Key Points
- Modern, feature-rich, cloud-based case management software such as Filevine can bring firms an ROI of 2,180%.
- This return is achieved through reduced supplies costs, lower IT expenses, savings from increased efficiency, and increased revenue through greater productivity.
- This white paper explores the value for ROI measurements for finding the case management technologies that are best for your practice. It analyzes the list of concrete and hidden costs associated with traditional case management, and provides example equations which attorneys can use themselves to estimate their own case management ROI.
ROI's and Case Management
Case management software is finding new ways to streamline the day-to-day practice of law. These apps and platforms have the capacity to simplify office management, client relations, research and litigation, calendaring, and more. Cloud-based services provide these benefits with low upfront costs, requiring only a subscription and a web browser.
Following years of slow or uneven adoption, attorneys are beginning to take notice. The ABA Techreport for 2017 saw, for the first time, a majority of respondents using cloud-based software (52%). This rising trend is expected to continue.
But attorneys are still left with hard case management questions. Should they invest in case management software? And if so, how do they find the one that’s right for them?
Muddying the waters are pervasive preconceived ideas about new technology. Some attorneys have unwarranted tech-optimism, misplacing faith in any new app or gadget. Others have unwarranted tech-pessimism, preferring to practice law just like their grandad did. When it comes to deciding whether to purchase case management software for your practice, these emotions clamor for attention.
Both unwarranted optimism and unwarranted pessimism can cause great damage to your practice. With the former you can wind up with a host of expensive and clunky apps; with the latter you can stagnate into irrelevance. To free their decisions from preconceived opinions, attorneys can turn to the numbers.
One of the best metrics to use for new information technology is the Return on Investment measurement, or ROI. This number shows if and when you can expect a new piece of technology to pay for itself through improved efficiency or removal of other costs.
This white paper demonstrates how attorneys can calculate ROI numbers for firm management software. First we’ll explore the uses and limitations of the ROI formula. Then we’ll use a real-world example to show you how that formula could be applied to an expanding law firm. Finally, we’ll put it into practice and give you guidelines on how to calculate your own ROI.
Problem Statement: The Elusive Legal ROI
Accurate Return on Investment (ROI) estimates can help attorneys make sound investments in practice management software. While some costs, savings, and increased productions are straightforward, others can be more difficult to quantify. The costs of traditional case management are often spread out across a variety of systems, and tied up in firm inefficiencies and redundancies.
Attorneys can learn from business professionals to quantify true costs and savings with practice management options while still respecting the unique requirements and needs of the legal profession.
The discussion below centers on decisions about cloud-based practice management software. However, these basic principles can guide investment in other legal automation technologies as well.
Why ROI?
ROI is more than a number. It’s also a disciplined way of thinking through your practice needs. It can be a communication tool, too - a way to engage the entire team and establish group buy-in on new investments.
Changing over to a new practice management system always causes a disruption. No matter how fitting your new system is, its success is dependent on lasting group buy-in.
As information systems scholars Alexei Botchkarev and Peter Andru put it, ROI evaluation can be “a method of persuasive communication to senior management, a process of getting everybody’s attention to the financial aspects of the decisions and stimulating a rigid financial analysis.” They note that in some cases, the process of gathering and analyzing cost and benefit data can bring even more value than the final number itself.
Failure to estimate ROI can lead to poor investment decisions. But that’s just the first layer of damage.
- It can also create resentment or apathy among associates and staff, as they continue to build on unaddressed doubts concerning the new system.
- For in-house counsel, ROI can justify new legal tech expenses to management.
In the equations below, we follow the most frequent expression of ROI as a percentage of the original investment. Others like to express it as a dollar range. Still others depict ROI as a payback period (if ROI is 4 months, then the investment is projected to be recouped in that amount of time). For the most accurate calculation of ROI for a new management software, we believe a percentage-based approach is best.
Calculating ROI can be valuable not only for pending decisions but also for past ones. Before and after evaluations will also help you understand where your estimates are inaccurate and what changes to your ROI formula may be needed.
The ROI Equation
The basic ROI equation is:
Cost savings and increased production - Investment
Investment
For example, if the software costs $100, but saves $500/month and helps a firm collect an additional $500/month, the ROI can be represented as:
($500 + $500) - $1,000
$100 = 9x return on investment OR 900%
The resulting fraction is presented as a percentage. If there are absolutely no cost savings, then the ROI is -100%. There is no ceiling to how high the number can go if the investment is much smaller than the resulting savings.
For case management decisions, the first step in the equation is to figure out the cost of your current form of case management.
This task seems straightforward, but comes with a few challenges. In older practice management systems, costs aren’t bundled into some clear monthly payment. They’re often hidden in your budget as unmarked inefficiencies and redundancies.
