Does technology reduce the costs of practicing law?

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Recently, the Wisconsin State Bar Board of Governors issued a report entitled, “The New Normal: The Challenges Facing the Legal Profession.” In it, the Board concluded that the legal profession is facing an assortment of unprecedented challenges, brought upon by an ailing economy, new forms of regulation, and technological change. In part, the Board concluded that lawyers will need to reduce their costs by restructuring the delivery of legal services if they hope to prosper in the 21st Century.

Lawyers hoping to successfully acclimate should make use of new technologies, as explained in a State Bar of Wisconsin blog post which summarized the report:

Information technology and the availability of communication tools are transforming the practice of law, according to the report, because of new client expectations. But technology is also opening doors for lawyers to cut costs and deliver more efficient services…

“Lawyers who resist this trend will find that their clients (and potential clients), routinely use the Internet to identify cost-effective legal resources and ways to solve their legal needs,” notes the report, which highlights an ABA eLawyering Task Force that follows this trend.

Of course, the question remains whether technology necessarily reduces the costs of practicing law–especially for lawyers who have practiced just fine without it for their entire careers, thank you very much. For these lawyers, the time spent learning how to use these new tools and the income lost while doing so might very well outweigh the benefits of utilizing new technologies.

So, while at first blush, the answer would seem to be obvious, perhaps the issue is more complicated than it seems. Yes, technological innovations have the potential to greatly reduce the costs of practicing law. And, many argue that new technologies, including Internet-based tools, have been the great leveler, making it substantially easier for solos and small firms to compete with large law firms in ways never before seen. But is this potential being realized or is it mere conjecture?

I believe that the short answer is that technology has reduced the cost of practicing law, but the changes wrought by rapid technological change have come at a price–one that may, for some firms, balance out the benefits achieved by taking advantage of new technologies.

What types of technologies? Well, there is cloud computing, which allow lawyers to outsource the costs of IT, including erasing the need to purchase and maintain costly servers and pay the expensive annual licensing fees charged for traditional software programs.  Another benefit of cloud computing is that lawyers can practice from any location at any time, day or night. No longer are lawyers tied to their desktop computers. Instead, some lawyers, particularly those who handle transactional law matters, have the flexibility to practice from home as needed or can even forgo a brick and mortar office entirely and practice from a virtual law office.

Mobile computing also increases lawyers’ flexibility, allowing them to accomplish an array of tasks using a smart phone or tablet–tasks that once required the use of large, costly machines, such as copiers, scanners and fax machines. Lawyers can also use mobile devices for voice-to-text transcription, thus replacing a function once provided by secretaries.

That’s all well and good, but how does technology result in cost savings if some types of technology reduce the number hours billed and fewer billable hours results in reduced income?

Well, in part the cost savings comes because many of the tasks now simplified by technology are solely administrative, were never billable in the first place, and thus do not represent a loss of income in that respect. And, there is the added benefit of reducing administrative costs by utilizing technology effectively.

And even for those tasks which were billable in the past and can now be accomplished more quickly because of technology, the reduced time does not necessarily equate to a loss of income. This is because the legal field is in a state of flux when it comes to billing and many lawyers are now exploring alternative fee structures in lieu of the traditional billable hour. So in the long run, the focus may not be on billable time, but on the end product delivered to the customer. So the better, more efficient workflow arising because of technological advancements should ultimately benefit the bottom line of most law firms.

Toby Brown recently discussed this idea of more efficient work processes resulting in reduced costs over at 3 Geeks in a Law Blog. He explained that legal project management, in part, helps law firms to gain efficiency and increase productivity by becoming “better, faster, (and) cheaper.” Toby then described a number of ways to achieve this goal:

Better: Doing it with the same or more hours, but getting a better result.
Faster: Doing it with the same hours, but in a shorter time-frame (probably with more people).
Cheaper: Doing it with fewer hours or by using people with lower rates or with technology.

However, that’s not to say that technology is a the magic bullet for struggling law firms. It’s not. In fact, the security issues presented by new technologies can present untold challenges for law firm IT staff. And in some cases, the costs of implementing new technologies doesn’t seem to be paying off, as explained in this legalweek.com article which summarized the findings of a the 2011 Legal Week Information Technology Report:

Fifty-one percent of IT directors said that their annual budgets had increased but, according to Berwin Leighton Paisner IT director Janet Day: “It’s almost like we’ve gone back and forward 20 years simultaneously, because 20 years ago people were saying: ‘Technology is going to decrease the number of secretaries in law firms, reduce the number of lawyers doing repetitive tasks’ – and here we are rolling forward saying we can use technology to reduce our costs.”

Kosminsky adds: “The biggest debate we’re having is not so much the cost of the box or the infrastructure. There’s an assumption that technology is so critical to the ability of our lawyers to do their work that we don’t want to skimp on that, and maybe even want to pay a little bit more for a degree of flexibility, such as the option to connect to the work systems using an iPad.”

So it would seem we’ve come full circle. Technology can indeed reduce costs. But the short term difficulties faced when implementing new technologies–especially in the face of the rapid technological change that we’re now undergoing–can sometimes seem insurmountable.

The truth is, there’s no easy answer. Implementing new technologies can reduce costs, but the mileage gained by doing so will vary because every law firm’s needs are different. It’s a matter of carefully assessing your firm’s processes, your employees’ willingness to change, and the benefits and drawbacks of incorporating new tools into your practice. Ultimately, it boils down to doing what’s best for your firm.

-Niki Black

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