The Financial Case for Cloud for Law Firms

The shift towards cloud computing is more than just a trend—it’s a strategic move that law firms of all sizes are making to stay ahead.

But what does this mean for your firm financially?

In our comprehensive analysis, we dive deep into the economic benefits of cloud computing, comparing it against traditional on-premise servers and exploring the burgeoning world of web applications.

We’ll guide you through the upfront, ongoing, and those often overlooked unplanned costs, providing you with a clear financial perspective.

Whether you’re contemplating the leap to the cloud or seeking to understand the nuances of your current IT infrastructure, our insights aim to equip you with the knowledge to make informed decisions.

First, we’ll analyze all costs incurred each new server cycle (once per analysis period). That is: buying and implementing server infrastructure.

I suggest gathering quotes for each of the previously mentioned costs and meticulously documenting them in a spreadsheet. By summing up these figures, you’ll gain a comprehensive understanding of the total upfront investment required for embarking on another on-premise IT lifecycle.

It’s crucial to recognize that the bulk of these expenses are significantly influenced by the specific software solutions your law firm employs. The quantity and capacity of the servers you require hinge on these choices. Questions to consider include:

The answers depend largely on the type of software you’re using, particularly your Practice Management and Document Management systems, and their respective server specifications.

For example, robust applications such as iManage, ProLaw, and Worldox demand substantial computational resources. Conversely, solutions like PCLaw and Tabs3 are far less demanding in terms of server capabilities.

Use our Cloud Cost Calculator to tally up all relevant up-front costs for your firm.

Next, we’ll analyze costs incurred on an ongoing basis. We’ll identify monthly recurring costs (and will extrapolate those over our full analysis period).

Tally up what you do, or will spend on an ongoing basis. This should include fixed monthly costs (such as a Managed IT Provider contract) as well as sporadic, less predictable costs (such as hourly IT support). For the latter, if you’re unsure of a reasonable budget for this amount, I recommend finding the average over the past two three years.

Add all of these up and determine your average monthly IT spend.

Finally, we need to identify and budget for some level of unplanned IT expenses. Proactive IT does significantly reduce the chances and impact of unforeseen IT problems, but over enough time they’re likely to occur nonetheless.

These unplanned costs may take the form of:

As you can see–some costs are fixed and predicable, others are wildly unpredictable (but should be budgeted or accounted for in some way.)

Next, add all of these costs together, based on your historical or projected costs–over the analysis period.

For our bottom line, simply do the math:

(Total Up-Front Costs) + (Total Unplanned Costs) + (Monthly Ongoing Costs x Analysis Period)

Supposing that you expect your servers’ anticipated useful life is 3 years; you’d define a 36-month analysis period, multiply your monthly cost by 36, then add the up-front and unplanned costs.

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The up-front investment of web applications varies based on the software you use (or intend to use), its complexity, and the level of support your firm needs.

For instance, if you’re starting a new firm (and have no historical data to import), and are implementing a lightweight, web-based law practice management application, your up-front costs may be minimal.

On the other hand, if you’re implementing more robust or sophisticated practice management software (or document management software), there’s likely a greater need for data conversion, setting up of accounting preferences, and training for your team.

Sometimes the software company provides the necessary onboarding (including data conversion, setup, and training), but often they will refer you to an authorized consultant.

In any case, capture the entire amount to implement your web applications, including training for your entire staff.

The ongoing costs of a pure web-based law firm are pretty straight-forward.

Most web-based applications charge a fixed fee per-user, per month. To determine your monthly costs, add up the total of each web-based application that your firm will use.

A common pitfall here is to under-budget your total monthly costs, forgetting all of the different cloud-based services your firm is likely to need.

Consider the monthly costs for all services your firm needs, including:

Your firm will almost certainly need some combination of the software above, each having their own fee per-user, per month.

Finally, we can discern our total cost over our analysis period by simply adding up our annual and up-front costs.

(Total Up-Front Costs) + (Monthly Ongoing Costs x Analysis Period)

The up-front costs associated with a Private Cloud relate to migrating your applications, documents, data, and email from their current home (often a law firm’s in-house server) to the new private cloud platform.

This often includes:

The initial investment required for transitioning to a Private Cloud can differ significantly based on the scope of the migration—whether it involves shifting a single application or your entire technological framework to the cloud.

Also, the complexity of the applications being migrated plays a crucial role in determining these up-front costs, as some software demands more intricate migration processes than others.

A reliable Private Cloud provider should be able to offer a definitive quote for migrating your firm’s operations, including users and applications, to their cloud environment. The provider’s expertise in handling the migration of various legal software applications, especially considering their complexity, serves as a strong indicator of their proficiency in catering to law firms’ specific cloud needs.

Similarly, the ongoing costs of a law firm private cloud should be transparent and fixed.

Your chosen private cloud solution should include all of the IT elements that you would otherwise need to procure in an on-premise environment, including:

With your IT and infrastructure provided for a fixed fee, per user, per month: your costs may be less each year and significantly more predictable.

To calculate the total cost of a Private Cloud model for your firm, simply multiply the fixed monthly cost of a Private Cloud solution by the number of months in the analysis period, then add any setup or onboarding fees quoted by the provider.

(Total Up-Front Costs) + (Monthly Ongoing Costs x Analysis Period)

Controlling Costs and Managing Risk

The devil’s in the details when it comes to not only selecting the right law firm private cloud provider, but making sure your fixed costs are just that. I recommend you spend time learning more about how private cloud solutions work and what to look for in a cloud provider.