To accurately measure the difference between current and potential management systems, we need to consider these hidden costs which are removed by cloud-based services.
This means having a clear-eyed assessment of how cloud-based case management software might increase your practice’s profitability. Computer engineering scholars Subhas Chandra Misra and Arka Mondal have found that cloud-based technology increases profitability in a number of ways, including “massive scalability, flexibility of service, [and] elasticity of resources.”
The list of practice management costs below include these potential areas of profit growth for attorneys who adopt cloud-based practice management.
The Cost and Risks of Traditional Case Management
1. Costs of a Paper-ful Practice
One promise of cloud-based case management systems is that they can create a paperfree (or ‘paper-light’) practice. Consider how a new practice management system could digitize your paper use, and which of the costs below could be removed from your budget:
a. Labor: The greatest cost of a paper-based practice isn’t the actual paper itself. It’s the time required to file, retrieve, and edit important documents.
b. Supplies: When the SEC recently decided to go paperless, they determined they will save $2 billion over ten years just on paper and mailing costs. Consider your own paper overhead. The average office worker uses up 10,000 sheets of paper annually. About 45% of that ends up in the trash by the end of the day it was created.
When these documents can be dealt with digitally instead, law firms can automatically save on overhead. Journalists found that average paper costs in U.S. offices are around $80 per employee per year. In a paper-heavy law office, that number is likely even higher.
And it’s not just paper. Consider also the costs of toner, filing cabinets, mailing, copiers, fax machines, shredders, staplers, paper clips, and folders.
c. Storage: How much of your office is dedicated to paper? One estimate found that a single filing cabinet eats up the real estate equivalent of $320-$685 a year. Some law firms are paying additional rent for off-site storage, just to keep a paper copy of their archives.
Research shows that legal professionals waste a tremendous amount of time on paper documents. The market analysts IDC found that information workers waste around six hours a week on bad document management. This comes out to $19,732 per worker per year, and amounts to a loss of 21.3% of the total worker productivity.
This wasted time is from fruitless searches for documents, recreating documents that can’t be found, or the other filing and editing tasks associated with paper-based practices.
These costs can be eradicated by project management software that includes thorough document management. This cost saving remains even if attorneys with project management software still choose to print out paper hardcopies for their review.
d. Disaster recovery: Another benefit of cloud-based filing systems is the ability to withstand disaster. Misra and Mondal estimate that large companies spend between 2-4% of their budget and small and medium enterprises spend up to 25% of their IT budget on disaster recovery planning. This can include intrusion, viruses, power failure, or natural disasters like flood, earthquake, and fire.
They found that when companies had a major loss of business data from a disaster, “43% never reopen, 51% close within two years, and only 6% survive long-term.” The ongoing costs of data backup and replication or urgent costs of disaster response can be fixed by the cloud, which stores information in geographically scattered servers.
2. IT Costs
a. Multiple app licenses:
Those who don’t use modern case management software often get their needs met by patching together a number of other programs. Many of these could be replaced by one coherent system. Tally the cost of apps that could be replaced by the new practice management app under consideration.
- Depending on the features offered by your new system, this can include apps for:
- Document sharing
- Automatic document generation
- Data analysis and report generation
- Calendaring
- Task list managing
b. Servers and related staff:
Some law offices rely on their own servers for case management tools instead of the cloud. Others are debating between buying their own server or going on the cloud. For them, these are some of the related costs to consider:
- Server hardware
- Server software
- Server installation
- Staff time hours for installation
- Support services
- Projected downtime costs compared to cloud services (servers-based programs require downtime to fix problems or do system maintenance)
- Wiping and recycling old servers
Technology consultant Karen Graham estimates 5 years of server costs for an organization to be around $24,000.
But there’s an additional consideration. Cloud-based services can instantly scale up or down, a flexibility lacking in other models. If you reach the limits of your server, you need to make a larger capital investment in more computing power. In the meantime, you’re hamstrung by this limitation.
But when you have invested in greater computing capacity than you need, you have the opportunity cost of whatever else that money could go into.
Misra and Mondal conclude:
Cloud Computing avoids the cost impact of over-provisioning and under-provisioning. This is in addition to the opportunity for cost, revenue, and margin advantages of business services enabled by rapid deployment of Cloud services with low entry cost, and the potential to enter and exploit new markets.
Measuring the gaps between capacity and utilization can reveal hidden server costs.
Attorneys should consider the costs of over- or under-provisioning that are addressed by cloud computing. This is illustrated by a popular chart created by Amazon Web Services called the Capacity vs. Utilization Curve, shown here:
3. Improved Firm Performance
The costs above are fairly straightforward and measurable. But a thorough ROI shouldn’t end there. Some of the highest costs of traditional practice management systems are hidden.
a. Hours Gained Due to Increased Efficiency:
Cloud-based, feature-rich case management automates legal tasks. It is accessible to members of the legal team from anywhere, on any device. This is why our own research has found 67% higher productivity than average in firms with modern cloud-based case management.
