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Comparing the Cost of SaaS LPM Tools to Conventional: The Metrics That Matter

by Carolyn Elefant on March 4, 2009 · 12 comments

in Law Practice Management, Solo Practice Trends, Tech & Web

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So, how many of you maintain a law library in your practice?  You know, the digests and volumes of caselaw and annotated statutory codes with the annual pocket parts that always slip out and of course, those loose-leaf reporters where you need to unscrew the metal binder clasp with a coin, then fumble around to slip dozens of flimsy sheets off of the metal stem and insert the updated replacements.

Probably not many.  My guess is that rather than buy all of those books and own them outright without any further costs (except de minimis updating fees),  instead, you fork out anywhere between $30 and $300/month for commercial legal research services so that you can access a library online. But horrors!  Doesn’t that mean that over a lifetime of use, you’ll wind up paying far more for legal research – thousands and thousands of dollars – than you would if you invested in a good set of law books?

Seriously, few of us flinch at the cost of commercialized legal research and willingly pay more on on an ongoing basis for its convenience and ease of use.  So why then, are so many lawyers and technology experts so quick to dismiss software as a service (SaaS) practice management tools because they believe that the ongoing subscription fees cost more in the long run than a one time investment in a desktop based practice management tool that the user owns outright after purchase?

Some may argue that my comparison isn’t fair because computerized research tools offer added functionality, notably, the ability to run searches that casebooks and statutes don’t entirely replicate (unless you remember how to use those digests from legal research in law school).  But SaaS tools offer added functionality which well justifies the ongoing fees.   As Larry Port at Rocketmatter pointed out, SaaS systems are simple enough to use that lawyers can replace costly IT support, a point echoed in this ABA piece.  Systems like  Clio, which offers a client portal feature spares lawyers several hours a week fielding client requests for updates by enabling clients access their files themselves.  In fact, I’d go so far as to say that SaaS systems can eliminate the importance of (if not entirely need for) physical office space by making it easier for lawyers to run a practice completely online (as with VLOTech) or to work in a multi-person practice with each lawyer or virtual assistant in accessing common client matters and administrivia through the SaaS programs, but working from separate locations, including home.

Simply comparing the cost of SaaS versus desktop tools isn’t accurate because from a pure cost perspective, a $600 deskbased practice management tool will beat out a $50/month SaaS tool by year two.   The better metric is the cost of the SaaS tool versus the deskbased practice management tool plus the cost of IT support and extra billable hours responding to client requests and even the cost of office rent.  Lawyers are already adept at making this type of externalities-based comparison when it comes to legal research tools.  There’s no reason why they should evaluate practice management systems  any differently.

Update (3/5/09 – 9:30EST) In response to comment, yes, one can still work outside of an office or at home with conventional tools on a laptop.  However, what if a lawyer has a virtual assistant or a clerk?  They are going to need some mechanism to be able to access your desktop system remotely.  But you do make a point that perhaps SaaS tools do not fully replace rental costs, nor should they for lawyers who still prefer face to face contact with clients in an office.  This is also important.  As for law libraries being free, there are also many SaaS products that are free (Google apps and others) but  they are not always convenient because they weren’t designed specifically for lawyers.  Personally, I am a fan of the law library for research but recognize that many are not.

  • L.R.S.

    Admission to the local law library is free.
    Laptops are portable, and thus having a desktop tool does not mean that a lawyer needs to pay rent for an office.
    If only a few “techy” lawyers would get together and create a free (or cheap) practice management tool . . . New solos need better options.

  • L.R.S.

    Admission to the local law library is free.
    Laptops are portable, and thus having a desktop tool does not mean that a lawyer needs to pay rent for an office.
    If only a few “techy” lawyers would get together and create a free (or cheap) practice management tool . . . New solos need better options.

  • http://www.goclio.com Jack Newton

    Great post, Carolyn.
    A truly honest cost analysis of traditional desktop systems and Software-as-a-Service systems is hard to do. Each “side” of this debate can make a convincing argument one way or the other by making a set of assumptions about initial and ongoing costs, but vendor-based positions on the Total Cost of Ownership need to be viewed with a grain of salt.
    Rather than comparing Desktop VS Software-as-a-Service solutions from a cost perspective, I think the discussion should shift to a value-based discussion. What is a practice management system worth to your practice? How much time can it save you per month? How much faster can you get the bills out the door? How much faster can it get you paid? Can you provide a higher level of customer service and deliver higher customer satisfaction?
    Each practice management system, whether it is desktop-based or Software-as-a-Service, can be compared along these dimensions, and each firm will ultimately have to decide whether the benefits justify the costs.
    There are so many interesting issues and perspectives on this debate, thanks for weighing in Carolyn.

  • http://www.goclio.com Jack Newton

    Great post, Carolyn.
    A truly honest cost analysis of traditional desktop systems and Software-as-a-Service systems is hard to do. Each “side” of this debate can make a convincing argument one way or the other by making a set of assumptions about initial and ongoing costs, but vendor-based positions on the Total Cost of Ownership need to be viewed with a grain of salt.
    Rather than comparing Desktop VS Software-as-a-Service solutions from a cost perspective, I think the discussion should shift to a value-based discussion. What is a practice management system worth to your practice? How much time can it save you per month? How much faster can you get the bills out the door? How much faster can it get you paid? Can you provide a higher level of customer service and deliver higher customer satisfaction?
    Each practice management system, whether it is desktop-based or Software-as-a-Service, can be compared along these dimensions, and each firm will ultimately have to decide whether the benefits justify the costs.
    There are so many interesting issues and perspectives on this debate, thanks for weighing in Carolyn.

