Software solutions - IT costs how much?

In previous columns we have been looking at some of the potential benefits of investing in law office systems - but exactly just how much money should solicitors' practices be spending on technology?

There is an element of how long is a piece of string here, with some firms clearly not spending enough while others probably spend more money than they need.

There is also the fact that the spending pattern among small-to-mid-sized firms tends to take the form of a big splurge on new systems every four-to-six years and then just running costs in the years between.

However, bearing in mind that most firms fund major capital projects through some form of lease-rental finance deal, with monthly payments spread over a three or five-year period, it is possible to estimate law firms' annual expenditure.

Along with finance payments - and at current rates an expenditure of 100,000 would involve lease-rental payments of 3,200 per month over a three-year period or 2,445 per month over five years - firms also need to take into account various annual running costs.

These include annual hardware and software maintenance/support contracts; in some instances annual software licences; insurance, including cover for the increased cost of working if you need to revert to manual methods while data is recovered after a computer disaster; telecommunications costs, including the charges for accessing the Internet and maintaining 'leased line' links between branch offices; and 'consumables' such as laser printer toner and continuous stationery.

There will also be the inevitable extras you may not have originally budgeted for, such as extending the network to encompass new members of staff.

In larger firms - as a rule of thumb this tends to be in practices with more than 25 to 30 computer users - there will also be the additional cost of employing dedicated IT support staff.

And, there are also the various accounting charges associated with IT, including capital allowances and depreciation.

Add this altogether and the figure that consistently emerges from research into this topic, both in the UK and US, is that law firms spend between 2% and 7% of their total fee income each year on IT - with smaller firms spending an average of 4% and larger firms an average of 5.5% annually.

Next time - is it a false economy to try to trim IT budgets?

Charles Christian is an independent adviser to the Law Society's software solutions guide