Other analysts have found that law offices with cloud-based practice management can operate with 40% fewer support staff.
Tech columnist Robert Ambrogi breaks down what this savings means:
Assuming a median support staff salary of $59,969, that is an annual reduction in salary of $42,835 for a five-lawyer firm and of $428,350 for a 50-lawyer firm. That number does not include savings in overhead and corollary employee costs.
b. Higher Quality of Service and Increased Client Satisfaction:
Several case management features significantly improve client satisfaction and quality of service. By using older systems, attorneys are essentially paying an unseen tax of fewer client returns and referrals.
For example, cloud-based practice management reduces human error. They also can provide client portals. These allow clients better access to the developments in their case. It also increases communication speed.
Cloud-based case management compiles all case information into one location. That means more timely and accurate responses to clients, and better decisions by attorneys. A clear, modern case management system could also help your office recruit and retain more talented staff.
Client satisfaction can be measured through the Net Promoter Score (NPS). With a solution like Filevine, you can see your NPS score improve by as much as 20%. That translates into higher average case value and more quality referrals.
These benefits are unavailable to those without modern case management systems.
c. Decreased Malpractice Claims:
Low case quality and dissatisfied clients creates an increased risk of malpractice claims. But practice management software ensures better conflict checks, fewer missed deadlines, and more frequent communication with clients. It reduces security risks and provides thorough documentation for all actions taken.
This is why many insurers will offer a discount for those who have case management software.
d. Higher Case Values and Better Billable Hours:
Good case management will typically increase the average case value as well. Attorneys and staff keep in better contact with their clients and ensure their clients are taking the best steps to improve their case quality. Improved case management can increase average case value by 50%.
Case management technology can also greatly improve the recording of billable hours. Regular reports keep you on top of your financial returns, and can automate the process of ensuring timely payment for your work.
e. Higher Employee Satisfaction:
The ability to work from home or a mobile location can improve employee satisfaction and retention. Staff also
may find their work is less stressful, duplicative, and tedious.
Decrease in staff attrition can save 15-20% in hiring and training costs.
d. Intangibles:
There are often additional costs that are harder to quantify. Perhaps the inability to work remotely means that staff will miss more important life events with their loved ones. Maybe staff will have increased anxiety and stress from having important case information scattered across many platforms. Maybe your paper-heavy office will drive a percentage of clients toward more sustainable paper-free firms.
Consider consequences that are harder to quantify financially. You can either attempt to put a dollar figure on intangibles, or list them as additional considerations once the figures have been found.
ROI & The Modern Law Firm
We’ve established the importance of the ROI equation, and why your firm should be using this formula whenever you’re considering a major expense. We’ve listed the areas of your practice that you need to pay attention to and the figures you’ll need on hand to calculate your ROI.
But theory and practice don’t always match up perfectly. In those cases, real-world examples can help drive the point home. Here’s one law firm’s account of using the ROI equation to evaluate their purchase of a Filevine Case Management System:
1. Paper Costs
First, the firm analyzed its paper-related costs. While their legal teams were using a server-based digital management system, its interface did not allow for seamless document management, and they were forced to rely on paper records and filing cabinets instead. This led to lower levels of efficiency, higher occurrences of misplaced paperwork, and unnecessary amounts of chaos in the way they moved their cases forward.
a. Supplies:
Between post-it notes, filing cabinets, pens, and other paper-related supplies, the team quickly discovered that they were spending upwards of $4,335 a year on paper supplies alone.
b. Storage:
All that paper has to go somewhere! To keep their office as organized and efficient as possible, the firm spent at least $1,018 a year on filing cabinets, boxes, bins, and other paper storage and organizational supplies. This figure does not include value lost in the floor-space that these storage solutions can eat up.
c. Labor:
From drafting form letters, to locating documents, auditing file systems and performing other day-to-day maintenance, this legal team found they were losing an estimated $10,222 worth of productive time a year on paper-related tasks.
d. The Verdict:
After averaging annual expenses over the past several years, the law firm calculated that it was losing $15,575 a year on paper alone.
2. IT Costs
Next, the law firm reviewed its IT-related expenses. Using a server-based system demands a lot of IT overhead, especially when implementing a new instance or augmenting an established configuration. That’s leaving alone the day-to-day costs of having an IT professional on staff at all times to answer questions, fix bugs, and work around system inefficiencies.
a. Multiple App Licenses:
Because their server-based system was not a one-stop solution, this law firm was spending almost $44,600 a year in other services to “complete” their case management solution. This included a medical records retrieval company that charged them upwards of $40,000 a year, while Filevine allowed them to build their own in-house system for record processing.
b. Servers and Related Staff:
Maintaining a server-based solution is a costly enterprise. The nature of outdated remote connections, VPN’s, and routine server maintenance makes in-house IT support a necessary expense. By relying less on in-house IT and more on Filevine Support, the legal team was able to save an additional $15,128 a year.
c. The Verdict:
After reviewing annual expenses for IT related staffing and infrastructure, the law firm found it was spending $59,728 a year to maintain its server-based solution.
