Financial Strategies in a Fluctuating Legal Market

Shifting Law Firm Security Landscape

As more and more commercial clients move their legal teams in-house, competition among law firms continues to grow—law firms have been pooling expertise and gaining market share through mergers and acquisitions. At the same time, office and back office relocations are becoming commonplace for many firms around the country to control costs.

Another driving force behind this trend is the ever-evolving nature of technology. A recent report by Robert Half Legal, “Technology’s Transformation of the Legal Field,” found that access to technology, including smartphones, tablet computers, and cloud computing, has legal work being done outside the traditional physical confines of a law firm, resulting in a rise in telecommuting and reduction in physical law firm space— facilitating the shifting of many law firms’ locations.

The Robert Half Legal report found 59% of lawyers  expect their law firms to increase spending on technology in the next two years, with the overwhelming majority of the firms surveyed focusing on increasing technology investments that included additional software, hardware, PCs, laptops, tablets, and smartphones. On the other hand, although lawyers are expecting their firms to increase tech spending, the 2014 ILTA Technology Survey found that nearly half of firms plan to keep their technology operating expenses flat.

The ILTA survey also reported that among firms’ top three technology issues and annoyances, keeping up with new software versions, along with high costs of technology and software maintenance costs were in the top ten.

This might be an indicator of a disconnect between the needs of the lawyer end users and the firms’ procurement and finance departments.

Do I Want to Own This Equipment?

Moore’s Law provides the framework for the pace of change in technology and also reveals the fundamental question we all must answer when faced with a new technology: should I purchase that device? Since the period of exponential improvement in technology has actually increased as breakthroughs in speed, functionality, and processing power are released in ever shorter cycles, we are constantly seeing the delivery of better, cheaper, and faster products. And who even knows what changes the Internet of Things will bring?

The pace of technology change coupled with law firms shifting resources, merger activity, and downsizing and moving their physical resources is a unique and potent combination. From a financial perspective, when it comes to the firms’ technology and equipment needs, options such as leasing and financing offer flexibility to stay on the leading edge which may make strategic sense rather than an outright purchase. Ownership of the firm’s technology and equipment in a fluctuating market can put roadblocks up against strategic and cost-effective decisions.

Mergers and moving offices to locations with lower costs requires flexibility regarding law firms’ technology, software, and equipment needs as these are reconfigured and optimized. If your firm owns technology, the result of reconfiguring operations could leave you with equipment that is no longer needed, but will require dedicated staff hours to handle.

The financial burden of office relocations like Tallahassee by Kaye Scholer and Nashville by Pillsbury can be alleviated by converting all new technology and equipment needs into a monthly expense as opposed to a single, large cash outlay. At the same time, in addition to the hardware and equipment needs, firms also can finance the software, software upgrades, and associated soft costs, including training, implementation, installation, and services, which can help alleviate the cost of onboarding new staff in new locations.

Leasing a firm’s hardware, software, and other technology is a strategic solution that can allow a firm to convert what would be a large purchase into an affordable monthly expense. Leasing conserves cash, keeps bank lines of credit open for their intended short-term use, and cuts out-of-pocket costs for security upgrades while enabling the necessary new projects to be fit into the budget.

Combined, these financial strategies allow flexibility and rapid decision making, distinct advantages in a merger and re-sizing market.

Have a Strong Leasing Partner

If your firm wants to lease technology, the choice of a leasing partner is crucial. A leasing company owned by an equipment manufacturer may not be flexible when you want to replace that manufacturer’s equipment with a competitor’s. A leasing company that is vendor and manufacturer agnostic will give you more flexibility to change out equipment manufacturers and select the cutting-edge technology that is best suited to meet your needs, not just the needs of a single equipment manufacturer.

Also, when selecting a leasing partner, it’s best to review their expertise in the legal field and make sure the lessor has a vetted and demonstrable understanding of the unique challenges faced by law firms. And most importantly, ensure the lessor has a reputation for creating custom and flexible financial solutions.

It is important to ask your peers about the transparency and fairness of a lessor’s lease documents. It is good to make reading and reviewing master lease agreements part of your firm’s best practices when contemplating a lease. This ensures due diligence has been done for the firm, and that you have selected the lessor that best suits the firm’s needs. It is never about just finding the lowest lease rate factor or monthly payment. It is essential to consider both the end of lease provisions and the overall master lease terms and conditions.

We asked Ted Gerber, director of data systems of Hawkins Parnell Thackston and Young, about best practices for deciding whether to own or lease equipment. These are Ted’s recommended tips for reviewing master lease agreements:

  • Carefully review of the master lease agreement  and any addenda
  • Do not fixate on lowest lease rate factor
  • Do fixate on total cost of ownership of the master lease agreement and any addenda
  • Start with the end of lease terms in mind and ask these questions:
    • - What are my costs during the installation process?
    • - What are the financial ramifications of pro-rata and quarterly interim rent? Is there
         anything I can do about these prior to signing?
    • - What is my notification process at end of term?
    • - What are the consequences if I miss deadlines detailed in the notification? Is there an
         auto-extension? If so, how long is that extension, 30 days? 180 days?
    • - What does my firm have to do to satisfy the terms at the end of the lease?
    • - How is the equipment to be returned?
    • - Is it feasible that my firm can satisfy the terms at the end of the lease?
  • Consider the qualifications of your lessor:
    • - Are they a knowledgeable resource for your firm?
    • - Will they communicate consistently and transparently?
    • - Are they responsive and able to accommodate changing needs over time?

Leasing is a long-term relationship: make sure your lessor has a reputation for transparency, flexibility, and customized solutions. Terms and conditions buried in lease contracts can end up costing you much more in the long run than you originally anticipated. It is vitally important at the outset to look at any leasing contract with the flexibility offered at the end of the lease in mind.


Although the outlook for the legal industry in terms of revenue is positive, firms are always looking for ways to cut costs and improve efficiencies through consolidating resources and relocating offices and back offices to smaller, more cost-efficient spaces. These trends are partially driven by new technology, which allows firms to operate in less square footage than they previously required.

Successful mergers, acquisitions, and relocations require flexibility and avoiding any unnecessary large cash outflows. Leasing gives firms the flexibility and quick decision making needed to meet these challenges.

CoreTech Leasing

CoreTech Leasing is an independent technology and equipment lessor. Founded on over two decades of leasing expertise, CoreTech's executive team delivers over a century of experience in technology and equipment leasing and lease administration services to over 100 of the nation's most distinguished law firms. Click here for more information.

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