcing terms and approaches and to be familiarwith the types of services provided by third parties.As the pressure to consider outsourcing will likely increase, you can be prepared to evaluate itintelligently. A side effect could be that your due diligence allows you to be more prepared toavoid the need for outsourcing in the future.Evaluating outsourcing is a natural evolution of the business nature of IT. Avoiding theconsideration altogether could mean that you will lack an under-standing of potential practices orsolutions, whether or not you determine that outsourcing is right for you.Dave Cunningham is a consultant at Baker Robbins & Company. 3