Were starting a law firm What should we do about IT by asafwewe

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									                                                    We’re starting a law firm:
                                                    What should we do about IT?
                                                    an independent guide written by
                                                    David Longworth




       Virtual Practices is happy to answer any
questions you may have about your IT choices.
                             Please contact us at
                             2 Widcombe Parade
                                   Bath, BA2 4JT

                                  DX 8045 Bath

                             T 01225 787700
                              F 01225 787701
                    www.virtualpractices.co.uk
                                                    In association with Virtual Practices, the on-line legal software service from
                                                                             Solicitors Own Software.
    Introduction

          Hundreds of enterprising people start new businesses every          ■        What’s your unique offering? With the Legal
          year in lots of different sectors and with different motivations.            Services Bill around the corner, solicitors need to
          Some are lifestyle businesses, designed to provide the business              think carefully about new sources of competition,
          owners a reasonable income – for example hairdressers or                     including accountants, business advisors and even
          florists. Others have ambitious growth plans, raise venture                  supermarkets. Positioning yourself to provide non-
          finance and go on to create entirely new business models.                    commodity, ‘reserved’ services like employment
          Increasingly, solicitors are spinning out their own practices –              advice and contracts, can protect margins. Above all,
          sometimes because they see all the hard work they put in                     you need to be constantly aware of profitability.
          going to subsidise the partners’ salaries, other times, they
          simply want to do something for themselves.                         ■        What administration support should you be
                                                                                       looking for? A key issue that requires attention
          But, according to common wisdom, 50% of all start-ups fail                   upfront, whether it’s providing top-notch personal
          within their first year and only 5% make it past year five of                service to keep key clients onboard or an efficient
          this exciting new journey. Over the next few years, in                       back-office to ensure services are delivered at the
          particular, we can expect to see a whole tier of law firms                   lowest cost possible.When partners have come out
          disappear as newly created competition from the Legal                        of a big firm to set up on their own, the complexity
          Services Bill begins to bite.                                                of accounting and IT systems that can meet client
                                                                                       and regulatory needs can be underestimated.Will
          The decisions you take early on can make all the difference                  you, for example, hire a legal cashier to manage the
          between success and failure as a start-up, particularly when                 bookkeeping or is that something you plan to
          they relate to cash flow and the sorts of investments the                    handle yourself and what systems do you have in
          business might make in premises, staff, IT and office                        place to run the books?
          equipment. Ask yourself the following questions:
                                                                              This guide introduces a new combination of hosted services
          ■        Why are you starting the business – what’s your            and business process support, called a bureau service, which
                   motivation? The answer affects everything from the         can free up company founders to focus on the core business
                   company structure (partnership, incorporated               offering.
                   practice or alternative business structure?) to finance,
                   location and the choice of systems that will support
                   it. Company founders tend to find, particularly in
                   the early days, that running a business consumes
                   their every waking hour: are you ready for that?



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    Why worry about IT?

              With so many things to think about, from renting office space               ■        Maintenance, which can end up being the biggest
              to putting together a business plan and bringing in business,                        cost. Hiring a specialist IT resource or contracting a
              IT and admin issues can take a back seat. But in fact they are                       third party to manage it for you is time consuming,
              fundamental to the smooth running of a legal start-up, as this                       difficult and expensive
              section explains.
                                                                                Can’t you hire a reseller to manage all this for you?
    Do you need an IT network and what’s it likely to cost?                               Resellers and IT support firms will happily install and take
              If there’s going to be more than a couple of partners in the                over the running of your IT network.What’s more, you can
              firm, you're probably going to want to share documents and                  contract with them to provide certain service levels, so they
              information with one another so you can distribute data and                 will for example, guarantee a next business day fix if anything
              work collaboratively on different cases. A sole trader could                goes wrong. However, such an arrangement will end up
              feasibly manage all their applications on a laptop locally. But             costing you slightly more than managing the network yourself
              such a set-up is very restrictive and, as soon as you start                 as these providers strive to make a margin. And while you can
              employing staff to fulfill administrative tasks, effectively                get some great finance deals from equipment suppliers, the
              unworkable.                                                                 assets will remain on your books, locking you in to a cycle of
                                                                                          ongoing costs and equipment replacement.
              The costs of an IT network for a small business have come
              down dramatically in recent years, but still add up to several
              thousands pounds.They include:

              ■        The server – a separate, super-powered PC which
                       holds all the shared files, administers back-ups and
                       manages the network

              ■        The infrastructure – all the cabling, hubs, routers
                       and switches that connect the network together

              ■        The applications that run the business, including not
                       just Microsoft Office, but also practice management,
                       client management (CRM) and accounting software