3. Improved Firm Performance
In addition to measuring the costs above, this firm considered the deeper, system-wide benefits of moving toward an efficient, intelligent, and best-of-breed case management system. By measuring the tangible changes their firm saw after adopting Filevine, they gained a sense of the technology’s deeper implications.
a. Hours Saved Through Efficiency:
The firm looked at changes in their team’s productivity levels before and after Filevine. Because Filevine cut the clutter, kept them on track, and automated case stages, they saw a marked uptick in individual productivity. They estimate this has saved them $42,400 a year.
b. Higher Quality of Service and Increased Client Satisfaction:
The firm has also measured their growth in client satisfaction following Filevine’s adoption. They’ve found that with Filevine’s communication tools, they stay in more frequent contact with their clients. Automation tools have freed their minds to provide better legal advice. The result is a growth in their Net Promoter Score (NPS) of 18 percentage points. The referrals generated by satisfied clients have played a large part in a 300% increase in overall caseload. This has seen a return of $134,400 a year.
c. Higher Case Values and Better Billable Hours:
Filevine improved not only the quantity but also the quality of the cases this firm encountered. Through the state-of-the-art data analysis tool Filevine Periscope, they pinpointed the case characteristics and employee practices that led to the highest returns. Periscope also improved their record of billable hours. The firm estimates this improvement adds at least $48,125 to their practice each year.
d. Higher Employee Satisfaction:
The firm also found Filevine had a surprising effect on the lives of their employees. With automation tools, attorneys and staff were spending less time on tedious, repetitive tasks, and more time on high-value and creative work. Because of higher revenues, they were able to enjoy better benefits. And improved efficiency and mobility allowed for increased flexibility in hours worked. They believe Filevine played a larger part in a 15% reduction in staff attrition, saving $13,300 in new hiring and training costs.
e. The Verdict:
After quantifying efficiency savings to the best of their ability, the law firm found it was saving at least $238,225 a year due to improved firm performance with Filevine.
4. The ROI Calculation
After totaling their annual expense for Filevine, the firm now had the figures it needed to produce an ROI for their new case management system:
$117,703 in Savings + $195,825 in Improvements - $13,750 in Investment
$13,750 in Investment
This leaves us with an ROI of:
$299,778
$13,750
That’s a 2,180% return on investment for purchasing Filevine.
Filevine Savings in Action For You
Now that we’ve shown the importance of measuring ROI, and given a practical example from current Filevine customers, it’s time to evaluate your practice.
When you’re considering cloud-based case management solutions, look to the software that was created to give attorneys a higher return on their investment. In addition to the benefits already listed above, Filevine brings an additional boost to your ROI. It does this by retaining a low subscription price while offering additional features to make your practice more profitable.
Some of these high-value features include:
Text-to-case File:
Attorneys and staff members can send and receive texts directly within the case file. This allows increased communication, more rapid movement on cases, and higher client satisfaction.
Taskflow Triggers:
Radically speed up repeated tasks through automation. Filevine allows for the custom automation of any repeated task.
Reduced Interruptions:
Filevine is designed to protect your ability to focus. It gives you timely information while reducing interruptions, allowing attorneys the chance to produce higher-quality work.
Document Management:
Cloud-based document storage allows for files to be shared for collaborative work or reference. Edit-in-place tools make it simple to make changes.
Deadline and Calendaring Tools:
Deadline chains automate the phases of a case cycle. Shared calendars and task lists keep the entire team on track.
Advanced Reporting and Metrics:
Filevine allows automatic, custom reporting for any aspect of your practice. Filevine Business analytics gives in-depth, visual analysis to facilitate management, litigation, and marketing decisions.
E-signatures:
Through Filevine’s partner Vinesign, you can text and receive secure e-signatures, signed with a selfie.
Fax Management:
Send and receive faxes directly into the case file.
Cloud Based Profitability
Globally, information technology is experiencing a new trend. More investment is moving away from fixed capital expenses (CapEx) and toward more flexible operating expenses (OpEx), such as cloud-based software-as-a-service (SaaS). Much of this movement is driven by a desire for higher returns on tech investment.
Within law firms, this transition is seen through greater interest in cloud-based practice management software.
By analyzing potential ROI, attorneys can determine whether this move toward the cloud is also right for their practice. They can also determine which, among a number of tech offerings, will bring them the greatest profitability.