Bricks and mortar - the real cost of IT

Raymond Perry weighs up the financial and time savings of the transition to electronic conveyancing - and wonders what the real cost will beThe costs involved in the introduction of new technology always seem to be higher than anticipated.

Indeed, with large IT projects a failure properly to estimate or manage costs can easily lead to financial disaster.Therefore, a careful cost benefit analysis is essential before the start of any such venture.

This is particularly true where part of the rationale for the introduction of technology is itself to reduce costs.

Given this, it is surprising that there has been little debate about the cost of the proposed move to electronic conveyancing (see [2001] Gazette, 15 November, 14).One of the justifications advanced to support the introduction of such a system is that it will lead to a significant reduction in the unit cost of conveyancing transactions.

In appendix III to the consultation paper on e-conveyancing, published by the Lord Chancellor's Department earlier this year, a figure of 16 was suggested as the estimated net saving per transaction.In fairness, the paper makes it clear that this calculation is only an estimate and it would be harsh to criticise the authors when they have at least tried to arrive at a figure, albeit a provisional one.

The general tenor of the paper is optimistic on the issue of costs, and in view of the importance of the subject the estimate offered is a useful starting point for further scrutiny.The net figure of 16 was calculated by deducting the total estimated savings for each transaction from the anticipated additional costs.

It has already been suggested elsewhere that some of the time savings that are thought likely to flow from the introduction of e-conveyancing may be illusory.

Might the same be also true of financial savings? It is questionable whether the figures given for estimated savings - excluding additional costs - withstand a robust examination.

To ensure there are no disputes about whether or not they had authority to sign a particular electronic document, it is inevitable that solicitors will ask clients to sign a paper copy of the final version in advance.

As a result there is unlikely to be any saving in the preparation of paper documents.

This is particularly important as it is contended that reductions in clerical labour and the preparation of paper documents will provide the bulk of the anticipated savings.However, even if this pessimistic assessment is correct it is still suggested that the estimated additional cost per transaction may be as low as 5.

This would be a fairly marginal cost and clients might easily accept an increase in charges of this size.

Two questions arise - is this a realistic estimate and what exactly should be included in any definition of additional costs? As with any IT system, in analysing the likely cost of e-conveyancing it is important to ensure that the total cost of ownership is considered rather than just the cost of the software and hardware.

A calculation takes into account the full cost of a purchase including maintenance, installation, upgrades, training, security, networking and licensing.

As a general rule, a total cost of ownership calculation for the introduction of a system will produce a figure many times higher than the simple software and hardware purchase costs.

With this in mind, perhaps the best place to look for evidence of the likely cost impact is at the history of similar projects elsewhere.

E-conveyancing - based on digital signatures - is an example of what is known as a public key infrastructure (PKI) system.

PKI is the entire administrative infrastructure that surrounds and enables the use of digital signatures.

An examination of other PKI projects reveals some evidence indicating that financial problems may lie ahead for the profession with the adoption of e-conveyancing.An assessment of PKI deployment in the US suggests that implementation can be an expensive process.

In part, this is caused by the intrinsic complexity of the technology, which involves a high level of expertise.

As a result both installation and support are difficult.

Complaints by users about the eventual and unforeseen costs involved in introducing PKI systems are not uncommon, as these often seem far to exceed the initial purchase costs.

Implementation can take months or even years to complete and excessive costs at this stage have led to the failure of a number of projects.

Support costs are also a problem with PKI.

The technology is expensive to maintain and hard to manage in practice.

PKI has to be able to work with a variety of other software on users' existing systems.

As PKI is a specialised field, locating and retaining support staff with the appropriate knowledge is not easy and training is costly.

External consultants may be needed who are also expensive.

PKI is often deployed in fields where reliability is crucial.

Employing just one IT manager is not realistic if no one can resolve a fault which arises when that person is away from the office.

Solicitors cannot afford to be in a position where a deadline expires because a contract could not be signed.

In this way, PKI locks users into high maintenance costs.The skills that users themselves require for PKI are also more advanced than normal for IT products and as a result training costs are likely to be higher.

Solicitors tend to be busy individuals.

If they are to attain the degree of skill necessary to use a digital signature system involving a high level of security, then this must impose substantial demands on resources.

The additional security costs are also likely to be higher.

The financial consequences of a breach of security in e-conveyancing are of a different order of magnitude to those of, say, a university or hospital where PKI is being used to secure medical records or examination results.

In this respect, it might be more appropriate to expect a financial burden similar to that which is needed in a banking environment - and that is a high one.

This is likely to be particularly onerous to solicitors, as hitherto their security costs have been low.

Not only will there be capital costs - locks, secure computer rooms, advanced firewalls - but there are also the costs of training and employing IT security personnel.

This may be feasible for a 200- partner City firm; it is less likely to be so for a high-street conveyancing practice.

There is little doubt that the answer to the question of what e-conveyancing will cost is difficult to answer.

There is an absence of any real discussion of the issue.

This may be because no one actually knows what the cost is going to be.

There is also a widespread view that as the move to e-conveyancing is inevitable we have to pay the price involved, whenever that might be.Raymond Perry is a solicitor at Davies and Partners in Gloucester