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    Risk management                                                            2
            Another important consideration when running your own IT
            network is around back-up and disaster recovery (DR).The
                                                                               Software as a service
            legal profession has very strict requirements about managing
            risk because of the area it operates in. Exposure to the risk of
            a fire, flood or other disaster has to be carefully managed,                 There's a lot of confusion about software as a service (SaaS) or
            back-ups of business-critical data made and disaster recovery                ‘hosted services’ – and indeed it means different things to
            procedures put in place. DR is an area that’s routinely                      different service providers. But in truth, much of the hype
            neglected by small businesses, and last summer’s flooding                    surrounding web services,Web 2.0 and browser-based
            caught hundreds of SMEs off guard, forcing them to write off                 computing simply distracts from what is in principle a simple
            large amounts of IT equipment. For a legal start-up, a natural               proposition, uniquely suited to a small business or start-up.
            disaster which compromises business critical data would                      This section explains what SaaS is – and what it isn’t – and
            simply put it out of business without the right contingencies                how it can help ease the pain and expense of setting up in
            in place.                                                                    business.

                                                                               What is Saas – and what isn’t it?
                                                                                         The principle behind SaaS is simple. Instead of buying,
                                                                                         installing and maintaining your own software, service
                                                                                         providers run it for you and you access it over the internet. It’s
                                                                                         not actually a new concept, but Web 2.0 developments,
                                                                                         including .NET and web services, have made it easier for
                                                                                         service providers to separate the software into a browser-based
                                                                                         front end and a back-end database, accessible over the internet
                                                                                         and holding all the information.

                                                                                         The wider benefits of the SaaS set-up are explored in the
                                                                                         coming sections, but suffice it to say it’s similar to having your
                                                                                         own applications but without the hassle of running them
                                                                                         locally and maintaining all the hardware and networking
                                                                                         needed to support them.The software you rent could be
                                                                                         anything from Microsoft Office to Oracle, but typically for a
                                                                                         legal start-up would include legal accounting and practice
                                                                                         management applications.

                                                                                         Crucially, too, you don’t own the software yourself, but just
                                                                                         rent the use of it, in the same way you don't own the utility
                                                                                         substation but pay for the energy you use. And like the utility

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              example, you expect the lights to come on when you press           programmed to the client’s particular workflows, for example
              the switch, regardless of any technical problems that might        sending out a reminder e-mail if documentation hasn't been
              have occurred.                                                     received after a set time has elapsed.

    The benefits of Bureau services                                              The key with such services is that it’s not a one-size-fits-all
              Dealing with legal accounting is a complex process.That’s          approach. Service providers should offer a ‘menu’ of offerings
              why specialist applications have emerged that meet the             with basic services, premium additions and different options
              Solicitors Accounting Rules, ensuring that money is kept in        on the volume that is expected.
              the right funds and managed accordingly. Providing SaaS
              applications only takes away half of your overhead, since with
              most set-ups you would still need to employ a legal cashier to
              administer the software.

              Some providers go a step further and provide a full bureau
              service, so all you have to do is enter details of money coming
              in and out and the service provider will do the rest, posting it
              to different charts of accounts, reconciling to your bank
              account and reporting back on your profitability as cases
              progress.The bureau is a well established practice in other
              areas, such as payroll, where companies just fill in employee
              details and the service provider does the rest. And as in the
              payroll example, it has proven particularly successful where
              complex and changing regulatory requirements are involved.
              You benefit from the expertise of the service provider in the
              area and a well trained accounting clerk ensures your postings
              stay within the regulations.

    Practice management and the ‘menu’ approach to services
              The next logical step in a bureau service offering is to add
              case management, managing all a firm’s client data and
              document production. Rather than spend valuable time
              cutting and pasting client and matter details into a word
              processing system, a case management system manages the
              workflows around a particular legal process, automatically
              producing the relevant documentation at the correct time. As
              with the accounting, the bureau approach ensures that the
              firm is meeting best practice.The system can even be

