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Financing the Future

Law firms need to learn from their clients and demand more flexible ways to operate.

The so-called “sharing economy” appears to be on the rise, as consumers decide they would rather access a service efficiently than pay more for something they don’t even own anyway. And where consumers go, businesses will surely follow.

But what about law firms? While a few collaborative moves on the resourcing front make headlines (DLA Piper working with the freelance lawyers of LOD, for example), these are not businesses that typically jump at the chance to share what they know, either with peers or the outside world. Partners are business owners, and they value ownership.

That's an attitude that may prevent them from choosing more flexible ways of financing the expensive physical and digital kit they need to remain competitive, says Econocom UK Managing Director Chris Labrey. “Companies in other sectors are eager to match the cost of a digital investment much more closely to the business process that consumes it. It’s almost a fundamental principle of their cash management, and the wise business knows that cash is king.

“On top of that, the digital world evolves faster as time passes. Investments grow over time as business expands, but their cycle times shrink. The next system simply won’t last as long – and legal businesses need to realize that when they plan for the future.”

Business of Spreading

This reality of a workplace ever more dependent on digital technology may be more difficult to adapt to for law than many other sectors. Most likely delaying decisions, continually catching up with WIP, and drawing down profits each year, the owners of a traditional legal business risk being left further and further behind. After all, of the 80% of UK firms that describe digital strategy as truly “critical”, fewer than a quarter have turned that awareness into operational reality (according to the PwC UK laws firms survey 2015).

There’s a touch of irony in this fact. “Firms today say they are happy to embrace more flexibility to improve the client experience,” says Labrey. “Alternative pricing arrangements can include factors such as shared risk or temporary resource. But when it comes to investments in the business they own, the burden of historic culture and processes frequently results in responsiveness getting stifled.”

This simply isn’t the case elsewhere, he explains. Repayments for a big purchase can reflect how busy a business is, or other local circumstances.

“For example, a global oil company is able to anchor the rentals for a digital project to an external variable” (in this case, of course, the oil price). “If the price drops, so do the rentals, and the amortization takes a little longer.” “Retailers can choose to opt out of rentals altogether when stocking up in the autumn. They then pay double in December and January – which is fine, because they’ve got the cash from Christmas.” Others enjoy a price per transaction model across various points of sale, or payment per square meter of shop floor to provide a balance across the estate.

Something similar could be applied to legal business, with a price for IT per matter (or even billable hour), suggests Labrey. “Some already have payment holidays when tax or insurance bills are due. A high-volume firm may well prefer a price-per-matter arrangement. If the firm’s busy, it pays off the project investment sooner, and saves in interest costs.”

User Disadvantage

Pay-per-use as a model becomes even more compelling when you consider that law firms often struggle to persuade busy lawyers to use what they buy as it’s meant to be used. What was a hard-won strategic investment becomes the dreaded “shelfware”.

For example, Labrey cites one study (Ackert Advisory, 2015) which found that while 70% of firms have a client relationship management system, a mere 7.3% of those businesses are confident they’re getting the most out of it with strong usage statistics. And partner reluctance to invest or change historic business processes is reinforced, as they can see—and say—something is literally “a waste of money”.

“Large software projects are the perfect partner for a more flexible payment plan,” says Labrey. “That might be a practice management or CRM system, but it could equally be a firm-wide replacement of mobile devices.”

“The bottom line is to achieve a well-managed, integrated, and above all strongly adopted back-office system to help firms be even more responsive to the clients paying the bills. Matching the huge cost of that more closely to the benefit it finally brings can be helpful when challenging resistance to the change.”

The new competitors for traditional top 100 firms, less encumbered with legacy systems and behaviors, are certainly thinking this way, he says.

“Unlike many firms, they know that finance isn’t a topic to be avoided or a sign of weakness – it’s a sign of a company that is serious about moving forward.”


Econocom is Europe's largest independent provider of digital finance and associated services. Active in 19 countries across Europe, Morocco and North America, Econocom has been working closely with the legal sector for more than 20 years. Econocom has many years' expertise in the financing of large hardware and software projects such as CMS and PMS systems. By working with Econocom, our clients benefit from stable IT budgets and comprehensive management of their technology portfolio. This means they can concentrate on their core business free of the administrative and budgetary hassle of buying technology. Click here for more information.

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