ERP mustn’t be seen as a PMS swap out in the legal sector

29
Apr
2015

Guy Phillips

Law firms have always been enthusiastic adopters of best of breed technology – practice management, document management, time and billing, expense, human resources and more. Unfortunately today, despite the significant investments that law firms have made in these systems, the software is falling short. 

Why? Well the economic and market landscapes have changed – there are increasing competitive and market pressures forcing law firms to change the way they operate. There is a heightened need for operational efficiency like never before as clients demand value for money, greater transparency and the highest levels of service. The siloed PMS solutions are not designed as enterprise-level technology platforms.

Consequently, there is a rising interest in ERP business management systems. Their biggest allure is the gain of a platform that supports business growth – these systems buoy highly complex corporate structures, easily scale and provide globally recognised, best practice processes for every aspect of business operation. The worrying observation nevertheless is that many law firms are mistaking an ERP system to be a replacement for their traditional practice management system (PMS). In doing so, they are risking their investment in this technology. 

ERP and PMS are two ends of the spectrum 

The underlying technology of the two systems is very different. An ERP system is designed as a single, underpinning growth platform for a law firm that offers all the functionality it requires – from financial management, HR, time and billing, expense management, budgeting and so on. From an IT standpoint, it eliminates the need to deploy and manage multiple and varied business critical systems that perform different tasks. All the business processes are streamlined. 

On the other hand, a PMS-led approach to technology requires all the standalone systems to be deployed and then integrated in order for them to work in unison and potentially deliver a seamless working environment. Herein lies the challenge. Integration of systems is a substantial overhead that greatly escalates the cost of ownership of technology. Keeping these diverse systems up to date simultaneously is enormously time and resource intensive. An upgrade in one proprietary system requires compatibility checks and possibly further upgrades in other solutions too in an attempt to re-connect the interfaces in the hope of a seamless work environment.  These issues don’t arise in ERP as all the applications are part of the same product. So firms instantly eliminate costs related to system licences and maintenance and support costs of multiple solutions. 

ERP promotes a culture of enterprise 

Technology aside, ERP has a business rationale. Law firms are no longer simply professional services organisations, but commercial entities in their own right. As mainstream enterprises, they require legal and non-legal functionality in equal measure. Clients – at the very least are expecting law firms to adopt the same industry-wide business practices that they themselves follow for ease of business. At the same time, they are demanding value for their legal spend – which requires firms to ensure the highest levels of efficiency, but more crucially adopt a mentality that makes it easier for them to try new ways of doing things to meet the ever changing requirements of their customers. 

ERP makes ‘change’ par for the cause and fosters agility. Such a business management system offers a standard set of capabilities based on widely recognised and adopted industry best practice – all of which can be manipulated to enable a firm to deliver against customer needs and the marketplace. For instance in a merger and acquisition situation, a firm can quickly deploy standardised processes across the entities for tax compliance or to instantly support multiple currencies in the different geographies. Traditional PMS solutions don’t provide this kind of flexibility or agility. 

A different mindset

Fundamentally, the capabilities of ERP and PMS solutions are vastly different. Therefore, its adoption must be based on ‘enterprise’ requirements rather than purely ‘legal’ requisites. So if a firm is looking to simply replicate the functionality of its incumbent system in the new ERP business management system, the exercise is a missed opportunity.  

ERP system implementation requires a long term view of the solution. Research shows that traditional best of breed systems change every 15 years or so, but if a firm is adopting an ERP business management system – with all the R&D that is being invested to make the solution future-proof, it’s not far-fetched to say that it’s unlikely a firm will change it again in a hurry, if at all – if done correctly! Unlike previously, where law firms were able to develop their own in-house solutions as add-ons to existing PMS solutions systems to expand functionality and carve a competitive niche for themselves, today the speed of technological development and the cost of keeping pace is prohibitive. Microsoft invests something in the region of $10.6 billion on R&D, covering everything from database to underlying compatibility of the operating system.  Adopting supported and future-proofed business systems is the judicious option.

Also, ERP implementation should be driven by strategic goals – growing revenue, expansion into new markets, increased efficiency, cost reduction or any other. The aim of the technology deployment should be to meaningfully leverage the system’s capabilities to continuously align the operation with the strategic objectives and commercial drivers of the business in a changing landscape.   

This means that the traditional features and functionality-led mindset must give way to a business process improvement-led focus. This in turn requires an in-depth evaluation of how things are currently done to further determine how they should be done better. If the goal is to improve operational performance, then the firm should assess the processes behind the way business is conducted, what the desired outcome is, and what changes need to be made to achieve that outcome. For example, if it is taking the business too long to collect cash from debtors then redesigning processes to reduce debtor days will provide an instantaneous cash positive position for the firm. The advantage of an ERP business management system for legal is that many such core best practice processes are already pre-configured in the solution, so often with minor alterations a firm can optimise its own individual practices. Consider Microsoft Dynamics AX, a solution that is today used by over 20,000 organisations worldwide.  Firms that adopt the technology instantly benefit from the learnings of organisations across sectors. 

A ‘modified to fit’ technology approach will give way to a true ERP business management methodology – it’s a matter of time. Already, this trend is gathering speed. Firms exploring this option will do well to investigate closely before making the final decision – things like suitability of the system for a law firm environment, availability of broader skills for the solution in the market, the investment committed for future product development by the technology provider and even the strength of partnerships with third party systems providers – are all important considerations. Firms today must deploy technology that they can profit from – through efficiency gains, agility to leverage new growth opportunities and reduce business risk. ERP-style business management systems offer this.