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                                                                                          constant for the duration of the contract (unless either side
     3                                                                                    breaks the terms, in which case it’s easy to escape from it).
     Cash – a start-up’s lifeblood                                                        Service level agreements, the pillars on which the whole
                                                                                          contract is supported, provide a business with the assurance
                                                                                          that action will be taken as quickly as is specified.The extra
               The number one reason cited for the high failure rate of start-            efficiency means you don’t have to wait for a legal cashier to
               ups is that they run out of capital. But that’s not necessarily            work through their pile of outstanding paperwork before a
               because they are undercapitalised – more that they don’t                   payment is processed – again providing better cashflow when
               spend what they have wisely when it matters most.This                      you need it most.
               section examines how you can save money early on in the life
               of your business.                                                          And because you’re accessing information over the internet,
                                                                                          you can usually look at the accounts at any time of day and
     How much can I save with a bureau?                                                   they will be up to date.
               Bureaus usually charge either a fixed rental or usage fee – or    Getting more for your money
               sometimes a combination of the two.They take on the major
               upfront investment of setting up a new client and set that cost            Perhaps the greatest benefit the bureau service provides for a
               against a three or five-year contract period. Over the period              start-up business is access to enterprise-class software. As in
               of the contract, the total sum you’re paying may be similar to             most disciplines, you get what you pay for in applications
               what you might have invested setting up the system in-house,               software.While there are some ‘cheap and cheerful’ software
               but the cost is spread. Also, bear in mind that you have to                packages for the legal start-up, the depth of functionality
               factor in maintenance costs and offset the salary you would                which allows you to map exactly how your business is going
               have paid a legal cashier to run your books in-house.                      to work, the inputs and outputs you expect from the system
                                                                                          will only come with a reasonable application software
               If you’re not careful about the services you are contracting to            investment.
               buy, you could also end up paying various additional costs on
               top of that basic per-month rental. So look for a transparent              Bear in mind too that upgrading the hardware and software is
               tariff of all the additional costs, including set-up costs and             the responsibility of the bureau and you should expect to
               charges for additional reports you might request.                          always be on the latest version of the application.

     Predictability: your best friend
               It’s well documented that most IT projects end up running
               over budget and past their deadline.The predictability that
               you get from a rental contract then provides you with a figure
               to put in the budget that you know is going to remain




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     4
     Growing business

               Strong growth may or may not be high on your agenda when           Saving your time – and the bottom line
               you start a business, but somewhere down the line, the                      A lawyer should not be taking the time to manage their own
               chances are your enterprise is going to start expanding, raising            accounts – but many do, and this means they are distracted
               a whole new set of considerations.                                          from the day-to-day task of running the business and earning
                                                                                           fees.Think about how much time you could save if you
     Reporting: the importance of business intelligence
                                                                                           weren’t constantly inputting data into spreadsheets, putting
               When you undertake a piece of work for a client, particularly               together invoices and updating client records.
               if you operate on a fixed fee basis, how do you know that it’s
               going to be profitable? The simple answer is that you don’t –               Do a simple sum on the number of hours per week you
               but based on similar work you’ve done in the past, it’s possible            spend doing this kind of admin – and now consider how
               to build a comprehensive picture of the cost of your time and               much money you could earn from that time. Now factor in
               level of resource you should be committing to a particular job              the opportunity cost – the cost to the business of you not
               to ensure it remains on track to make you money.                            actively pursuing new business – and you can quickly see the
                                                                                           impact on the bottom line.
               At month end, a business requires in-depth reporting on its
               financial health from profit and loss accounts, balance sheets,    What happens if I outgrow my service partner?
               trial balances and cash flow statements. Combining that with                Once you get to a certain size (probably around 20-30
               client and time recording data enables a business owner to                  employees) it can make more sense to bring legal accounting
               answer important questions such as:                                         back in-house.With a service provider that can cater to much
                                                                                           bigger legal businesses, it’s a fairly straightforward task to
               ■        Are we bringing in the right mix of fee-earning                    transfer the server in-house, hire a legal cashier and start
                        business?                                                          administering it yourself. But you need to ensure first of all
                                                                                           that your partner is big enough to cater for future growth,
               ■        Are we charging enough billable hours?                             effectively future-proofing your business for whatever the
                                                                                           coming years have in store.
               ■        Are we working too long on certain cases?

               ■        Who are our best-performing employees – who are
                        our most profitable clients?




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     Glossary

           Bureau service: A business service, usually accessed by the
           user through a browser-based front-end, where the service
           provider fulfils some value-added services at the back end,
           such as updating accounting ledgers

           Business Intelligence: A combination of reporting and
           analysis that provides insight into what's driving the business
           forward (or holding it back)

           CRM: Customer (Client) Relationship Management:
           A system that manages information relating to customers,
           including marketing and sales contact and ongoing support

           DR: Disaster Recovery: A set of procedures that is put in
           place to recover data and systems in the event of a disaster
           such as a flood

           IT network: The file server, cabling and switching that
           enables PCs to talk to each other

           SaaS: Software as a Service: A method of delivering
           (usually) business applications over the web. Users do not own
           the applications but pay a rental fee for using them. Also
           known as hosted services

           Value-added reseller: A third-party company (ie not the
           supplier) which will install, maintain and support your IT
           systems




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