  • Jason Goodwin

    I think Jack is right – it’s about the value – but I tend to think the issue is moot. If non-legal software packages are any indication, web-based (predominantly SaaS) and desktop/laptop sw are moving towards eachother. Think Google Gears, or Quicken (now avail both on the desktop and online).
    Another thing to mention in the equation, though, is that SaaS will end up costing just as much or more over 2 or 3 years, but you still need updates at the end of that period. It’s not like you could have paid for Windows 3.1 in 1993 and still have a functioning, efficient business today.

  • Jason Goodwin

    I think Jack is right – it’s about the value – but I tend to think the issue is moot. If non-legal software packages are any indication, web-based (predominantly SaaS) and desktop/laptop sw are moving towards eachother. Think Google Gears, or Quicken (now avail both on the desktop and online).
    Another thing to mention in the equation, though, is that SaaS will end up costing just as much or more over 2 or 3 years, but you still need updates at the end of that period. It’s not like you could have paid for Windows 3.1 in 1993 and still have a functioning, efficient business today.

  • Andrew Weltchek

    Good post. Thank you. My virtual assistant and I were recently considering this very question. As a new solo, the key factor for me was freedom from sunk costs. That is, with SaaS, it costs me less cash to switch LPM tools – which, in fact, I have done. It’s perhaps hard to compare the time and aggravation of switching desktop programs and SaaS services, but not the out of pocket cost, which clearly favors the SaaS format.

  • Andrew Weltchek

    Good post. Thank you. My virtual assistant and I were recently considering this very question. As a new solo, the key factor for me was freedom from sunk costs. That is, with SaaS, it costs me less cash to switch LPM tools – which, in fact, I have done. It’s perhaps hard to compare the time and aggravation of switching desktop programs and SaaS services, but not the out of pocket cost, which clearly favors the SaaS format.

  • http://www.responsivedocuments.com Bruce

    Hi, Carolyn. I wouldn’t be surprised if part of the issue with SaaS practice management were to come from the perception that when one buys a package with a permanent license and it sits on one’s desk, it feels like “owning a practice” whereas under SaaS it feels like one doesn’t own one’s own practice. In other words, I suspect that SaaS practice management tools could position themselves better through optics designed to make the attorney feel like they are renting office space rather than renting the filebox which the leasing company could yank back.
    Lawyers feel possessive about their books of business, as they certainly should. It takes a lot of trust and the passing of a psychological hurdle to allow a third party to control, even indirectly, the DNA of a law practice. Legal research is an arm’s length tool, to tap and drop. No one can grasp the totality of jurisprudence, not even the smartest, most studied lawyers, so tapping into a garden that some publishing company tends is inevitable. But the clients – they are our grapevines, our green peppers, our onions.
    Maybe this doesn’t reflect objective reality but I think it reflects the psychology of many of us who have the “solo gene.” I might be wrong of course.

  • http://www.responsivedocuments.com Bruce

    Hi, Carolyn. I wouldn’t be surprised if part of the issue with SaaS practice management were to come from the perception that when one buys a package with a permanent license and it sits on one’s desk, it feels like “owning a practice” whereas under SaaS it feels like one doesn’t own one’s own practice. In other words, I suspect that SaaS practice management tools could position themselves better through optics designed to make the attorney feel like they are renting office space rather than renting the filebox which the leasing company could yank back.
    Lawyers feel possessive about their books of business, as they certainly should. It takes a lot of trust and the passing of a psychological hurdle to allow a third party to control, even indirectly, the DNA of a law practice. Legal research is an arm’s length tool, to tap and drop. No one can grasp the totality of jurisprudence, not even the smartest, most studied lawyers, so tapping into a garden that some publishing company tends is inevitable. But the clients – they are our grapevines, our green peppers, our onions.
    Maybe this doesn’t reflect objective reality but I think it reflects the psychology of many of us who have the “solo gene.” I might be wrong of course.

  • http://www.litfolio.com Matt Horn

    Also keep in mind with SaaS you only pay for what you use. There are several desktop programs that we buy that we only use on rare occasions. With SaaS, costs are only considered when you use the program.
    Perhaps the largest value based characteristic with SaaS is the time saved not having to update desktop software on each computer and synchronize multiple computers. I have worked with solo practitioners, large firms and software companies and the common complaint with desktop software is the time it takes to update software on each computer and synchronize multiple computers in an office so the desktop program has the same information.

  • http://www.litfolio.com Matt Horn

    Also keep in mind with SaaS you only pay for what you use. There are several desktop programs that we buy that we only use on rare occasions. With SaaS, costs are only considered when you use the program.
    Perhaps the largest value based characteristic with SaaS is the time saved not having to update desktop software on each computer and synchronize multiple computers. I have worked with solo practitioners, large firms and software companies and the common complaint with desktop software is the time it takes to update software on each computer and synchronize multiple computers in an office so the desktop program has the same information.

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