August 11, 2006
Firm Hardware Strategies for Law Firms
By Guest Author Barry Lancaster, Juris, Inc. Senior Director of Client Services
In today’s environment, computers and technology are a vital part to the operation of a law firm. Law firms need to develop a long-term strategy to maintain their level of technology in the practice. This article focuses on developing a strategy to maintain hardware such as computers and servers.
We recommend that computers and servers be replaced every three years. This is a common practice among many top technology firms who, likewise, follow the accounting practice depreciating computer purchases over 3 years. New innovations in technology continue to make older purchases out of date. The day-to-day use of computers in an office environment also wears on equipment. After three years of usage, the reliability of a desktop computer or server drops. Also, new software is usually designed and regularly updated to use the resources available on current technologies. So software updates can also make older technology purchases obsolete.
Just like purchasing a car, there is a key decision you must make when purchasing new PC equipment: Do I lease or purchase my equipment? During my previous experience with Accenture in support of large consulting engagements with over 50 consultants, I have had to cost benefit leasing equipment versus buying equipment. I found that it was cheaper to buy the equipment versus leasing the equipment if the leasing terms were greater than a year. Leasing, however, can be beneficial in the management of cash flow by spreading the cost over the life of the equipment.
The leasing company we used was responsive and provided good service. However, regardless of what leasing company is used, there are two things you need to be aware of.
1. Accessories: When we had to return equipment, we had to pay a high premium for missing accessories such as network cards. In today’s computers, these items are built into the motherboard so it is less likely you will have to order accessories.
2. Length of the lease: We were on a three year lease. Due to circumstances at the time, we went over the three years and had to continue to pay the rent in accordance with the lease terms. At the end of the day, our cost to lease was higher than anticipated and significantly above the aggregate value of the equipment and related cost of money.
Remembering these two factors will help you contain the costs of your lease.
Leasing may be the best alternative for a small firm to “smooth” technology costs over three years. A monthly payment instead of one large “investment” every 3 years can be easier on cash flow. Larger firms should consider a strategy to stagger purchases on a yearly basis. Every year, refresh one-third of your equipment. This lessens disruptions of having to swap out equipment for 60 employees at one time. Your technology purchases become a yearly cost that you plan for.
When purchasing equipment, one important decision is whether or not you should purchase an extended warranty. Offices without an on-site technology resource to service any computer hardware issues should buy extended warranties that cover the time frame you expect to use the computer. This puts the burden on the manufacturer to correct equipment issues. I supported a project of 70 consultants with an on-site technology resource and I still purchased the extended warranty. We did not carry spare motherboards or hard drives, so it was more convenient to support the computers through the extended warranty. I found the extra money spent on the extended warranty was worth it
At Juris, Inc., we are a technology company. Having up-to-date technology to support our client base is important to us. The practices outlined in this article are the practices we employ for our company. Law firms specialize in law, not in technology. However, they have the same need for a sound strategy for managing technology purchases. Law firms are responsible for servicing clients and should use technology to increase the efficiency and quality of the firm’s services.
Review recommendations in this article and develop a strategy that makes sense for you. Whether you are a large or small firm, you should have a capital budget to plan for technology expenses. We have discussed PC equipment in this article. Your capital plan should be all inclusive of printers, fax machines, copiers and phone equipment. Any recurring costs for services should also be budgeted in the plan.
Morepartnerincome.com is sponsored by Juris, Inc. For information about Juris® products and services for increasing law firm performance and partner income, go to www.Juris.com.
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Filed under Expense Control, Planning by Tom Collins